Time your refi appraisal to get the highest loan?
A client of mine wrote me about her refi:
So, the question: we are in the midst of refinancing, and the appraisal has come in low ($470K). Got any advice on challenging an appraisal? Also, there are 2 potential comps on the market right now. Both are Sale Pending. One was listed as a comp but not weighed in the result, as far as I can tell (I assume because sale hasn't closed). The other was not considered, perhaps because it wasn't yet UAG as of the time the appraisal was done last week. I know they won't necessarily turn out to be helpful, but is it ever possible to find out from a seller's agent when the closing is supposed to take place, and even what selling price was agreed on? I think we have enough cash to basically repay a bunch of the principal and take a much smaller refi loan, but we'd prefer not to have to do that. If we can bump the appraisal up by even 20K, that would make a big difference.
This question brings up two things that I have been thinking about bringing up, here at Boston.com:
1. Should you time your refi, so that you can take advantage of the higher prices that show up in the spring?
In every market, bear and bull, the housing prices around here are higher in the spring and early fall, relative to the rest of the year. When the prices were double-digit inflating, it was harder to see. But even then, summer and the dead of winter were still the times for the lowest prices.
Even now, prices are going up in several towns compared to last winter’s sales. They are likely to go down as the year goes on. This happened last year, too. Many towns showed price gains in the first half of the year, but fell overall in 2008.
Has anyone had luck with timing their re-fi appraisals?
2. How deep is the loss for owners who bought at peak? There is a lot of talk about this, statistically. But averages don’t tell the real story. In the real world, how much have you lost?
I set up a survey, so that you can report your loss without saying who you are. Click Here to take survey
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Interesting survey. I hope you will be kind enough to share the results!
I'd be more worried about getting whipsawed on your interest rate. With the dislocations in the bond market, it's not uncommon for rates to bounce 0.5% or more in the matter of hours. Remember those 4.5% rates that were going to save the market? Didn't last too long. I've seen rates bounce over 6% for a 30 yr fixed in the last couple of weeks. Every 1% rise in interest rates adds roughly 10% to your monthly costs.
Interesting article. There is always a good time and bad time to do just about anything. Whether it is having an appraisal done on your house, or giving up drinking.
Timing your refi appraisal to take place during the "peak" periods may make the difference between a yay or a nay from the lender, depending on how much you owe. But can anyone please explain why, within the past two weeks, interest rates have jumped as much as 1.5 points for a 30 year fixed mortgage? I was all set to refi thinking I could go from my 5.875% to 4.5%, only to be told "you should have come in yesterday". This surely is going to disappoint a whole lot of people trying to refi their way out of a tight money situation......not to mention eliminate scores of people trying to purchase a home. What's up with this? Is this just an unexplainable blip in the rate or have the 4's gone the way of the dinosaur? This trend seems counterproductive to me and has far reaching effects that will surely hurt more than just the housing industry.
We refinanced last month at a rate of 4.69 (we bought a point). Despite the fact we had gutted the kitchen, redone floors, insulated the entire house, put in a pellet stove, the appraisal came in 8k less than when done last summer when we bought our house. We challenged the appraisal & the comps used as they were smaller houses, with fewer bedrooms & were in complete disrepair. We offered 5 other comp houses that were closer to the condition of our house. No movement in the appraisal. In the end, we did re-fi b/c of the amazing fixed 30 year rate. We just had to have about $6500 to do the re-fi i/o rolling the closing costs into the loan. While we were initially annoyed at shelling out closing costs, it ends up being a good deal for us b/c we plan to be in our house for at least 10-15 years & we are saving $250/ month. So we are not taking a loss.
How about your advice for challenging the appraisal? Similar situation affected my attempt to refi and the appraiser omitted a favorable comp that was the most recent sale and most similar in size and location. I estimate ths omission is going to cost me thousands. Advice please.
The problem is that housing prices are simply not stable and continue to move down. With few homes selling, outliers (either too high or too low) can easily skew the determinations. I find it hard to believe that any lending institution now would allow a loan based upon seasonal / short time snapshots of home pricing. It would be interesting to know what type of timeframe appraisers are using and how trends are being factored into their equations. Has is changed in the current market climate? If trends are factored in, then waiting for a home to sell, with the hope that it might bump up the comp, may not be the best strategy.
A good appraiser realizes there are ups and downs in the market. They certainly understand the differences between the spring market and winter market in New England. I just got an appraisal. Appraiser can go back as for as 6 to 9 months to find comps. There was a flurry of big sales in October and November of last year that will counter balance some recent weaker sales this spring. I would recommend having your agent provide you MLS access, you can track sales for the last 9 months. I gave my appraiser the properties I felt were comps. Hes used 3 of them. Lot's of places are under contract, but it is taking forever to close due to financing. I locked my rate at 5% a few weeks ago, because I saw the sales on the market tapering off. If i waited any longer, the comps from the Fall would not have helped me. As it turned out, interest rates shot up as well. I felt comfortable with a .65% rate reduction to lock in the rate. No need to be greedy as Bobby pointed out. Rates can shoot up fast.
I have *never* in alomst 15 years, find that a borrwer or real estate agent is able to provide comps that are usable for the appraiser. Pain truth here: don;' waste your time.
S - you bought a house and then gutted it. Of course the appraiser is going to use houses that are in complete disrepair, as your is in ...complete disrepair (defined as repairs not finished yet)
EH- I'll be glad as a borrower to show you the comps I gave my appraiser. Actually twice. Once in January. refi'd in Feb. Again in May, refi'd this week. It's not rocket science. Both appraisers used 3 out 5 properties I showed them. they had to feel like they did something for their money and chose 2 other properties.
Size, quality, location. How difficult is that?
As an appraiser and appraisal trainer/supervisor for 9 years, I have often seen a 5 to 10% fluctuation between the spring and winter markets during normal market cycles.
As for using comps that are 9 months old to get a value, that's not so valid in the current market. Appraisers and lenders are telling me that the underwriters that review and sign off on the appraisals want to see comps that are "fresh" so that they can see what is really going on with values in the CURRENT market. That is no different than it was during the last couple of slumps in the real estate market.
The criteria for a good "comps": "the nearest, most recent and most similar sales available". That leaves a lot of interpretting up to the appraiser but there are also guidelines about how much larger or smaller a "comp" should be and the maximum percentage of a comp's value that can be adjusted for location, condition, size and features, so what looks like a comp to an agent or borrower, may not really be a good comp to an appraiser.
Either way, it doesn't hurt to submit sales that you feel should be good comps to the appraiser.
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