My house is worth WHAT?!

**eastsidechris** · July-30-09, 04:34 PM

My wife and I like being Detroiters and we love our place in East English Village â€”great architecture, fancy plaster, leaded-glass doors and windows, good spaceâ€”so weâ€™ve decided to stay for the long haul. Weâ€™re trying to refinance our 7-year ARM [[it adjusts in a couple of years) to a 30-year fixed. The bank sent an appraiser from Lake Orion last week. He took some pictures and was in and out within half an hour. Today, we received a copy of his appraisal: $20,000.

The new appraisal is 87% lower than one we got almost 2 years ago when we were going to try to fight our taxes. Now, given the current economy, we werenâ€™t expecting that high of an appraisal this time around, but know the house is worth more than 20 grand! If we put it up for sale at that price, it wouldnâ€™t last a day. Even these days, a nicer home in the neighborhood would run you $100,000, if not $20,000 to $40,000 more.

What really infuriates us is that the six comparable sales he used against it were all foreclosures [[only a couple were even in the same style, most had major issues we could see from the street, and some were not even in EEV), selling for around $20,000. We need to paint the outside trim, but our house is by no means run-down.

I have to wonder if this guy even understands the real estate market of a decent neighborhood in Detroit, or if he just kind of assumed that all the houses around here must be worth next to nothing.

Has this kind of low-balling happened to any others of you on the board? If so, is there any way to fight it? Because as of right now, it looks like we arenâ€™t going to refinance any time soon and the $300 fee we paid for the appraisal is wasted money.

Also, apparently low-balling appraisals has become a real problem the last few months across the country:
http://moneyfeatures.blogs.money.cnn...ll-appraisals/

2blocksaway · July-30-09, 07:08 PM

Why do you assume because he is from Lake Orion he does not know anything about Detroit?

I say eat the $300 and go to a different bank. You shouldn't have even paid the $300 upfront.

I am in a similar situation and the appraisal came back low so I decided not to refinance and just let the ARM adjust and I didn't pay anything. My rate actually went down for the next 12 months.

His low appraisal is a result of years of simple "drive by" appraisals which contributed to todays mortgage mess.

**eastsidechris** · July-30-09, 07:48 PM

Originally Posted by 2blocksaway

Why do you assume because he is from Lake Orion he does not know anything about Detroit?

I say eat the $300 and go to a different bank. You shouldn't have even paid the $300 upfront.

The Lake Orion factor: I find it hard to believe that somebody who truly understands the Detroit housing market could not find ANY legitimate house comps for us. Of course he would find our house to be worth $20,000 if he only compared it to foreclosed houses of that were about the same size as our house! For example, one of the houses he used as a comp is located on a dilapidated block of 3 Mile, and has a "Bank Owned, $10,000" sign out front and is covered with boarded up windows. How could he seriously say our house is even remotely worth the same as that one?

As for paying the $300 fee, we had no say in that matter [[nor about who would appraise our house) and had to pay it up front. Check out the link I attached to the original post--when these banks can choose their own appraisers, many of the appraised values coming out recently have been suspiciously low. The article all but comes out and says that it looks like there are shady appraisers who are in cahoots with the banks.

2blocksaway · July-30-09, 07:56 PM

Originally Posted by eastsidechris

The article all but comes out and says that it looks like there are shady appraisers who are in cahoots with the banks.

They are but it doesn't have anything with him being from Lake Orion.

If you paid upfront $$ you got played.

My broker didn't charge me anything for the appraisal when I didn't go through with the re-fi.

**eastsidechris** · July-30-09, 07:57 PM

Another article on the low-appraisal trend, this one about Michigan appraisals: http://www.mlive.com/news/grandrapid...eforms_ap.html

**iheartthed** · July-30-09, 08:01 PM

Your house is only worth what a buyer is willing to pay for it. The closest barometer that the bank has for what a buyer will pay for your house is to look at what people recently paid for houses in your area. If your neighborhood has a lot of houses being auctioned off for $20-$30K then that is about what your house is worth. Because if you try to sale your house today, you won't get buyers who are willing to pay you $100K if they can buy the house next door for $20K.

This is called the evaporation of wealth.

My suggestion would be to hold off for as long as possible in hopes of a moderate rebound. But my gut says that rebound ain't comin' no time soon.

**RickBeall** · July-30-09, 08:15 PM

Get another appraisal, this time from someone who actually understands the local market.

**grumpyoldlady** · July-30-09, 08:16 PM

I know this is a totally different situation, but we had our farm home and property appraised and the appraiser also used comparables that weren't comparable. He also left off many features of the home...dual heat sources for one, and claimed that our gutters were "in good shape for the age of the home". OUR HOME DOESN"T HAVE GUTTERS!. He worked for a major property appraisal firm in this area and we complained and they did another appraisal that was much more accurate and came in considerably higher. If this appraiser works for someone else, it is time for you to complain long and loud, and if he doesn't, I'm sure there is a state agency to complain to.

**McIPor** · July-30-09, 08:16 PM

My suggestion is to talk to your current bank / mortgage company about a Loan Modification. The banks are doing them now for properties in distress. My mortgage was modified to 2% for 40 years.

You have to intend on staying in the house, and show hardship which almost any Michigan resident now can. Upside down mortgage, lower income, etc. The banks are doing this now to help stop the foreclosures. My mortgage is with Citibank.

**eastsidechris** · July-30-09, 08:33 PM

Iheart: I completely understand what you are saying. I have a friend in real estate who is already doing another comp search for me, so hopefully he'll have some better news for us.

2blocks: The fact that he's from Lake Orion isn't the issue for me. It's the fact that Lake Orion is 40+ miles away from my house. Assuming he works a similar 40 mile radius all the way around from his office, that would mean he appraises houses as far away as Flint, Brighton and New Baltimore. That's a lot of territory to cover, and I couldn't expect him to be an expert on the housing markets of all points in between. For comps, it would seem that he just relies on what the computer --not common sense-- would tell him. I wonder if he even knows the difference between, say, East English Village and English Village, or if Detroit is just Detroit to him. That --coupled with the fact that he was in and out of my house within 30 minutes -- makes me suspect that he 'phoned in' the appraisal. If you read those articles I've given links for, you'll see that I'm hardly the first person to question the validity of appraisals done by 'hired guns' who are not local appraisers.

**eastsidechris** · July-30-09, 08:40 PM

MclPor: Thanks for the tip on loan modification. I'll have to look into that.

Grumpyoldlady: I left out that there were errors on our report as well, including that he shortchanged us over 200 square feet as compared to our 2007 appraisal, which is quite interesting because my wife says she never saw him measure any of our rooms. I'm already starting to check into what state agency or group I can file a complaint with.

**buildingsofdetroit** · July-30-09, 08:43 PM

The fact that they're using foreclosures for comps is absolutely ridiculous. You can't compare a nice house to something someone either walked away from or was kicked out of. For example, there's a house across the street from mine that is a bank short-sale for $2,000. Why? Because the jackass took everything out of the house from the furnace to the kitchen cabinets. Now, I paid more than $100,000 for mine three years ago [[I bought two years too soon), and if I were to sell, that'd hurt me. But you can't compare my house with the stripped one. They're on the same block, but they're not in the same league.
Two coworkers of mine bought a house on the Boulevard north of Vernor for $20,000 a couple of years ago. A steal. They sank $15,000 into fixing it up [[A/C, alarm system, finished the attic into living space, etc., etc.). They tried for more than a year to sell it at $80,000. No dice. They get a buyer two weeks ago who offers $65,000 on it. The comps come back at $18,000 because two houses in whatever radius they use were foreclosures that sold around $13,000.
That's down right criminal.

Downtown diva · July-30-09, 11:21 PM

i am sure it is all becasue your appraiser is from Lake Orion.

You see in the suburbs, the appraisal communiuty is taught to appraiser the suburban properties at a higher value.

Find yourself a resident of Detroit appraiser....

go to appraisalinstitute.org....what you will find is a very small handful of appraisers who actually have offices in Detroit.

Your Lake Orion appraiser was propbably right, by the way.

The true value of your house is what someone is willing [[and able) to pay for the house today.

The real question that you should be asking yourself is "what would YOU be willing to pay for your house today, KNOWING EVERYTHING THAT HAS HAPPENED TO THE REAL ESTATE MARKET"

If you think it is 120,000, then I have a house that I'd like to sell you...i got a couple.

Downtown diva · July-30-09, 11:23 PM

Originally Posted by buildingsofdetroit

The fact that they're using foreclosures for comps is absolutely ridiculous. You can't compare a nice house to something someone either walked away from or was kicked out of. For example, there's a house across the street from mine that is a bank short-sale for $2,000. Why? Because the jackass took everything out of the house from the furnace to the kitchen cabinets. Now, I paid more than $100,000 for mine three years ago [[I bought two years too soon), and if I were to sell, that'd hurt me. But you can't compare my house with the stripped one. They're on the same block, but they're not in the same league.
Two coworkers of mine bought a house on the Boulevard north of Vernor for $20,000 a couple of years ago. A steal. They sank $15,000 into fixing it up [[A/C, alarm system, finished the attic into living space, etc., etc.). They tried for more than a year to sell it at $80,000. No dice. They get a buyer two weeks ago who offers $65,000 on it. The comps come back at $18,000 because two houses in whatever radius they use were foreclosures that sold around $13,000.
That's down right criminal.

that is not a short sale, BOD.

WHat you are talking about is a foreclosure....

Short Sale = A sale of a house in which the proceeds fall short of what the owner still owes on the mortgage. Many lenders will agree to accept the proceeds of a short sale and forgive the rest of what is owed on the mortgage when the owner cannot make the mortgage payments. By accepting a short sale, the lender can avoid a lengthy and costly foreclosure, and the owner is able to pay off the loan for less than what he owes. See also deed in lieu [[of foreclosure).

Downtown diva · July-30-09, 11:28 PM

Originally Posted by McIPor

My suggestion is to talk to your current bank / mortgage company about a Loan Modification. The banks are doing them now for properties in distress. My mortgage was modified to 2% for 40 years.

You have to intend on staying in the house, and show hardship which almost any Michigan resident now can. Upside down mortgage, lower income, etc. The banks are doing this now to help stop the foreclosures. My mortgage is with Citibank.

why screw the banks becasue you couldnt meet your mortgage payments?

Why is it my responsibilty as a taxpayer to bail out a bank becasue he has been forced to eat a mortgage that you are unwilling to live up to.

why is it their fault or responsibility to eat your mortgage?

who are you, Kwame Kenyatta?

**Lowell** · July-30-09, 11:37 PM

Take to new assessment to the city board of assessors and demand that you taxes be lowered to reflect the new 'value'.

crawford · July-30-09, 11:43 PM

$20,000 sounds pretty fair to me for a nice house in East English Village, at least for this point in time.

All the talk about architecture and leaded glass is basically meaningless. It does not make any difference for 99% of people. Almost all people primarily care about resale value, schools, taxes, services, and safety.

Keep in mind that a majority of houses within Detroit city limits are currently basically worthless.

Wait a few years, and maybe things will turn around, but the estimate does not sound unreasonable.

**mjs** · July-30-09, 11:47 PM

I hear there's alot of short sales out there. Problem is that the banks often drag their feet on them. A $80,000 property with a $100,000 mortgage is valued on the bank's books as $100,000. If they approve a $80,000 short-sale, its value immediately becomes the $80,000 they now have. If the law allows them to write loans for say five times their assets, that signature just cost them a $100,000 loan.

Its why the banks sometimes keep title tied up even if nobody has made payments in years. This is much more common when fraud is involved and Wayne County has more title fraud than most anywhere because it was taking six months to a year for a deed to appear in the chain of title.

Several of the appraisals were also so high they bordered on fraud. Some mortgage companies would call up their favorite appraisers and tell them they wanted a 80/20 loan and then tell them what the buyer was willing to put down. The appraiser then knew that his appraisal had to come in so the selling price minus the cash down was 80% of his appraisal. Since those loans were getting bundled together for wall street, the mortgage company never really faced any long term risk.

**mjs** · July-31-09, 12:05 AM

Originally Posted by Downtown diva

why screw the banks becasue you couldnt meet your mortgage payments?

Why is it my responsibilty as a taxpayer to bail out a bank becasue he has been forced to eat a mortgage that you are unwilling to live up to.

why is it their fault or responsibility to eat your mortgage?

who are you, Kwame Kenyatta?

Because, if someone can't make their mortgage payments, the only choices the bank has left is foreclosure, short sale, or modification. The bank decides which of those three will happen; not the homeowner. If a homeowner could make their payments and just simply chose to stiff the bank, the bank can get the court to seize other assets to cover any shortages after a foreclosure.

The bank gets screwed because they didn't do their job. It was their responsibility to make sure the buyer would either be able to make their payments or a foreclosure could pay off the mortgage. Bankers get paid good money to do their jobs and stock holders also get paid well when they do. The cluster fuck came when the bad banks and bankers were supposed to lose to the good banks and bankers, but the government had to get involved.

Banks are in the risk business. If there was no risk, loans would be alot cheaper. I'm still clueless as to why its the taxpayers responsibility. Ask your congressman.

**Eastside** · July-31-09, 08:43 AM

Hey eastsidechris--

I'm a longtime EEV resident and the $20,000 appraisal seems quite low to me. You may want to call Tom at T. J. Stevenson Apraisals and have him take a look. I've used him in the past, he's reasonable, lives on the eastside and understands the market. He can be reached at 313-885-8808.

Good luck!

**McIPor** · July-31-09, 08:50 AM

Another appraiser won't change anything. Even if they triple the appraisal to $60,000 from $20,000, you will still be upside down and unable to refinance. Your ARM will expire, your payments will go up and you'll choose to stay or walk away.

The other option of a loan modification doesn't change the principal of the loan, it changes the terms to encourage you to stay in the house instead of walking away.

Thats good for the banks and everyone else if it halts the foreclosures or owners walking away from properties.

**davewindsor** · July-31-09, 08:53 AM

Originally Posted by Eastside

Hey eastsidechris--

I'm a longtime EEV resident and the $20,000 appraisal seems quite low to me. You may want to call Tom at T. J. Stevenson Apraisals and have him take a look. I've used him in the past, he's reasonable, lives on the eastside and understands the market. He can be reached at 313-885-8808.

Good luck!

Yes, but a lot of lenders won't let you choose your own appraisalist, so it's a waste of money. Which banks do you use that let you do that?

**sumas** · July-31-09, 10:07 AM

We also live in EEV. A $20,000 appraisal is nuts. Two years ago, we had 13 homes in foreclosure on our block alone. All sold for well over $20,000. Happy for us that all new owners have invested significant sums in home updates. Only one nutter in the bunch!

Our home, bought by my parents in 1965 was $18,000. Mom is still alive so taxes are very low compared to others. We have watched property values go up and down for decades. EEV has stayed a very stable and desirable community. 16 years ago our property was valued at 140k. Now it would probably come in at 60k. It is a modest but very well maintained colonial.

I agree with Lowell, take the assessment and get your taxes reduced. After all, new home buyers can take advantage of NEZ tax breaks. Capitalize on this accessment if you can.

Glad you are in for the long haul. I do assure you that your house will go way up once again in value with an improvement in the economy.

Always good to chat with a neighbor.

For those who don't know EEV. We have a tremendous community organization. We get better than average police response. Our streets get cleaned, the dead Ash trees were removed and replaced with new trees. Streets were recently repaved and we even have weekly curb side recycling. Low crime and great neighbors, young and old. Super diversity.

crawford · July-31-09, 10:33 AM

Originally Posted by sumas

We also live in EEV. A $20,000 appraisal is nuts. Two years ago, we had 13 homes in foreclosure on our block alone. All sold for well over $20,000.

Two years ago, the median home sale in Detroit was 3x what it is today.

A $20,000 appraisal sounds reasonable. It isn't 2007. Deal with reality.

**Novack** · July-31-09, 11:39 AM

Originally Posted by crawford

A $20,000 appraisal sounds reasonable. It isn't 2007. Deal with reality.

What is that?

This poor F$^&%& guy finds out that his house is worth 10 percent of what it was and probably owes something close to the same on the house. And you want to be glib about it. Let the guy bitch and maybe just maybe be a little supportive of his situation. Shit...I would burn the mother f@#$@%$ thing down and be giving you the bird from my moving van window. What kind of neighbors do we have in Detroit anyway?

sorry to hear that your place isn't worth what it was. I hope the market turns in the next few years and seeing you actually like living here, you can afford to wait it out.