Question about House Appraisals

[SandyinMonterey]

Is a house appraisal when you're selling your home the same as a house appraisal when getting a HELOC?
Would you think the numbers would be the same, different, or close? If different or close, by how much?

Thanks everyone!

 

[tvguy]

As far as I know, an appraisal is an appraisal and they should be identical.

 

[supersnoop]

An appraisal for a heloc will likely be based on the original purchase price plus any documented improvements. Banks don't like to give you credit based on unrecognized appreciation.

 

[mistysue]

In my experience it depends on what the bank wants. They hire their own appraisers. When I went to get a HELOC, the bank hired an appraiser than a local realtor told me they hire when they want a low number.
They will look at your house, determine a price per sq ft then list comps to justify what they say. So I got a HELOC appraisal listing a bunch of local houses which were all in the $95-120/ft price. My house appraised at $80/ft. I was the ONLY house on the list with lake access, used higher grade materials, had a bigger yard, etc- nobody can figure out why I wasn't at the high end there. There is really no rhyme or reason for it but you can't contest an appraisal without listing NEW comps as a reason- he put a list on the last page of all the recent sales so technically I had no legal way to contest it.

When you go to buy a house they usually want to sell you a loan, so they are inspired to be a bit more rational. Same house when I bought it appraised as a higher value than any of the comps they listed. So IME, if they want to give you a loan they appraise high. If it's a HELOC I wouldn't bother unless you know you really have the value there because they have the ability to round down.

In actual numbers, 8 years apart my house was $114/ft when the market average here was in the 80-100 range, it was $80/foot when the market was in the $95-120 range. Somehow in between there we poured about $60K into renovations and it still appraised less... ? LOL, Can you tell I'm still mad about it? Got the amount I wanted anyways but left me feeling cheated.

 

[Anthony1971]

A Bank appraisal is done for the bank and based what your house should actually sell for. If you have a real estate agent appraise your house they are basing it on what people are asking for houses in your area... In other words people might be asking 500,000 for house in your area but only getting and taking offers of 200,000... a bank will appraise your house at 200,000 a real estate agent at 500,000. This was a huge problem in the early 2000's and part of the reason so many people owe more than their house is worth as banks would appraise at what ever value you wanted... Banks are far more strict these days..

 

[tasha99]

A Bank appraisal is done for the bank and based what your house should actually sell for. If you have a real estate agent appraise your house they are basing it on what people are asking for houses in your area... In other words people might be asking 500,000 for house in your area but only getting and taking offers of 200,000... a bank will appraise your house at 200,000 a real estate agent at 500,000. This was a huge problem in the early 2000's and part of the reason so many people owe more than their house is worth as banks would appraise at what ever value you wanted... Banks are far more strict these days..

A Bank appraisal is done for the bank and based what your house should actually sell for. If you have a real estate agent appraise your house they are basing it on what people are asking for houses in your area... In other words people might be asking 500,000 for house in your area but only getting and taking offers of 200,000... a bank will appraise your house at 200,000 a real estate agent at 500,000. This was a huge problem in the early 2000's and part of the reason so many people owe more than their house is worth as banks would appraise at what ever value you wanted... Banks are far more strict these days..

I thought comps were recent sales. ??? If it's other houses on the market, that's a crazy way to do it.

 

[mistysue]

I thought comps were recent sales. ??? If it's other houses on the market, that's a crazy way to do it.

They are. Having an agent appraise isn't the same thing as having a bank do it for a loan.

 

[barkley]

An appraisal for a heloc will likely be based on the original purchase price plus any documented improvements. Banks don't like to give you credit based on unrecognized appreciation.

I thought comps were recent sales. ??? If it's other houses on the market, that's a crazy way to do it.

in our fairly recent experience 'comps' are COMPLETED (actually closed-can't be a pending sale) "recent" sales (recent as defined within a certain established time frame criteria).

when our former home sold it was right as the housing bubble burst in that area-when that home closed it was the only closing for over 60 days in that city, and the house was constantly being photographed by appraisers to use as a comp (BAD comp to use-b/c home values were falling by tens of thousands per week so ours was not a good comparison). where we live now it was challenging for our recent appraiser to find comps in close proximity to us-that's b/c no one in our neighborhood has sold in several years (newer homes/all custom built and largely very different from each other) so he had to do some kind of process where he found a physical home comparable to ours a distance away then calculate out and document how our physical location (for commute, school district, services....), land (acreage, views) would positively or negatively impact those comp sale prices.

one thing I found interesting is how 'current market trends' impacted the calculation-apparently the area the appraiser used for the comps on ours was going through a period of time where the 'norm' in sales was for the seller to pay for the buyer's closing costs, but it's not for our area. the appraiser therefore documented that while this was the trend and he would normally offset the value for it, in our case he was not.


so in our experience (and the experience of several neighbors who have either done a re-fi' or helo recently) it comes down to-
the VALUE of what the home could within reason-NET (after regional sales concessions) in a sale at the time of appraisal. what someone paid for their home is not a factor-WHAT THEY OWE on their mortgage (or any other debt that's secured by the home/land) becomes a factor AFTER the appraisal when the bank/lender is crunching the numbers to see if they will extend monies to be secured by the home based on the current appraised value of the home.

example-2 houses each purchased for $350,000 with current identical appraised values of $400,000 (owners with same income/credit scores/other debt)-

owner #1 owes $310,000 on their mortgage-bank/lender may or may not approve helo depending on stability of local housing market
owner #2 owns their home free and clear-bank/lender trips over itself to barrage the owner with offers for a helo (I only know this b/c we get 2 or more offers per week for preapproved/all fees waived helo's from our bank ever since we paid off our mortgage).

 

[barkley]

They are. Having an agent appraise isn't the same thing as having a bank do it for a loan.

don't know about other states but where we are it's illegal for an agent to so much as say they can do an appraisal unless they are a state certified and licensed 'real estate appraiser'. a broker can under certain circumstances can offer a 'price opinion' but there are specifics in our state law that spell out how those that do this may be putting their profession on the line unless they follow the letter of the law as to how and to who their 'opinion' is and can be communicated.

 

[tvguy]

I thought comps were recent sales. ??? If it's other houses on the market, that's a crazy way to do it.

It is recent sales, and as comp is short for comparable, the homes have to be comparable. So recent sales of the same floor plan in the same subdivision are going to be helpful, but in an area where no 2 homes are similar, it can be much of more an educated guess.

 

[Jake]

They normally check on what the other houses sold for in your area. Recent sales and your home is base on those prices. Your house will never appraised over the last few sales. Not in today's world

 

[StephMK]

Our very recent experience was the same as Mistysue. We even contested it based on our neighborhood sales and no luck. Our neighborhood is totally different than the surrounding ones. They used a recent comp 1mile away that is much lower valued overall. I showed comps from both hoods reflecting cost per sq ft and how they are always lower than ours.

The whole process was difficult and the appraiser got several things wrong. The bank did not care if he did sloppy work. And their own appraisal estimator gave us numbers we should have had that were in line.

I do not recommend Bank of America. We were current customers when we refi'd and they have been horrible to us. We almost cancelled closing and regret that we went through with it. Still having issues with misinformation from them.

 

[mistysue]

don't know about other states but where we are it's illegal for an agent to so much as say they can do an appraisal unless they are a state certified and licensed 'real estate appraiser'. a broker can under certain circumstances can offer a 'price opinion' but there are specifics in our state law that spell out how those that do this may be putting their profession on the line unless they follow the letter of the law as to how and to who their 'opinion' is and can be communicated.

I think what happens often is an agent will give you an estimate and they won't use the word appraisal, they might say they are giving you a sales value or estimating a price or whatever. You might know there is a difference, but the average consumer looking to buy/sell goes "hey, agent says it's worth 5 bajillion dollars, awesome! My house appraises really high!" They will then show you some listings to back up what they say. They don't say the word appraisal so they aren't lying but people don't know why it's different.
Either way I think a lot of this comes down to the fact that appraisers have a huge amount of leeway to make your number higher or lower to please whoever is paying the bill and the legal system is set up so that if the bank is paying, the homeowner of powerless to object.

 

[mistysue]

Our very recent experience was the same as Mistysue. We even contested it based on our neighborhood sales and no luck. Our neighborhood is totally different than the surrounding ones. They used a recent comp 1mile away that is much lower valued overall. I showed comps from both hoods reflecting cost per sq ft and how they are always lower than ours.

Isn't that insane how that works? My house has not only a lakeview, but also deeded private access. Somehow rather than being close to the value of homes on our street, we were close to the value for the street across town with no lake that backs up to the expressway...