Probably no permit and poor workmanship, the key is poor workmanship.

There was a permit and the inspector listed it as excellent. So, sorry, that's not it.

Where Is the 260 sq ft part of the house? Is it located in a detached garage? Is it heated space?

Yes, maddielee, it's located in a detached garage. It is cooled and heated.

This article may help, your realtor should have known this.

4 areas that appraisers will not include in sq. Footage

Thank you maddielee. So why has the county appraisal district counted it as living space all this time?

And what about the bathroom in there? Does it count as anything?

Incredible!

How far below the agreed upon price is the appraised value?

$30K

Our realtor just left. Looks like the appraiser just didn't like our house. lol He priced our house less per square foot than all the houses within 5 miles of us. He left out one house in our neighborhood that sold at way less, but it was also a fixer upper. One of his comps was a house with a one car garage and it is still listed as pending on realtor.com.

Our realtor suggests that we let them out of the contract, lower our price to take out the office and it will still be $15K over the appraisal, and see if we can get another offer this week.

Appraisals are coming in low all over, although 30k is REALLY LOW. I recently had issues with an FHA appraiser, (Not on value), but with repairs. This was the second time around with these buyers and this same appraiser. (Lucky us). Because so much time had passed in between the two appraisals, the buyer actually qualified for a conventional loan. They flipped over to conventional and we are closing 3 weeks later. If your buyer feels the appraisal is too low and it certainly does sound crazy not to count the additional space. If it will be included with a conventional loan appraisal, see if your buyer loves the house enough to see if they qualify to switch to conventional. Im confused as to why your agent wants you to reduce the price, is she now saying you need to reduce the price because it wont appraise with a conventional appraisal where the space will count either?

No, it's like maddielee said, originally we counted 260 sq ft that was in a detached garage. So taking that off, his appraisal is still $15K below compared to the comps he used. So our realtor says to reduce the price so it reflects the going rate per ft with only the sq footage in the house. He didn't mention asking the buyers to switch to a conventional mortgage. I guess that is their decision. After seeing the appraisal, we lowered our price more than we would if we go back on the market. But first we get our own appraisal.

I'm used to selling prices being well above tax appraisals.

Me too - selling prices are well above tax assessments in our area. But, again, tax assessments don't necessarily have much to do with real estate appraisals.

Because you are the seller and not the buyer, you don't have a right to examine the appraisal. It is the property of the lender. They won't share it. Because it is an FHA appraisal, a different set of examination standards are applied to the appraisal. There is probably only one FHA certified appraiser in your area. If your purchaser selects a conventional loan, another set of standards will be applied and you may get another appraiser.

As a retired appraiser, let me explain that your finished area in the garage has been included in the valuation. It's on another line within the appraisal. If it is heated, it will be considered as finished space and given a value. It will be treated as an accessory structure. The finish and utility of an accessory structure won't be as high as the finish and utility of the main home. Without having examined it, my guess is it's is equivalent to a finished basement and I would treat it as such. That means it is accounted for, just not within the grid for the main house.

Never confuse what the county does with what a real property appraiser does. They aren't equivalent. They are similar in some ways but they are entirely different approaches to valuation. I know that sounds contradictory. As I said, they aren't equivalent.

I'm not reviewing the appraisal, but if they didn't use a sale in the immediate area, it was because the house wasn't comparable for some reason. We can't see the appraisal to know for sure, but there should be a note in the remarks section that explains why the sale wasn't used. It's probably because your home condition is so superior to the other that they can't be compared without ridiculous adjustments. My educated guess is excluding this property helps you.

About the pending home, sometimes appraisers will use a home that is pending because it is a supportive comparable. It will be a fourth or fifth comparable on the second page. It's not really used to determine the final valuation, rather it's used to make a point about the market or a specific feature of your home that is not included in the main set of comparable properties. For example, this property could have a detached garage with a finished feature such as your office, bath and kitchenette. Even though it's only a one car garage and yours' is a two car, that's an easy adjustment. Finding finished detached space is not as easy. That's why they added this as an additional comparable. It is clearly marked as pending and not sold. The appraiser may have contacted the sales agent and made inquiries about it's sales price. While no specifics would be given, enough information can be exchanged to get a pretty good idea of it's pending sale. If it is supportive of your sales price, you could wait until it closes and try again.

Appraising is a mystery to many realtors. They know just enough to be dangerous and not enough to explain it clearly to a puzzled buyer or seller. They learn a lot along the way, but there will be things they won't understand. Your choices are to either lower the price to the appraised FHA price in order to allow the buyer to qualify for the loan, the buyer finance using a conventional loan, find a cash buyer or let the sale lapse.

It is fairly typical that a separate garage space will not be considered living space, even if finished. Can your buyers still buy the house? Are they unable to get a conventional mortgage?

I do not like FHA sales, for this reason.

midceenturymodernlove, I don't know if the buyers will still buy the house. We are giving them until tomorrow to decide. There has been no mention of them getting a conventional loan as far as I know.

We do have a copy of the appraisal. He expanded the market area "due to lack of market activity and to help bracket the subject in condition."

We do live in a very stable neighborhood where there might be one house a year go on the market. We haven't had any houses on the market for the last 3 years and this year there have been several. We also live in a neighborhood where there might be a house with one acre next to a house with 20 acres.

The first comp on his report was 3 miles away and backed up to a water treatment facility. He used it because it has a detached garage with habitable party room and bathroom. The houses there do not sell as well or as fast as the houses in the subdivision next to ours. He only used 3 houses from that subdivision even though there have been at least 10 that have sold since June. And they are within the one mile radius. He also didn't use one down the street that had 11 acres, even though he used others with different acreages and deducted the difference.

And he did use the pending home to make the final valuation.

Another thing he did that our realtor pointed out was that he did not give any value to our storage building, even though it has electricity. Yet he valued one of the comps at $10K. It was a metal building and ours is wood frame and slightly smaller. He gave another large metal building the same $10K. For two storage buildings without electricity, he gave the same 0 value that he did ours. On his building sketch, he didn't show our storage building either.

Was your realtor there when the appraiser came through and did he provide his recommendation on comps? This is common practice where I live, especially in situations where there have been low recent comps or if a house has a view or other attributes that make it more desirable than comps. Realtor needs to be diplomatic not pushy but can help make sure appraiser has accurate information.

No, my realtor wasn't here. I was here just to answer his questions like how old was the addition, etc.

Edited to add: We're back on again. The buyer's decided to come up. I just talked to the neighbor whose house is pending and used as our comp. The appraiser made a deduction there listed as :Listing Act/Sls" I asked our realtor what it meant and he said the appraiser is estimating that it will sell that amount under the list price. I asked my neighbor about it and she said it appraised at their list price. If we weren't back on again, I'd be upset all over again.

Boy will I be glad when this is over.

Appraisers and inspectors can be a funny lot sometimes (not so funny if you're the seller). A friend in NJ lost a sale of their property in the spring of 2008 - inspector spoke of things that did not exist on the property and had an attack of the vapors over a huge support beam in the basement - had the sellers convince that the entire house would fall in upon moving day. Seller got a structural engineer out who said the beam in this 80 yr old house was solid as a rock and could not imagine what the inspector was thinking. Deal still fell though - first time home buyers were scared off. Of course by fall, the economy had tanked and it took them over a year to finally sell the house for tens of thousands less than they originally thought they had sold the home for. They complained but apparently appraisers and inspectors are accountable only to God (or the Devil!).

Just to clarify, your home is the subject property. It will be treated as the basis on the form and the adjustments will be made to the comparable properties. On the line where the kitchenette, bath and office is noted, there will be plus and minus adjustments made to the selected comparable properties features. In this case, he found a detached party room. It was the best he could do under the circumstances. Even though the location isn't as nice, he will have accounted for that less desirable location with a location adjustment.

As I suggested, he had to go quite a distance to find an accessory structure, thus the free standing party room feature comparable. He thought your kitchenette, office, bath had value and needed to be included. It was hard to find something nearby in similar condition to your home, that's why he went so far away and to the casual observer ignored other closer properties. He probably gave the location on that comparable an increase because of the treatment plant adjacent.

This is where appraising becomes as much an art as science. The appraiser needs to adhere to a set of rules and practices that require he use some comparable properties that seem puzzling to the layman. Rest assured, appraisals are reviewed by review appraisers on a pretty regular basis for use of good practices.

The comparable property that was under contract was not used in the final reconciliation of valuation. It wasn't comparable one, two or three. It was on another page as comparable four, five or six. These are supportive properties. It may seem as if it were used in the valuation, but it really wasn't.

Good luck on your closing. I'm glad you were able to salvage the sale.

Even though the location isn't as nice, he will have accounted for that less desirable location with a location adjustment.

He should have, but he didn't. He didn't make any location adjustments. He also didn't have to go very far to find a similar property. There is one down the street that he didn't use at all and one about a mile away that he also didn't use. They were listed as party room for the swimming pools, but still had a finished room, a kitchenish area, and a bathroom.

I do think all six comps were used in the valuation. If you add all the totals, divide by six, you get the exact number he valued ours. If only 1, 2, and 3 are averaged, it is an even lower value - over $40K lower than the sale price.

Well, the appraiser under values them and the county assessor over vales them.

I suspect when a house is "overvalued" the seller is none the wiser. The appraisal is done by the buying party (usually the financing party for the buyer). A buyer isn't going to advertise to the seller they are buying at a bargain price! But, a buyer will definitely use a low appraisal to renegotiate a lower price (and therefore would have to inform the seller).

All I know is that I had been watching comps in my area for months before we listed and both realtors we interviewed said we needed to list it higher than the price we wanted and did list at. And we got two contracts the first weekend, both $10 over list. So you're right, who does know?

Oh shock. A Realtor suggested listing a home at a price higher than the would-be seller client thought.

Sounds like one of the agents got the listing - and the house appraised well below list.

Pricing a house can be an art rather than a science. But at this point, lending money to ppl is more of a science. So if somebody wants someone to cough up a few hundred thousand dolLars for them, the hoops have to be jumped through.

Second appraisal is in. $20K over the 1st, and is about $5K over our adjusted list price now.

You probably won't get a look at it. But, it would be interesting to compare the different comp selection. Thirty days and two or three new closings can make a big difference in market.

Second appraisal, while $20K over the first was still $10K below the original selling price.

Hi missouribound, I'm very interested to learn if your home closed. We have a very unique passive solar contemporary home on a 20 farm and there aren't really any comps. Buyer is FHA.