patrick.net

So I just bought a house, close at the end of the month. Price is fine, mortgage payment will be less than equivalent rent by at least 20% and the PITI is less than 18% of my income (Not counting wife's at all)

Now that all of that is out of the way, I noticed something interesting on the appraisal. Granted, I consider myself to be a local market "expert" (its why I bought this particular house afterall) I was thinking we probably paid about 35K under comp value. I On the appraisal we bought it for 7k under appraised value. No big deal to me, it appraised and that was all I was looking for I guess.

But in looking at the appraisal more closely, a few things jumped out at me:

1. The report identifies 5 total comparable sold homes in the last three months with a median price of, lets say 250K. It specifically uses three comparable homes in the determination of the price; the lowest of these three is 275K. It is not possible to have a median 250K of a group of 5 numbers in which 3 of the five all exceed 250K by definition.

2. The report quotes prices declining 15% YOY in this marketplace. I would say that is ambitious because Case-Shiller pegs it at about half that, and I have been studying this market for the past six months and I would say it is flat, but again, whatever. Then she adjusts the sale prices of each comp based upon this 15% YOY decline. The only caveat is, on all of the comps, this is done incorrectly. For example, she reduced in price a comp that sold two weeks ago 2.5%, and another than sold 6 weeks ago 4%. Those are 90% and 40% annualized declines by my math.

3. All of the comps are in a similar, within one mile, neighborhood. But there is a difference and anyone who drove through these neighborhoods would see that. One neighborhood is all brick homes on wooded lots with lake or golf course views, where the comp neighborhoods are stucco/siding in new developments, where all of the trees have been cleared and one backyard backs up to another, without any lakeview. My neighborhood has homes that are on average 1000+ sq ft. larger, and sell for and are listed for 100K more or so. Again on the average.

Basically, I think with all of the garbage that happened with appraisals a few years ago, the appraiser now just goes to the house, looks around, looks at the contract purchase price, eyeballs that that is a fair price, and adds 5-10K for the appraised value. Then she massages comp numbers to back up that price.

All of that would be fine except I paid $450 for it. That is is complete ripoff, especially for an absolute forgery like it is. I really resent paying such a sum for something that really has no value at all, nor basis in fact. The bank wants it to loan me the money, and it appraised so I guess thats all good...but I just hate the fact that $450 of my hard earned money went into the pocket of this moron just because she took a night school class on real estate appraisal. I am quite certain the highest IQ in the class including the instructor didn't top 90.

#housing