Day 50

Another appraisal. Another value. In another post, I told you about the very low appraisal we got a few weeks ago. Well, we decided to bail on the bank that we were using, and that was dropping the ball in more ways than one. I ran into person after person there that would just not return my calls, or didn’t seem to be in a hurry to do anything. Even after resubmitting information to the appraiser we had through that bank, he would not change his valuation of the property and house.

My realtor mentioned that they had a client that recently had a deal done with another bank that went very smoothly. I found out who did it and decided to give them a call. By the end of the day, I had applied online and the mortgage person had printed off my application by that night. A morning or so later, she had already gotten an appraisal ordered. The appraiser called me by 10:00 that next morning.

So, we sat on pins and needles for the next half a day. I was expecting a few day process, because of how things had gone at the other bank. Not the case here. We knew the next morning that we got the value we needed!

We were going to be able to build and have the equity necessary to prevent carrying PMI (Private Mortgage Insurance). On a house the size of ours, PMI could be as much as $250/mo. I really did not want to have that kind of a fee added to our house note if possible. And with this latest appraisal, it looks like we won’t have to have PMI.

So, I am glad I switched over and went with this other financial institution. The only bad things about this part of the process: we wasted about 5 weeks of time with this other institution, and we now had to pay for the first appraisal. A sum of $425!

Overall, I am very happy with how the appraisal came out. Now, on to the next step.

Until next time…

Day 47

Low appraisal. I am so sorry for the dereliction in duty to this blog. It has fallen by the wayside this past week, and for that, I am truly sorry.

Last week, we had an appraisal done on the land and the plans. The bank has to do that so that they know how much they will lend on the construction loan. Well, it came back super low. Like lower than my cost to build. That is just unacceptable.

Just as I have alluded to in the past, the appraiser holds all kinds of power over you when you’re selling a house or trying to build. They can pull old comparables, as they did in my case, and really pull the value of your property down. This guy pulled a few comparables, and some of them were over 30 years old. Really guy? You’re going to try to compare a 30+ year old property to new construction? Well, it doesn’t work that way.

What was suggested to me is that I get our builder to submit a more detailed cost estimate. It would have the amount for concrete, framing, roofing, etc. Also, we are having the builder price it out as if he bought the land and we are purchasing it from him as a turnkey project. That is how many builders do their projects…they actually purchase the land and build the house. Then, you pay them their fee, and you roll it into a permanent financing. It is a turnkey project, because you pretty much get the keys from them and turn the key to your new house.

I hope this works. He didn’t over-inflate it, but really showed some of the costs to build. That way, maybe the guy will be able to give a higher value for our property and house that we’re building. If not, our only other choice at this point is to get another appraisal. That is another few hundred dollars, but it would totally be worth it.

Until next time…

Day 44

(UPDATE: I have updated this post on 2014.03.19. See the update in bold below.)

I met with the appraiser of the land and the plans today. We arranged to meet at the land, so that he could get some photos and get any details from me about the building process. I handed him a set of the plans, there goes $25, so that he could reference them in his report.

The appraisal process is flawed. It is so subjective. How they normally do it is that they pull comparable properties (comps) to what yours is, and they see what they sold for. They can usually go back about 6 months to get some accurate figures. That is where we will run into problems…all of the homes in the subdivision that we are building in are custom builds. This is good for us, because most appraisers, come to find out, will actually give those kinds of properties a higher value, just because they are more detailed and a littler higher end. I really hope that is the case here.

He was spouting off figures and asking for different things. I am really glad that my builder was there with me, because this guy was a fast talker. He was all into the lingo and asked me what the cost to build would be. I told him the amount, but my builder was very quick to say, “That is just for the structure. The cost of the lot was in addition to that.” Very good thinking.

Let’s just say that it was going to cost $200,000 to build this house. (It is not really the cost, but let’s just use that for this exercise.) If the appraiser had that number, he might say that the property is worth $250,000, because $200,000 is 80% of that amount. I’m not sure how it got down to this being all of the computations that they do, but it is. So, they don’t just have a scale or measure that says if the house is being built with this in it, and it is this size and it is in this area…this is the actual value. I wish that were the case.

I just hope it can come back with a decent value on the land and house. That way, we should be in an equity position with it. I really want to own at least 20% of it, so that I don’t have to pay PMI (Private Mortgage Insurance). It is not a lot, but even at about $65/mo it can add up. If you own 80% or more of your house, that is not required to be on your payments. (UPDATE: Boy was I wrong. I later found out that PMI would have been over $200/month, not the low amount of $65/month I previously thought.)

Until next time…