I received our appraisal today from NVR. The good news is that it is above our purchase price.
Now, prepare yourself for my rant.
The appraisal came back exactly $500 higher than the purchase price.
The appraisal process is ridiculous! The appraiser is provided with the purchase price of the home and is told about closing costs being rolled in. By providing this information, don't we already skew the entire process?
We're building a house that is 2888 sqft and has a ton of tech built into it, high-end kitchen cabinets, etc etc etc. Our final cost is less than $100/sqft. Our comps on the appraisal varied from 1900sqft to 2400sqft. We're the largest house with the most upside in terms of features, but we were not even valued close to the highest comp on the list.
The appraisal process has become very simple. The appraiser received the purchase price and specs of the home and proceeds to search the MLS for 3-4 similarly priced homes in the area. They list those similarly priced homes as the comps to validate the number, but don't consider anything about the individual houses (such as size, features, upgrades, etc). Its a simple "should I validate their purchase price??"
I believe that there should be more work involved to keep people honest. The appraiser should be given the prints and a list of included options - and they should need to seek out similar houses as comps and derive what the value should be with all of the included options from some formula. Quality of construction and materials used should all be considered in this formula. Visual inspection of the finished home should be required and should be very thorough. If the appraised value is much lower than the sale price it indicates a problem with the builder's pricing and that they are charging too much. If it comes in much higher, it means the builder is either selling at a nicely discounted price or they undervalue their homes and quality.
Our process has become a joke. Simply a formalized yes/no question to satisfy current mortgage legislation.
I agree. I don't know if you read about our appraisal fiasco. We are building a home bigger and nicer than any of the homes around here. The homes they chose to compare us to are at least 10 years old with lots much smaller than ours. Having a house backing up to woodlands and a creek, a lot twice the size of the comparisons, newer and nicer options, non of it was considered. We were appraised $17k under what they were charging us. We were told it was because we have a VA loan and it was a VA appraiser. But I still feel like they were overcharging us. We compromised and they gave in some and we are paying out of pocket for the rest. What I didn't understand is that this appraisal process all took place before they even broke ground. It was all based off of blue prints. It was a really frustrating experience. I guess just be glad it's over and you can move on. A real buyer will know the true value of your home.
ReplyDeleteWow...
Delete