I will never, ever do this again.

[ReneeA]

We are in the process of buying a house. It was never finished by the builder and has sat empty for 5 years. It needs heating and cooling, all the plumbing, flooring (except the kitchen and baths), and we are putting a deck made of composite material on. We've had a trusted, experienced inspector go through it, and it's sound.

The house next door was built at the same time as our house, but the builder finished it - builder grade, base everything - no deck, no a/c. Once it went into foreclosure, it had a bid within days and sold for the asking price right away.

We are putting higher end upgrades in - nice carpet upstairs, hardwood floors in the living area, 95% efficiency furnace and a/c. My DH has worked in tile for 15 years, so we are doing a really nice glass backsplash, and the house will have maple cabinets and granite countertops.

We needed the appraisal to come in at what the house next door sold at for the mortgage - the appraisor had all of our quotes, and details about what is going into the house. He was to appraise it with what it would be worth, finished with the materials quoted. Guess what? Our house appraised for significantly less than the EXACT HOUSE next door - the base house. He used comps in the area - houses that were 80+ years old, in a school district close to ours that scores are very, very poor, and houses on main streets. Of course those houses sold for less.

We've been told that we can dispute the appraisal, but it's going to put us past our closing date and will screw everything up.

 

[lakelandgal70]

I am so sorry. I have no advice just Hope things work out for you.

 

[kirstenb1]

Ugh!!! I'm sorry.

 

[wdwmom0f3]

I am so sorry that this happened to you. I think that I would dispute it though. Did the house next door sell recently? I think they have to use to recent sales, right?

I live in an area where there are smaller and cheaper homes right around us. I was worried about the same thing happening to us recently because we are doing a refi on our house to get the rate down, but we got lucky some how.

I sincerely hope everything works out for you.

 

[golfgal]

Yes you can dispute the appraisal but also keep in mind that housing values have dropped dramatically in the last few years-especially in MI. I don't agree that he got you the best comps but that may have been all there was to chose from too. Not much is selling to use for comps.

 

[jlewisinsyr]

Confused, did you actually complete the upgrades/improvements you plan to? If not, then I don't see why an appraisal would come in at the same price the house, that is completed, next door did.

Appraisals are based on the current condition, not the condition you intend it to be as banks care about if you bail and don't do as you promise or want to. Sure, your house may be worth significantly more when your done, but right now, no.

If you hired a builder to complete the house, you might be able to get a builder loan for the future appraised value or something similar, but doing individually, highly unlikely.

 

[wdwmom0f3]

Yes you can dispute the appraisal but also keep in mind that housing values have dropped dramatically in the last few years-especially in MI. I don't agree that he got you the best comps but that may have been all there was to chose from too. Not much is selling to use for comps.

This is what our appraiser told us too. We are in a SMALL town and a big factory has closed so I was really worried because that really does effect the comps.

 

[wdwmom0f3]

Confused, did you actually complete the upgrades/improvements you plan to? If not, then I don't see why an appraisal would come in at the same price the house, that is completed, next door did.

Appraisals are based on the current condition, not the condition you intend it to be as banks care about if you bail and don't do as you promise or want to. Sure, your house may be worth significantly more when your done, but right now, no.

If you hired a builder to complete the house, you might be able to get a builder loan for the future appraised value or something similar, but doing individually, highly unlikely.

That makes sense to me if the house is not complete. Are you saying that they should get a construction loan until it is finished, then a regular loan? That may work for them.

 

[DrCavin]

Are you paying the same price as the FINISHED house next door? Why would your appraisal have to match the finished house when it sounds like yours needs some significant dollars to be finished at any level.

 

[Hootiss]

double post

 

[Hootiss]

Confused, did you actually complete the upgrades/improvements you plan to? If not, then I don't see why an appraisal would come in at the same price the house, that is completed, next door did.

Appraisals are based on the current condition, not the condition you intend it to be as banks care about if you bail and don't do as you promise or want to. Sure, your house may be worth significantly more when your done, but right now, no.

If you hired a builder to complete the house, you might be able to get a builder loan for the future appraised value or something similar, but doing individually, highly unlikely.

Agreed.

Sorry, but if the work is not done it will reflect the appraisal.

 

[ReneeA]

The loan we are approved for includes finishing the house. It's a FHA loan, and appraisers go into the unfinished houses with all of the quotes and are suposed to visualize what the house will be worth when the work is complete. Even if the can't take into account the interior upgrades like granite, hardwood, etc, you would think they would look at the furnace, a/c and deck. From what our mortgage person says, it's commonly done.

The house next door closed 2 weeks ago. They had it listed in the comps, with the sale price (which was the asking price of the home). The other comps were not comparable in the least.

 

[Colleen27]

Finding comps sucks right now in Michigan with foreclosures and auctions setting prices in so many places. We needed comps to dispute our tax assessment last year and they couldn't be foreclosures. Yeah, good luck finding that. We went in practically empty handed and did get a slight adjustment but not near what we'd hoped for, largely because of the lack of eligible comps that were actually comparable to our property. I don't know how the rules work for appraisals, but if they have similar exclusions/limitations on using foreclosure sales it is possible the appraiser just couldn't find better comps than he used.

 

[jlewisinsyr]

That makes sense to me if the house is not complete. Are you saying that they should get a construction loan until it is finished, then a regular loan? That may work for them.

If the house is unfinished, they only have what is finished to go on. If the intent is to buy the house and complete it then I would think a construction loan would be needed to complete the home before it has a market valuation that is sufficient for the mortgage.

 

[msmayor]

Your house won't appraise for significantly more than a finished house just because you are using better materials. A carpeted room is a carpeted room in the eyes of an appraisal. Same with cabinetry and mechanicals. Appraisers rarely ask the age of these items, or whether they are high-efficiency or not - they only want to know that you have the basics of what the comps have.

 

[Colleen27]

Are you going with a 203k loan? If so, you really should look for an appraiser who is familiar with the process (and my understanding is that not many are). Our real estate agent was able to recommend someone, but said that the whole process is more difficult than obtaining standard financing and we ended up with going with a home that needed less work so that we could do a standard FHA loan with a small repair escrow.

 

[ReneeA]

Finding comps sucks right now in Michigan with foreclosures and auctions setting prices in so many places. We needed comps to dispute our tax assessment last year and they couldn't be foreclosures. Yeah, good luck finding that. We went in practically empty handed and did get a slight adjustment but not near what we'd hoped for, largely because of the lack of eligible comps that were actually comparable to our property. I don't know how the rules work for appraisals, but if they have similar exclusions/limitations on using foreclosure sales it is possible the appraiser just couldn't find better comps than he used.

Blah. Apparently he could use foreclosures because the house next door to ours went into foreclosure at the same time as ours did. It was used as a comp.

Maybe I am mistaken about the appraisor using the quotes as a guide to the finished home. I don't necessarliy think so, because it would have come in much, much lower than it did. I think he took the comps and averaged them with the house next door being the highest one. It stinks that all the others were sold at so much lower than ours and that there weren't homes that were similar to ours.

 

[ReneeA]

Are you going with a 203k loan? If so, you really should look for an appraiser who is familiar with the process (and my understanding is that not many are). Our real estate agent was able to recommend someone, but said that the whole process is more difficult than obtaining standard financing and we ended up with going with a home that needed less work so that we could do a standard FHA loan with a small repair escrow.

We are. So far, the process has been less than fun. You would think that with so many underemployed contractors in Michigan they would be jumping through hoops to get the job. Not so much.

The entire process has been a headache.

 

[ReneeA]

Your house won't appraise for significantly more than a finished house just because you are using better materials. A carpeted room is a carpeted room in the eyes of an appraisal. Same with cabinetry and mechanicals. Appraisers rarely ask the age of these items, or whether they are high-efficiency or not - they only want to know that you have the basics of what the comps have.

I guess I assumed (wrongly) that because the EXACT SAME house next door sold within 2 days of being on the market for the asking price, I would at least be appraised at that $$ amount.

Especially since he went in armed with the plans, quotes and signed legally binding documents from the contractors.

 

[tvguy]

We had the opposite problem during a probate sale. The required appraisal came in after we had listed the house for sale, and accepted an offer.
The appraisal came in $20,000 over comps, and $15,000 over the sales price. There were 150 houses in the subdivision, and NONE had ever sold for what the appraisal came in at (including the larger models).
It meant an additional court hearing (and related attorney fees) for the judge to verify that all the heirs all agreed to the lower than appraised sales price. Apparently in a probate sale, a seller can cancel legally void an accepted purchase offer if the appraisal comes in higher, but the reality is, NOBODY would every pay what the appraised value came in at.