Appraisals - are they EVER accurate?

Financing, Hard Money Lenders, Private Money
1

I just did a cash out refi. Financed the house in Dec '04 for 157K. We just cashed out on a 192K appraisal.

But!

I got a “out of pocket” appraisal working with an out of state broker from here. That came in at 180K. I, not knowing very much about home value knew this was a complete lowball. The reason? I have a 3 bdrm single fam home on 1/2 acre and a 2 bdrm duplex was sold at 185k a 1/2 mile away.

I disagreed with this appraisal. I knew it was wrong. Ameriquest (I know they are terrible but to humor myslef I allowed them to appraise it through their “computer appraisal”) appraised it at 202k through that. The broker I originally used to get in my house sent her appraiser back out and she got $183k.

The actual place I just closed with had a “pre-screening” process which I found to be great peace of mind. That came in at 192K and I went with the refi. Im satisfied because I reached my goal of what I wanted.

BUT!

Interestingly, an exact same model as I own literally hit the market the day before I closed. List price, 215K!!! I know its just list price but the realtor is a Coldwell super realtor who sells everything in this area, he averages 98% list price and I usually see him score the full list price almost every listing.

I told my mortgage guy this, he closed my loan at my house so I got to talk with him. I said I was getting the cash I need, Im completely satisfied but was curious about all this appraisal discrepancy. He basically said appraisals are guesses, he said that listing is awesome for me, because in a year he can get me in a 15 yr fixed and could most likely get out of pmi by then getting a 80% LTV.

This is cool, but what the hell is the deal with appraisals? There is a 35K swing between lowest appraisal and the most recent list price, were talking a 2 month span here, not over a year or 2. What gives???

2

Howdy Straitfromjapan:

That difference is amazing. In a perfect world all appraisals would be exactly the same every time. In new subdivisions where the same plan is sold over and over and often you will get pretty close appraisals most of the time. When you add foreclosures and condition into the mix and different comps you start getting different numbers. Lenders appraisers ten to use lower comps as they are more conservative. Also if properties are spread out with few comps the appraiser may have to widen the search area. They all learn the same basic steps to evaluate the property. It is not a guess for sure it is a lot more than that. Your case is probably not the only time a wide spread has occurred. Perhaps if we had a copy of each appraisal we could see why the one is way low. Also the listed house has not sold and no matter how good the Realtor has been in the past he could have over estimated to get the listing.

3

Im not suggesting these guys “wing it” but I would say the best measuring stick for an appraisal would be what is selling in the area and for how much. Nothing has sold in this sub for under 199K all summer so it is amazing to me that using these comps, they are so much lower.

If this home listed sells for the 215K, that would mean my homes value has risen by 50K in under one year…this seems unbelievable to me, especially being a former renter for 7 previous years. Ugh, I can only imagine the equity I missed out on for 7 years.