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Jacklyn's Forum Posts: 26

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By Jacklyn in Hillsdale, MI on 7/26/2006


I was hoping to use IndyMac, as they are good with draws for construction loans, called me today and told me they heard from my appraiser. My bid for construction with us as owner-builders, before we signed on my builder to GC the house was $425,000. That is for the house building only.

It is going to be ICF with geothermal heat, radiant heat and good quality windows. My house is 2,663 sq ft so it was running at $160/sq ft. We are qualified for the loan, but the appraiser came and said my house according to the neighborhood is not worth that much. The house and land (valued at $50K) will be total of $350,000 according to the houses that have been sold in the neighborhood. That means that my house should be built at $300,000 only. That will be at $112/sq ft.

I talked to my GC, and he said that it is impossible to build my house for only $300K. He suggested I go and contact another bank. I knew early on that we will be building a house that we will not be able to sell for the price we are putting into it, but I did not expect it to be $125K more.

IndyMac said that 7 houses were pulled in the neighborhood and some of them are even bigger than my house, made of all brick and stuff, and they are cheaper. I did not know that bank appraisers are basing what they are going to loan you on the market value of the property and not on what it actually takes to build the house.

I have been to several Parade of Homes and I think the running per sq foot for above average finishes house is at $120 to $160 sq/ft. I will contact another bank but does anyone have any other suggestions?

I was hoping to break ground this August and if I apply with another bank I will be delayed another 2-3 weeks. I am not even sure if they will appraise my house higher. IndyMac said they will only lend me something like $280K, which is about 80% of the construction loan and I have a little bit of savings but not enough to get us through the whole construction. I am still excited about building and still have the vision of my dream house but I am getting tired about waiting to break ground. I hope that when all these things pass, the construction process will run smoothly. If that day will ever come.


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By P in North, FL on 7/26/2006


Hello,

Banks loan on the appraised value of the home.

Have you spoken to any other GC's?


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By Jacklyn in Hillsdale, MI on 7/28/2006


No Phil, I was not able to speak to other GCs. We are pretty much locked in with this GC as we signed the contract to use him.
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By Scott in Wanatah, IN on 7/28/2006


Jacklyn:

We ran into a similar situation. Appraisals are kind of strange on how they go about getting you a price. The bank has to cover their tail if you default on the loan. The appraisals are sometimes not broken down enough to get an accurate price on the value of your home once built. 

Our appraiser was a complete moron. She first told me she couldn't find any comparisons in our area so she was asked me tons of questions on cost, and how much and so on. She was taking a shot in the dark and way off. I called IndyMac and complained and told them she was a moron. They said it was my option to get another appraisal if I wanted. I said sure, but if you want my loan, you pay for it. They did. 

My next appraiser actually did some work and research and came in way higher than the first appraiser. The bank really wants a 'fair market' appraisal so they can be sure they can sell your house if you default. 

Sometimes people build houses that are worth more than they will ever get; that happens. We are right on the fringe of that. I plan on dying in this house, so it doesn't really matter to me. Sorry to be so morbid. But within that time, property value in my area will do nothing but go up as they are rapidly developing. 

It's time to call IndyMac and do some complaining. You may even do a little legwork yourself and check local MLS listings to see what homes similar to your are going for. Check other counties as well, and see. That's what I did and had 8 comps for my new appraiser to look at and it made his job easier. A good place to start is mccolly.com. They have probably the most comprehensive search engine for MLS properties. Good luck.

Scott


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By Kenneth in Lees Summit, MO on 7/28/2006


I ran into a different situation. When I took my architectural drawings to the bank to get an appraisal, they wanted copies of all my suppliers' bids, subcontractors' bids, etc., as they indicated the appraisal was based on what it costs to build. I disagreed and refused to give them any of that information, instead providing level of finish information, etc. I told them I already knew what it cost to build, what I wanted to know was how much could I sell it for when it was completed, and that was their job as the appraiser to figure out.

I overbuilt for the surrounding structures, both in size and level of finish. I knew this would hurt my market value and that an appraisal based on construction cost alone wouldn't accurately reflect market value. After the market value appraisal, the appraiser took out a fairly significant reduction based on the area and apologized. They still appraised it for far more than I was expecting.

While I don't advocate excess real estate debt, perhaps you need a lender that prefers to appraise like mine did, based on cost of construction.


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By Savitri in Warrensburg, MO on 2/13/2007


The bank did the same thing when they appraised our home. We're pretty sure that our house is worth more than the appraised value, since we upgraded a lot of things from the ground up, (they appraised it at only $25K more than what we spent on land and construction) but it was more than what we spent; so it was okay for our purpose. I guess it's a good thing we O-B'd and did many things ourselves, because it would have been really tight with a GC and more contractors involved.

The bank said they appraised it for market value and since the market in our area wasn't very strong the last few months before the appraisal, that's what we got. We also had some bad luck with the the prices of many things... copper went up very high and also concrete when it was time to do it... and who knows what else. Also our home plan was a bit on the more intricate side so all the carpenter bids were very high. They all said if it were less this or less that it'd be $5K-10K less. Ahh... we want to get it reappraised, but we'll wait on it. Maybe we're just overvaluing, who knows, but it doesn't hurt to get another appraisal after the summer... maybe the market will be better. Like I said, we got our loan; so that's all that mattered then.


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By Kenneth in Lees Summit, MO on 2/13/2007


If you got your loan, why get it reappraised? You insure based on appraised value and actual replacement costs, so you should be protected if something terrible would happen and your house would be a total loss. 

In addition, I would like a lower appraisal so that if I needed to reduce my tax assessment, then I would have a recent appraisal to do so. Interestingly, my appraisal matches my tax assessment (well, with the reduction factor) exactly to the dollar. Makes me think there are some extra factors that happen when the final appraisal comes in. 

I just see no reason to sit on a higher, more accurate perhaps, appraisal than you absolutely need, unless for some reason you see it as a mechanism to keep score? The appraisal is typically a lower-bound analysis to protect the lender; why ask for anything more if this suits your needs as well?


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By Michele in Stafford, VA on 2/13/2007


Hi Kenneth,

I WANT a higher appraisal once the home is finished, because I, like many others, did not get the appraisal I expected, and I ended up getting my loan at 90% loan to value instead of 80%. Once my construction loan flips over to regular mortgage, I'll have to pay PMI if it does not appraise higher. I also plan on shopping for other mortgage companies to refinance if the right opportunity presents itself. I hate PMI, it does nothing for you, it just bleeds you dry.

The appraiser that did my appraisal for IndyMac didn't even get the square footage right; he was under by 200 sq ft. He just did a slop job. IndyMac said they would still give me the loan, and I was pressed for time, so I didn't request a new appraisal be done. But I will once my home is finished.


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By Tonya in Mount Sterling, OH on 2/16/2007


Hi Michelle, we are in the planning stages of our home and plan on using IndyMac, we are building a log home which might be different.

But my head hurts from all of this appraisal stuff, I really do not understand it.

Could you maybe tell me how they do this? They appraise the house before it is built based on what you are building?

Thanks a lot:)


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By Dale in Richland, AZ on 2/16/2007


What they do is evaluate the square footage, materials to be used, and comps for similar homes in the area. It's similar to a contractor who uses the Means guide for cost estimating rather than getting bids for everything.

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By Savitri in Warrensburg, MO on 2/16/2007


Well, before you build the bank needs to see what it's going to cost to build this thing. So part of our process of getting a loan was the provide the plan and bids from the subs. This all relates to what you can qualify for too. They don't want to give you loan on a house that might cost $300K to build if you can only qualify for $150K.

The deal with mine was, they didn't use an actual appraisal. I think the bank just took the numbers that we gave them and added $25K on top of that. After the house was almost complete, an appraiser came and did her thing. I was in real estate before, so I have a good idea on what the current market is, and we made sure that we're within the market value. But, from looking at the newly built house, I thought that ours was better quality, inside and out. But I guess it's whatever the market value is and what we did extra was for our own comfort.

Kenneth asked why reappraise if we got what we need. I think it's more for our ego. But if it's going to affect our taxes, etc., we'll just wait till we have to sell.

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By Michele in Stafford, VA on 2/16/2007


Hi Tonya,

I am building a log home too. As of this afternoon they are 15 courses up. It's been slow with the frigid temperatures.  AARRGHH.

IndyMac is going to contact a local real estate appraising firm in your area. That person is going to meet with you and look at your home plans (possibly take a set with them), ask about your building materials, etc. That person will then visit your site and take pictures of the property. Then they go to work researching the value of what you are building on your land, based on comparable sales.

In the old days, they would have required a comparable log home to have been sold in your neighborhood in the last 6 months. The banks soon realized that this is usually not possible. Most of us are owner-building our log homes because there never are any for sale! Most people don't consider these starter homes. So, if there is no log comp in your neighborhood, they are supposed to evaluate your home against other custom-built, similar-sized homes that have sold in your neighborhood. Obviously you want the home to appraise for at least 10% more than the loan you need. IndyMac gave me a 90% Loan to Value.

The catch is that your appraisal is only as good as the person doing it. The banks are not allowed to let you hire your own firm (something about a law that was passed to mitigate fraud), so they hire someone. I am not sure if this is random by them or not, but the guy that did my appraisal was lazy or inexperienced.

There were no log comps in my neighborhood, so he went two counties south of me and evaluated my home against other log homes that recently sold, but were 28 years old. He never took a copy of my plans. He made a sketch on a piece of paper, and got the square footage wrong by 200 sq ft. He was supposed to take pictures of my property, including the outbuildings. Since I had an existing home that needed to be demolished, he took a picture of the existing home, the home was the only thing in the picture, not the property, trees, outbuildings, or anything. I hardly understand how he can evaluate the property if he takes a picture of the house to be torn down? He should have used custom home comparables in my neighborhood. I live in the DC area, and two counties south of me, homes are going for $100K less, no matter what they are made of. I am closer in.

Anyway, my appraisal was $90K less than what it reasonably should have been. But I got the loan anyway. So when I'm done I want it reappraised so I won't have to pay PMI. I'm going to talk to IndyMac about a better appraisal company. This guy took my money and did no legwork at all!

Sorry to ramble. Hope this helps.

Michele


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By Kenneth in Lees Summit, MO on 2/18/2007


Your problem with the appraisal is based on not building "ordinary." As you identified, there are no log homes within two counties. Clearly this is not "ordinary" and the appraiser will take a fairly large deduction for this. My appraiser took 20% off simply because I was ICF, even though it looks "normal" and quite honestly ICF was cheaper construction for me.

Take a $100K neighborhood, and it doesn't matter if you put in custom cabinets, custom finishes, swimming pools, solid surface countertops, wrought iron fence; it simply doesn't matter, as the market won't support these "improvements."

Anytime you get out of the mainstream (mid-century modern, ultra-contemporary, log homes), this becomes a much higher risk for the lender as there is much smaller market to dump the property if it goes into foreclosure, and the appraiser will lower the value accordingly based on risk. Remember the appraiser works for the lending company (and not for you), if the appraiser is going to be conservative it will be conservative toward the lender and not you, and ultimately this means a reduced appraisal.

Now then, I might consider reappraisal to remove PMI or MIP (depending on my financing), but I see no other reason to even consider a reappraisal. A lower appraisal isn't necessarily a bad thing, as long as you get everything you need.


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By Rupha in Beaverton, OR on 1/13/2009


I was planning to refinance my house loan and asked Countrywide to process my documents. Part of the process is to appraise my house where the appraiser is sent to my house by the bank. When  I looked at the appraiser's document I found he had made a mistake and mentioned and compared my house with a two-bedroom house and mine is a three-bedroom house. Because of this, the appraised value of the house came in lower than the value in the market.

When I spoke to the bank official he refused to do anything and insisted, if we wanted to resolve it then we need to directly talk to the appraiser. This is totally unacceptable and unreliable on the bank's part. When the appraiser was sent by the bank and paid by the bank through our account, then verifying the work done by the appraiser is also their responsibility. They just cannot blindly believe a person without verification and refuse to take responsibility for the mistakes made by the service contracts appointed and utilized by them.

This is completely dissappointing and reduces our belief in the bank as to their work performed. The appraiser document is normally not sent to the client and this makes the client blindly believe that every thing is correct when in fact its not. How do I know that all the other (thousands of) appraising procedures done by the bank are all correct. This is a big question and am hoping that people demand that the bank disclose all the documents to the clients before any procedure is finalised.


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By P in North, FL on 1/21/2009


The customer has the right to see an appraisal that they pay for. If the bank pays for it, the customer has the right to see it. The request must be put in writing within 90 days of the application. If the bank paid for the appraisal, they can request that the customer reimburse them, before releasing the appraisal.

Look up: 12 U.S.C.A. Section 1691(e), part of the federal Equal Credit Opportunity Act.


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By Rup in Beaverton, OR on 1/22/2009


Thanks.

I did request for the appraiser document, and found out it was wrong. I mentioned it to the bank and they refused to talk to the appraiser themselves and asked me to talk to the appraiser. The fact is that the service contract is between the bank and the appraiser and I have got nothing to do with the appraiser. So when I talked to the appraiser, he refused to take any corrective action and said it's the bank that he receives instructions and requests from and the bank pays him, not me!

In simple words, I am just stuck in the middle...

Good day.

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