A Lender’s Appraisal Does Not Care About Your Upgrades (update)

Real Estate Agent with EXP Realty 414-525-0563 57026-90 Broker


As first time buyers become first time sellers we hear it over and over...Yes But we have a __________.  It is a shiny penny market....and the yes buts keep you even with what is expected, what the home is compared to in the market....Thank you Tony ! Read on...

Hey Folks!

A few weeks ago I had a very popular post about appraisals. It addresses how lenders establish value. I also put links to Fannie, Freddie, and FHA guidelines. In fact you can read it here:

A Lender's Appraisal Does Not Care About Your Upgrades

Yesterday I was working with a new prospect. They had their appraisal done with a different lender and were very, very upset. Now I'm going to copy the points the client feels were overlooked:

"Tony - Below you will find notes I made that the appraiser didn't note.  She was in my house a total of 6-7 minutes and most of that time she was just measuring rooms. 

My upstairs laundry room is not even shown on the plan she included in the appraisal. 

The room she has labeled as a utility room is really an office area with built in cabinets, countertops, filing cabinets, etc.   My laundry is located UPSTAIRS which isn't even shown on the appraisal!    My office area counts as another room, making the room count 9, that is probably where the mistake was made in the room count.  I know she seen the laundry area upstairs because I specifically pointed it out. 

According to the blue print she made and the printed amounts of the measurements, the square footage is incorrect.  The only area not usuable living space would be the stairsteps. Even in the foyer area, their is furniture.  Maybe she didn't count the office area that she labeled as utility?  On the 2nd floor?

Also, even though the basement is calculated differently, I have a 5th bedroom in the basement.

 There is balcony/attic  storage space in the garage. 

there is wood beadboard paneling and a shelf in the master bath area.  No, there is not a whirlpool, but there is an antique and restored clawfoot tub which costs as much as some whirlpool tubs. 

 I don't know if it matters, but I have 2 heat and air units, one for upstairs and one for down.  Many of the 1.5 story homes do not have that added feature. 

 Every closet in the house is a walk in except for one!  On the additional features she only noted "Walk in Closet" meaning only one. 

 Under exterior description the "other" box should have noted that their is an outbuilding storage which looks like a child's playhouse.  It is painted and trimmed out of compliment the residence.

 Also, on the blueprint their should have been a patio drawn next to the screen porch and out past the kitchen window area.

 Why are all the comparables are 1.5 story and mine is a 2 story and their is no adjustment for this fact? 

 1. There is a disposal (won't make a huge difference, but it should be accurate)

2.  The square footage is low,  according to my blueprints.  I will measure it myself tomorrow.

3.  I have build in bookshelves in 4 places in the home.  Was this mentioned?

4.  Baseboard and door and window trim is wider and nicer than those in the homes being compared.  (I have been in several of the homes that were compared.)

5.  Rural or suburban, or does it matter?  I am 15-18 min. from the east end of XXXXXXXXXX.  According to various definitions, suburban is on the outskirts of a large city. Rural is large expanses of open country.  I live inside the city limits of XXXXXXXXXX, there are over 100 homes in my neighborhood, and I am 15-18 min. from the east end of XXXXXXXXXX.  Many people in XXXXXX XXX. commute to XXXXXXXXXX for work.   

6.  Even though it is 15 min. from a major city, my view is way above average.  When you see beautiful horses in your backyard and a wooded area with a stream, that view beats most I have seen in this area. 

7.  THere are 2 open porches, 1 screen porch, and one patio.

8.  THe landcaping is extension, probably $15,000 and much more and nicer looking than the comparables.

9. Yes the home is 12 years old, but it got a brand new roof a few years ago, painting last summer, and new ceramic tile in bathroom.  To say that the home is "average" and the others are "superior" is debatable.  Again, I have been in some of these homes.  The pool difference, I understand, but the other homes did not have a pool.

10.  I have 4 areas with built in shelving.  I have wall to wall built-in book cases in the family room.  THose were not noted or photographed.  I have built in book shelves in the kitchen, the basement, and one of the bedrooms.

11.  Why is the sq. footage listed at $60 a foot when the others are more and when I paid $85 a square foot when I built the home?

12.  What does 25-75% built up mean?  XXXXXXXXXX XXXXXXX is 100% full.  There are no more lots available for purchase.

13.  XXXXXXXXXX XXXXXXXX is not typical of other neighborhoods in the area. XXXXXXXXXXX, which has comparable lot sizes was $10,000 less per lot when I was purchasing and home values in that neighborhood are lower.  The subdivisions across the road contain MUCH smaller homes and lots.  XXXXXXX XXXXXXX on the other side has comparable homes, but not lot sizes!
14.  Room count wrong.  Not counting bathrooms, I have 9 rooms, 1 utility room and 2 1/2 baths.  The master bath is actually 3 areas.  The appraiser noted that this house "goes on and on". 

As you can see I will have my work cut out to help explain the appraisal. Of course every appraisal is open to interpretation but overall the company did a good job with the value analysis. The problem started with the mortgage broker not explaining the appraisal, they just emailed it.

We must remember that we are the professionals. We get paid to help our clients not to upset them. This client's "hot button" is her home. A professional recognizes this should have presented the appraisal in a professional manner, not just hitting "forward" on an email.

I'm sure I can help her and will update the post.

Folks, most homes are financed. These appraisal standards are very important when you price. Remember we are in a Lender's Market. Nothing will turn a buyer off more than working hard on a price agreement only to find out the appraisal comes in short. So to best serve our clients remember that most of the weight for your pricing strategy must be Lender comps.


At your service,
Tony Grego
Senior Mortgage Banker  American Bank - Indianapolis, IN Branch
www.tonygrego.com to learn more about me

317-348-0280 direct line
317-536-3754 fax
"Bankers with vision, helping people with dreams!"

Posted by

Sally K. & David L. Hanson, ABR, CDPE, CSS, e-Pro,ILHM, REDS

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Barbara Kornegay
REMAX Essential - Wilmington, NC
Wilmington NC Real Estate, Homes

Price it right! 

Price it right!  

Price it right!

Oh it is so important to be up front and honest with our clients on the value right now...  This is a great post and I hope some potential sellers read it and learn!!!!

Feb 27, 2010 10:11 PM #1
True Real Estate - Osprey, FL

These are good points. Ten different appraisers will come up with ten different numbers anyway!

Feb 27, 2010 10:14 PM #2
Maggie Dokic | Miami, FL | 305.81.HOUSE (46873)
eXp Realty LLC - Miami, FL
GREEN, CDPE, SFR, Pinecrest | Palmetto Bay |

Oh my...Tony has a considerable task at hand. 

Feb 27, 2010 10:20 PM #3
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

There are some things you have to do just to stay "even" and that is what sellers do not want to believe.

Feb 27, 2010 10:27 PM #4
Randy Ostrander
Lake and Lodge Realty LLC - Big Rapids, MI
Real Estate Broker, Serving Big Rapids and West Central MI

Appraisers seem scared these days. It always bothers me when an appraiser asks for a copy of my purchase agreement. How that plays in determining value I just don't see. Truly amazing how foreclosures even at half price of what they have sold for in the past are still only "valued" slightly over purchase price.

Feb 27, 2010 10:37 PM #5
Dick and Dixie Sells
Sells Real Estate, LLC - Trinity, FL
Realtors, Tampa Bay Florida Homes For Sale

Yeppers, it has to appraise. That is the biggest hurdle in our market. I wait to see how Tony's discussion goes. I hear the frustration in the seller's notes. I feel their pain. However the reality we live in is just what it is. And even a smart cash buyer should have an appraisal and a contengency in the contract that the property must appraise for contract price!

Feb 27, 2010 10:55 PM #6
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Here....appraisers have always asked for the offer...and amazingly, the appraisal always is quite near the offer....value ...hmmmm

Feb 27, 2010 10:56 PM #7
Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv
REISA - 317-663-4173 - Indianapolis, IN

Thanks for the re-blog and spreading the message


Feb 28, 2010 12:12 PM #8
Russel Ray, San Diego Business & Marketing Consultant & Photographer
Russel Ray - San Diego State University, CA

I think the days of the Buyer's market and the Seller's market might be a thing of the past. Now we have Lender's market.

Feb 28, 2010 12:38 PM #9
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

Now there's a point...I am going to use that...coin it...dollar it...mortgage it !

Feb 28, 2010 12:46 PM #10
Sharon Alters
Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL
Realtor - Homes for Sale Fleming Island FL

'Lender's market' - that's a good description of where we find ourselves. Thanks for reblogging this, Sally and David.

Mar 18, 2010 02:17 PM #11
Sally K. & David L. Hanson
EXP Realty 414-525-0563 - Brookfield, WI
WI Realtors - Luxury - Divorce

u r most welcome !

Mar 18, 2010 02:26 PM #12
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Sally K. & David L. Hanson

WI Realtors - Luxury - Divorce
For All Things Wisconsin Real Estate...Call the Hansons
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