Real Estate Appraisals

A recent experience has got me wondering how many errors are made in the home mortgage industry.

Ginny and I are in the process of applying for a Home Equity Line of Credit (HELOC) so we can do some improvements to the house in the next few years.

As part of the HELOC application, they did an appraisal of our house.

When they got the appraisal back, they informed us that our original loan offer had to be revised because the value of our house was significantly lower than our own estimate.

For privacy’s sake, I’m going to be referring to the house prices as P+$??? where P is the original purchase price and ??? is the difference from the purchase price.

Back in May of 2009 we refinanced our house … we got a good rate, reduced our term to 10 years, and started paying taxes & insurance ourselves.   During the refinance, the mortgage company had an appraisal done … the house value was determined to be P+$45k.   Not a bad increase in value over 9 years.

A few months ago we started the HELOC application … and I gave the P+$45k amount as the estimated value of the house.   The bank, however, had their own appraisal done … but it came back with a value of P+$10k!

Obviously there’s something wrong here … considering what we’ve done to the house (new windows, new HVAC, new floors, new driveway, etc), I would expect their appraisal to be somewhere in the ballpark of the original.   So I asked for a copy of the appraisal.

Not only did the appraisal not mention any of the improvements we did to the house … it had the number of bathrooms wrong.   Clearly they were going on some form of public record for the value.   Something like a ‘drive by appraisal’.

I mentioned this information to the bank’s loan processor … and she said they would request an on site appraisal be done.

I got a call from the appraiser and we scheduled it for the following Sunday morning.   I showed her the house, mentioning the improvements we had done, and she was on her way.

Today I finally got a response back from the bank … the new appraised value is P+$55k.

I wonder how many home mortgages suffer from this kind of problem?

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