Fun With Appraisals


A couple of weeks ago at my fun listing at 9 Violet in San Carlos one of the neighbors came into my open house and told me that, in the process of refinancing, his appraisal came in at $710,000. Interesting since he has the identical unit to the one I have for sale…and it’s listed for $879,000. Both of these units have expansive views of the Bay. I just closed one without a view on Violet for $761,000. In addition to that a larger view unit 2 blocks away in the same project just closed last week at $915,000. The neighbor wanted my advice about what he should do.

Then last week I get a comment here on the blog from Michelle that her waterfront, 3 bedroom townhouse just got appraised at $540,000 even though there are units in her complex listed for more than $650,000.

Appraisals are brutal right now. To make matters worse it’s no longer OK for the lender’s loan officer to actually talk to their own appraiser about the values of these properties. It’s a knee jerk reacti0n to the mortgage meltdown. Whatever the appraiser says, goes…even if they don’t have the foggiest notion of values in a given area.

I heard a story a week or so ago, an agent that I know had an escrow locally on a purchase of  $2,080,000. The appraisal came in at $2,050,000 and they buyer wanted to pay for a second appraisal hoping to bring it in at value. The bank randomly sent out an East Bay appraiser who was completely unfamiliar with our area…and his appraisal came in at $1,400,000! It seems like everybody I’m talking to right now has an appraisal horror story. I honestly don’t understand these refi appraisal stories though. In the case of Violet Lane there were comparables that truly did support a higher value. Why not use them to support the refi? Does the lender in question just not want to loan right now? Are these appraisers so very frightened of over committing on value that they intentionally aim low?

One thing I do know…it’s an interesting time. If I were trying to refinance right now and got an appraisal like the ones mentioned above I’d definitely have another one done. If you’re in this boat right now, be patient and be persistent.


  1. I agree its difficult to appraise in bad times especially you are not buying the property with cash.
    Lenders are burnt enough and they want to make sure the loans they write is safe. If it is under 625k, or 729k, its probably easier as fannie and freddie buys them most.

    I do wonder if buyers willing to pay cash more than the appraised value.
    integrity and responsibility is lost already in lenders/mortgage brokers market.

  2. The math would be more interesting considering county’s appraisal: it seems still far more higher than the market rates, let alone the bank appraisal.

    Jim: what is the good strategy to fight the county appraisal? Last year, we lost in court even though we provided comparison sales which are closer in time/space than the ones used by the county.

  3. Michelle says:

    Isn’t it just ridiculous? Then, you have the city appraisers that determine the value of the homes to determine property taxes, and those always come in higher. Totally. Lame.
    We are not going with another appraisal- partly because we are not allowed… We will be taking out a lot less money than we thought, and will have to figure out our down payment via other methods. I might have to start growing weed.
    Then I worry about the appraisal of the place we will buy, like you wrote about recently. Do they or do they not want people to buy?

  4. Michelle says:

    I also meant to ask, do you think buys who are interested in short sales/REO, should be working with agents who specialize in such things, and how do we go about finding one? Do you do this kind of work? I imagine it is annoyingly frustrating…

  5. Jim Minkey says:

    Alex, I really don’t know…I’ll ask around and get back with an answer.

    Michelle, here’s a story you won’t like. Recently in my FC office some buyers pulled equity from their existing home and bought a new house. 3 weeks into a 4 week escrow, after all contingencies had been removed, the lender did an appraisal on the buyer’s existing house (not the subject property)and decided they didn’t have enough equity. They killed the loan on the subject property. Nobody had mentioned that they might do a last minute appraisal like that. The buyers had to scurry around among relatives at the last minute to raise $35,000 to make the escrow close and thus avoid losing their deposit. Fun, huh?

    As to your second question, I think sellers should use an agent familiar with REO/Short Sales for sure. I’m actually very familiar with the process from the buyer side. Please feel free to give me a call. 650-610-6423

  6. Michelle says:

    Well, it sounds like the scenario you mentioned was a total nightmare. We are separating the transactions. We are almost done with the refi. With that cash in hand, then we take out the new loan. Hopefully, that will avoid this awful situation, since we won’t have relatives to scurry for us and lend us money. (We are going to ask for money from relatives if we lose our jobs, better not suck them dry, then REALLY need the money, but they are already dry…)
    So far, we are looking at regular sales, since there really isn’t any REO/short sales in Foster City… and thanks for the tips!

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