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Getting the Best Home Appraisal

Ylan Mui

It's been a long road to refinancing.

We scrutinized every detail of the offer from our lender and locked in a great rate of 5 percent. We thought we were golden -- until we had to submit our home to an appraisal. It came in $5,000 below our purchase price, which meant that we would have to make up the difference with cash in addition to paying closing costs.

We were stunned. We bought our house just six months earlier, in November. Shouldn't the true market value of the house be what we paid for it? We also had another appraisal done just a few weeks earlier, when we were considering working with a different lender. That one came in $5,000 over our purchase price.

The mathematical difference between the two appraisals wasn't huge, but it made a big difference to our bottom line. We had to cancel our loan with the lender (and lost the nonrefundable $620 lock-in fee) and signed up with the one with the positive appraisal. It was a humbling experience, but it also made me realize just how subjective home appraisals can be.

The two appraisals compared our house to completely different properties. One defined the neighborhood as a compact, four-block radius. The other used a scope that was much too broad. One took note of the thousands of dollars we spent upgrading our in-law suite, while the other ignored it entirely. One deducted $3,000 from the home value for each fireplace in the properties. The other reduced the value by $3,500.

Let's make this even more confusing: According to the appraisal by the D.C. government, the house is worth $719 less than our purchase price. And on cult real estate Web site Zillow, the estimated value of our house is $200,000 more than we paid for it. That makes my heart beat like it's 2005!

A recent article in the Boston Globe subjected this theory to even more rigorous testing. The reporter used several online appraisal sites and got real-life estimates for a 1,600 square foot condo in the city. The values quoted were all over the map.

I tried to chat up the appraiser who came to my home each time, offering him water or juice and -- of course -- gushing about the house: pointing out the original wood trim and floors, the pocket door in the dining room, the washer/dryer downstairs. Lenders Quicken Loans has some interesting video that walks you through a home with an appraiser to help you get a sense of what he or she looks for. I'm sure our appraisers thought I was just being pushy!

So how much is our house really worth? The appraisal definitely doesn't measure the amount of laughter when we invite friends over for dinner, the quiet peace of reading on the sofa in our bay window or the pride of finally being able to offer family a place to stay when they visit. The appraisal is just a few numbers on a page. For me, our home is priceless.

By Ylan Mui  |  May 28, 2009; 7:00 AM ET
Categories:  Mortgage , Ylan Q. Mui  
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Comments

So how do I get the best home appraisal? I don't think I get to choose who appraises my home, do I? The appraiser is chosen by (and contracted to) the bank.

Posted by: janedoe5 | May 28, 2009 11:04 AM | Report abuse

Something similar just happened to me. Based on my latest tax assessments from Loudoun County and the Town of Leesburg, which historically have been on the conservative side, I applied for a refi with a 4.75% fixed rate. As part of the deal, I had to pay a (non-refundable) $500 fee for an appraisal from a company chosen by the bank. It came in $25,000 lower than the county and town assessments, so the bank denied the loan. In effect, I paid the appraiser $500 to hose me!

Posted by: jprice2 | May 29, 2009 8:11 AM | Report abuse

I'm having the same problem with my lender. How were you able to refinance with little or no equity?

Posted by: niki1718 | May 30, 2009 3:34 AM | Report abuse

"We were stunned. We bought our house just six months earlier, in November. Shouldn't the true market value of the house be what we paid for it?"

HAHAHA - Are you really that thick? True market is what someone will pay NOW. Again, bwahahaha. Thanks for the morning laugh.

Posted by: popopo | June 1, 2009 10:47 AM | Report abuse

Ylan, I gotta agree with logic behind popopo's statement. There's been a true decline in what buyers are willing to pay since November. You ought check some of these websites that continually track market data - trend data is available on sites like redfin.com (http://www.redfin.com/city/12839/DC/Washington-DC), trulia.com (http://www.trulia.com/real_estate/Washington-District_Of_Columbia/) and others.

I hope the refi is worth the money. A lot of folks might be reaching the point where the cost of the refi is greater than the sticking with the existing loan terms.

Posted by: chumbucket | June 1, 2009 11:34 AM | Report abuse

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