My new dream farm is the victim of a bad appraisal!

[eponacelt]

Sorry guys, but I need to vent.

A few weeks ago, some might remember my excitement that our offer had been accepted on a really great little farmette. The place was perfect for me and my husband and our two horses and two dogs. I was comfortable with the price and frankly felt it was justified based on the great amenities - barn, fencing and cross-fencing, and riding arena. Closing was scheduled for next Wednesday.

Then it all went to cr*p. The appraisal came in OVER $100K lower than the contract price. We contested the appraisal because the appraiser didn't take into account the value of all the horse facilities - like the barn, arena and fencing. And were told by two different lenders that the appraisal was fine. So our deal is shot.

I'm heartbroken (not to mention homeless) that we've lost this place. It was the perfect little farm. And it came with a tractor. And a bushog and manure spreader. I've done all the research and pulled all the strings I can at this point. I'm fortunate in that I work in real estate (sort of) and have lots of appraiser and bank friends. Noone has been able to help me.

So I'm back to looking for horse property. And resigned to living in my very generous friend's teensy barn apartment with my husband and two dogs.

I have learned a valuable lesson though...no more working with big national banks. It'll be Farm Credit and local banks from here on out. I'm sick of being stuck in a giant meat grinder with no recourse. At least with local people, I can glare at the actual decision maker on the street if it doesn't go my way next time. :sadsmile:

Thanks for listening. Sorry for the rant.

[JSwan]

Aw crap. How disappointing - I'm sorry the deal fell through. :no:

[tidy rabbit]

Farms are really hard to finance. :(

I hope it works out and if it doesn't, and I know this is hard to believe right now, something better than you dreamed of will come along.

Would the current owner carry part of the mortgage for a while? That's what we had to do.

Can you get a different appraisal done?

Ask the appraiser to extend his area search for like properties? We had to do this.

[MrWinston]

Appraisals are BRUTAL right now. The banks want a guarantee that if they have to have a fire sale they won't lose. We just refinanced and were thrilled that the bank appraised our farm generously enough from what we paid that we actually would make back what our investments (stocks) lost even if we sold in this economy. That said, it's a new home, new well built barn and a beautiful property with new fencing (5 years old). It's appraising at about 200K less than it should be if we were doing it 5 or 6 years ago.We were lucky enough to find an undiscovered, undeveloped property and we did alot of the work ourselves. My husband built the barn himself, just contracted the slab and the roof.

I'm sorry that you are so disappointed but things should start to loosen up in banking and loans soon. If this property doesn't sell or becomes more affordable due to the poor appraisal, maybe you can still buy it. Good luck.

[kookicat]

I'm sorry. Life sucks sometimes.

[Sparky Boy]

That really sucks. Can you go with Farm Credit now or get a new appraisal?

[Cold Spring Farm]

That is terrible! To have everything set and then the rug pulled out from under you......urgh.

I know a really good mortgage guy in Middleburg who we have worked with for years.....great guy, straightforward, knowledgeable and very helpful. Let me know if you want his info -- just in case you decide to make another run at it and want another opinion/option.

[BestHorses]

That sucks! I had the same thing happen to me last year - the place we wanted to buy appraised at 20% less than our accepted offer. The seller wouldn't budge because when they purchased it didn't appraise at their price either. Their mindset was you either pay me x, or I will not sell to you!

Since we loved it, it was in the right location and nothing else on the market was even close in amenities, we increased our cash and reduced the mortgage to what the company was saying the place appraised for. Bleh.

We tried to get a different appraisal and questioned which comps they used, but it didn't change a thing. We found out the appraiser didn't even get out of his car when he came to visit! Of the four comps used, two were simply houses on similar acreage (um, hello, it costs money to put up fences, build a barn, riding ring, etc.) Two were actual horse properties, but IMHO completely different. On paper a listing may say riding ring, but a professionally graded ring with prepared footing is a far cry from a flat grass paddock used as a riding ring. Banks don't seem to care about details like that. It was so frustrating.

Good luck OP. I hope something even better comes along for you!

[ttldr1]

I wouldn't drop it off your radar just yet because if the sellers don't come down (substantially on the price) it will probably be on the market for quite sometime as anyone else that makes an offer is most likely going to have the same issues with the appraisals. That being the case the sellers will eventually decide to stay or come down on the price. Also consider that if the place is for sale due to the sellers falling into financial hard times the price will come down or worst case scenario (for the seller) it will be repopped by the lender and then can be picked up for much less than what the current asking price is.

[rckmeamadeus]

My parents are appraisers...unfortunately horse facilities do NOT add value to the propertym as much as we would like them to.

[Zu Zu]

So sorry to hear this - must not have been the "RIGHT" place after all - don't worry you'll find your "HOME" ~ chin up - keep looking it is waiting for you to find it !

[DLee]

What a bummer. :( We were not able to refinance our farm because of a ridiculously low appraisal. It's so important to get an appraisor who understands horse property. We're not bothering again for now though, another $400 wasted.

[Ajierene]

My parents are appraisers...unfortunately horse facilities do NOT add value to the propertym as much as we would like them to.

Yeah, I think property value is dependent on the area. A pool in Texas really increases value, but around here it does not and farther north it actually detracts from the value.

Similar with horse facilities compared to area it is in, compared to acreage, etc.

The amount of money you put in also does not always equate to the money you will get from it (yes, one of my favorite channels is HGTV).

[horsetales]

My parents are appraisers...unfortunately horse facilities do NOT add value to the propertym as much as we would like them to.

Unless they're a gov't appraiser and they want to raise your taxes ;)

When we refinanced they main-line loans would only consider the home and home-like structures (detached garages) and up to 5 acres. If you needed the other stuff included it had to be a farm loan. You could talk to your local farm buraeu and see what companies they recommend for horse properties.

[LisaB]

I was just going to say that, horsetales. You need to go through a horse/farm mortgage place and find another appraiser. Around here, farms can be appraised higher with facilities if you go through the right channels and the right mortgage company.
My instructor's place has the house attached to the barn sorta. There's a breezeway to put crap in plus an apartment so it was a bear trying to find a mortgage company to deal with that. Interestingly enough, Suntrust did it.
I would try to find other means.
Hell, they comped our house which is over 150 yrs old on 8 acres with frigging ranchers on 2 acres. Appraisers and mortgage companies are a nightmare to deal with right now.
Don't give up!

[MistyBlue]

eponcelt...sooo sorry to hear that. :no: How disappointing.
As others have mentioned...right now in much of the country appraisals have been coming in low. Pretty low. Banks expect many homes to be foreclosed on now and are getting a lot tougher on not only credit scores and interest rates, but even more-so on appraisals. Not to mention the unstable market fluctuations still going on in some areas.
It sucks out loud, but it is what it is. :sigh: And it is affecting the good credit risk folks in a negative way...like the old saying goes, "A few bad apples spoil the bunch."
Also like rckmeamadeus stated...in a huge amount of areas farm buildings and fencing doesn't add squat to an appraised property. (and like horsetales said...unless it's the town wanting it's property taxes, LOL) If the property is a working farm/business and the loan is for that purpose...then good outbuildings and fencing might matter to the property's value. If it's a private property with horse facilities...nope. My husband even though that when we built the barn and cleared some land on this property that he could add those costs directly to the value of the property. No sweetie, we're going to eat that $65,000 or so...at least mostly. The cleared land is worth more on the market value than the barn is. Neither mean diddly on the bank appraisal. Not enough to count anyways.
Our barn, clearing and fencing help on the market value a bit....my area is known to have a lot of horsie buyers looking. A *good* barn means a lot more buyers. Not necessarily a ton more money, but at least more interest. But then there's the issue currently of if we were selling...what our property would be worth to a horsie buyer isn't the same as the bank would deem it worthy of mortgaging.
My sympathy on the loss of the sale. Do keep an eye on it though...it won't sell anywhere near it's current price if nobody will mortgage it unless someone comes in with a hefty percentage of that price in a down payment.

[1Walks1Trots]

I'm so, so sorry this happened to you. I know how you feel because it happened to us. Our appraisal came in 33k lower than we needed it to, and that's after the price was dropped 50k!! We tried everything. It was completely frustrating. The appraiser only valued our horse barn at $5000. It's not big or fancy, but holy cow, you couldn't replace the shell at $5000. It's finished, has stalls, electric, water, gutters, you name it. Our old, crappy tobacco barn? We got $5000 for it on the appraisal! Makes no sense. Fencing they gave us around $2000 on the appraisal. I'd like to see them fence three pastures for that mount. It was awful. We ended up having to have the sellers carry the note for the amount above appraisal and us having to deal with being "upside down" for many years.

One option, we were able to liquidate half of our 401 k if used to buy a primary residence within 30 days. We feel like it was a good investment compared to what our 401k was earning (or rather losing) lately. That might be an option to help you get into your place. You probably know that with your contacts, but it was worth putting out there.

Good luck to you and I'm so sorry. I know how you "mentally move in" when you find a place!

[Schune]

Wow, that's rough.

If this was a residential property, I'd say possibly go back to the sellers to see what their response was. In this economy, people are just grateful to break even on their home or property's value, and not have to write a check at closing.

But since this is a farm and the appraisal came in at 100k+ less than the settled price... that stinks. Just flat out stinks. I second trying to find a company that specifically works with farm/land mortgages; if you find one, they might have an appraiser they use.

[trubandloki]

Unless they're a gov't appraiser and they want to raise your taxes ;)



:yes: So freaking true!

Our property is current appraised for tax purposes for the amount of all the building permits put together plus what we paid for the land. No matter how many Realtor appraisals we tried to show the tax assessor to prove there is no way in heck our property is worth that much they would not lower the assessment. They insisted that since that is what we paid for all the pieces that is what it is worth.

[arabhorse2]

My parents are appraisers...unfortunately horse facilities do NOT add value to the propertym as much as we would like them to.

Exactly.

I had my farm appraised recently, and even with the improvements I've made, it came in only slightly higher than when I bought it.

The barn and fencing were not included at all; only the house and acreage were considered.

[danceronice]

I agree with the suggestion to find farm/ag appraisers. And did you have the outbuildings inspected? Condition is everything. I'm lucky in the house I'm closing on today appraised above the selling price (we made them knock money off because of a couple roof issues) and is insured for almost double the sale price, but the three garage/sheds...well, the suggestions have ranged from "You might want to fix them up" to "Have you considered burning them down?" The area is zoned residential/ag and the insurance estimates were VERY different depending on which company I talked to--the locals and the Farm Bureau agency had a very different view on value.

I would HIGHLY recommend using a local credit union as your lender--that's actually been the easiest part for me (caveat--my credit is good and assets are such that I could almost buy the place outright, so they were happy to work with me.) I asked my realtor for a suggestion and the local lender has been very easy to work with--when I call the office, I get a real person, he knows the area, and knows my realtor in person. When we had pricing issues and the inspection, he could be on top of things, and his office and the insurance company I went with are able to work together easily as both are local. I also went with a local inspection company that has 20+ years and even runs training for state inspection programs. Know they area, know my real estate agent, know my bank. It all helps a lot, especially when you, like me, are a less-traditional buyer (and I think they think anyone who wants to be out in the "boonies" is a little weird!)

Is your realtor an ag/farm specialist? I would ask for suggestions for local banks or credit unions and ditch the national lenders. Citibank and such have their place (but do NOT get me started on Bank of America, who will be losing my business as soon as I have a checking account at the credit union open!) but it's not in special-insterest area lending.

[CatOnLap]

tax appraisals and bank loan appraisals often have little in common. I have never paid full tax appraisal for a property, usually substantially less, because the tax people want your property to be worth as much as possible so they can charge YOU for it and THEY make money. I have always gone back to the tax people and shove my actual purchase price in their face and had my tax appraisals lowered on appeal at least 3 times because of it.

The Bank wants your property to worth as little as possible because if you default, then THEY will still make a profit and only YOU will lose money. Screwed blue both ways I am afraid.

And in most instances, horse facilities in residential or semi-urban areas are not adding much to the value even if they cost an arm and a leg to put in. I had one person approach me on a "cold call" to try and buy my farmette. ( he loved the location and the size) Our house is 60 years old, but our barn, rings, fences, sheds, etc are all in good repair and less than 15 years old. So all starry eyed, thinking some rich guy has come to make an offer I can't refuse, I listened. He figured, since the tax appraisal was a certain amount, and because he'd have to remove all the buildings as he didn't want horse property and the house "is worth bulldozing" ( true, but sheesh!), that he was being generous in offering me about $100K under the tax appraisal value. Which is about half the commercial value of the property right now. It seems like no-one has a clue in this business.

Anyway, Epona, do keep your eye on the property- at least once, because I maintained an interest in a place I wanted to buy, that had fallen through (they sold it to someone else with a higher offer) I ended up getting the property. The original buyers ran into troubles about 2 months later and the realtor called me and I bought it the same day, at the price I wanted to pay and less than what the original buyers had offered.

[Saidapal]

Would they be willing to lease with an option? They are going to run into the same problem with the next buyer so they might consider it and they won't have to make the mortgage payment. Get a lease for a few years until the market turns around. A good RE lawyer can draw one up that will be fair to both of you.

[eponacelt]

That sucks! I had the same thing happen to me last year - the place we wanted to buy appraised at 20% less than our accepted offer. The seller wouldn't budge because when they purchased it didn't appraise at their price either. Their mindset was you either pay me x, or I will not sell to you!

Since we loved it, it was in the right location and nothing else on the market was even close in amenities, we increased our cash and reduced the mortgage to what the company was saying the place appraised for. Bleh.

We tried to get a different appraisal and questioned which comps they used, but it didn't change a thing. We found out the appraiser didn't even get out of his car when he came to visit! Of the four comps used, two were simply houses on similar acreage (um, hello, it costs money to put up fences, build a barn, riding ring, etc.) Two were actual horse properties, but IMHO completely different. On paper a listing may say riding ring, but a professionally graded ring with prepared footing is a far cry from a flat grass paddock used as a riding ring. Banks don't seem to care about details like that. It was so frustrating.

Good luck OP. I hope something even better comes along for you!

You could be describing exactly the situation we're in AND the bank's response to it! We figure all the improvements cost at least $90K to put in. The appraiser's estimate? $20K.

Bleck.

[appaloosalady]

If you have a local farm bureau, contact them and ask who they would use for farm appraisals. Good luck! DH and I went through the same thing when we bought our farm 17 yrs ago. It took a lot of trying, but we finally managed to get the appraisal we needed - hope you have the same outcome :).

[ReSomething]

Both CoL and Saidapal have good advice - keep a serious eye on this farm. It's amazing how flexible people can be after it sits for a while.

[BuddyRoo]

Also, please keep in mind that now that they've had an appraisal 100k less than what they were "willing" to take, anyone else who makes an offer is likely going to have the same issue--so the sellers may have to come down on their price.

In all honestly, aside from your disappointment, this is actually kind of a good thing. If you had gotten into a loan for that amount and then the property was adjusted after the fact, you'd lose if you had to get out from under it. This way, if they drop the price and you get in there, chances are that you'll end up with some serious equity in a few years as valued bounce back.

Hang in there.

[FatPalomino]

Besides keeping an eye on the property, I heard that if you did an FHA appraisal, then it will stick to the property for a year. So, no one with FHA can buy it.

Someone told me about a acreage property that the buyers, two lawyers, were getting a great deal on. The FHA appraisal came back around $10K less than the (steal of a) selling price. Little old man selling the farm was screwed.

BUYERS contested the appraisal (to no avail). The buyers had negotiated for a bear trap to be included in the sale. So, the buyers made an agreement to purchase the bear trap for the difference of the appraisal. Basically, the seller owner financed the bear trap for the gap ;)

You could look into this (have the seller owner finance say $50 or $75K), and refinance in a few years, when the market stabilizes and pay off the seller.

On properties we're buying, we're doing the appraisal first thing, because there have been so many problems. But $100K off... that's just crazy.

[Threebars]

BUYERS contested the appraisal (to no avail). The buyers had negotiated for a bear trap to be included in the sale. So, the buyers made an agreement to purchase the bear trap for the difference of the appraisal. Basically, the seller owner financed the bear trap for the gap ;)
.

One, that is just AWESOMELY clever, :lol: and two - Kudos to the buyers on trying to keep things good for all parties involved!!

[Fancy That]

Even though it sounds like you've been down all avenues....if this is truly your dream home, keep trying.

Perhaps the sellers will come down in price, or you can find a farm-friendly appraiser and lender.

I feel your pain. We just bought our dream ranch 6 months ago, and almost lost the deal due to a ridiculour FHA requirement on the "well agreement" of all things! They literally said I needed to get the 3 neighbors to sign an ammendment to the well agreement, that included the verbage that FHA needed to see. It was almost a deal breaker....and we had to be very creative to make it happen.

If there's a will, there's a way :)

[SGray]

when I bought the appraisal came in low so seller financed my purchase -- then a few years later I refinanced my note after the place had appreciated

[eponacelt]

Thanks everyone for all the good ideas and well wishes. Unfortunately, the seller just refinanced last year, and the refi was for about $60K more than our current appraisal, which is why owner financing probably won't work. I am looking into whether there is a possibility of assuming that mortgage, but its not looking good right now. We'll see.

And I will keep my eye on that property...you can bet on that!

[foggybok]

It's rough out there now. We just tried to refinance and got nailed on the appraisal. They used a house down the road as a comp that was so bad it was essentially a tear down...And another comp was 30 miles west of town in the rainy area...and the 3rd only had 2 acres...none were appropriate... But around here there are not many comps to use, so we had no choice...they went by sf of the house, not by the property (which is set up for horses and of a size that you can't get this close to town in a nice neighborhood......)

I'd keep an eye on the property and see if you ca nwork something out with the owner

Good Luck!

[FatPalomino]

Epona- does that mean the sellers only owe $40K less than what they are asking?
Ouchers. So many people are so far financed, it's scary.

[Seal Harbor]

It's rough out there now. We just tried to refinance and got nailed on the appraisal. They used a house down the road as a comp that was so bad it was essentially a tear down...And another comp was 30 miles west of town in the rainy area...and the 3rd only had 2 acres...none were appropriate... But around here there are not many comps to use, so we had no choice...they went by sf of the house, not by the property (which is set up for horses and of a size that you can't get this close to town in a nice neighborhood......)

I'd keep an eye on the property and see if you ca nwork something out with the owner

Good Luck!

Sounds as though you had the same genius that I did when I went to re-fi my house. Size of house and close to mine where the only requirements. However I have a larger lot than all of the comps. The rest were on postage stamps. King county has also re-assessed everything and flip -flopped the value of the land and house, now the land according to them is worth 2.5 times more than my house, yet to the appraiser it wasn't. Go figure. Even the folks I was dealing with to get the re-fi were blown away and couldn't believe it. They figured it was a cake walk.

[FancyASB]

Oh this brings back memories of when I was buying my place in 2005. The appraiser came up the hill to the mountains from Sacramento with her high heels on. She knew nothing about horse property, wells, streams, ponds, fencing, barns, outbuildings, etc. She didn't even know houses still had septic tanks. I started all over with a local bank and local appraiser and it came in above my offer which was nice; wouldn't happen probably in these times. Years ago my Mom was having her house appraised small horse property and the appraiser compared it to a tract home on "Equestrian Lane" he was so stupid he thought it was horse property. He never got out of his car to appraise my Mom's house. Her house looked small from the front but was 3,000 sq ft and the horse facilities were in the back which you couldn't see from the road. I helped her and got another more knowledgable appraiser. I have "farm" home insurance thru the local co-op and they were a big help in finding a knowledgable bank and appraiser of "farm" property when I was buying my place. Good luck!!!!!

[sidepasser]

Have you tried this company?

http://www.mortgagemade4you.com/farm_mortgage.htm

I know nothing about them so be careful and check them out, but they do make farm and horse property loans.

[foggybok]

Sounds as though you had the same genius that I did when I went to re-fi my house. Size of house and close to mine where the only requirements. However I have a larger lot than all of the comps. The rest were on postage stamps. King county has also re-assessed everything and flip -flopped the value of the land and house, now the land according to them is worth 2.5 times more than my house, yet to the appraiser it wasn't. Go figure. Even the folks I was dealing with to get the re-fi were blown away and couldn't believe it. They figured it was a cake walk.

LOL, probably! I think this guy was from Seattle....

Yup, no value for the land and riduculous comps...The loan agent was shocked and the realtor said the guy was crazy.....

We also have nice salt water and mountain views which usually count for something and he listed "neighborhood" as the view....

His total assessment of the property was less than the county assesment for land only......