My $290,000 home’s worth what?

By Paul Donsky

The Atlanta Journal-Constitution

This is a story of how my $290,000 home was appraised for $115,000.

The tale begins in 2004, when my wife and I decided to buy a three-bedroom, two-bath 1920s bungalow in Ormewood Park in southeast Atlanta. It had been lovingly renovated by the previous owners, who’d also added a new master bedroom and dining room.

To keep our monthly payments low, we opted for a seven-year adjustable-rate mortgage. But earlier this year, as rates fell to near record lows, we decided to switch to a 30-year fixed-rate loan. We rang up our mortgage broker and began what we thought would be a quick, relatively painless process.

Everything went smoothly, including the required appraisal, it seemed.

The appraiser hired by the lender, Wells Fargo, took measurements and shot several photos as he tromped through our toy-strewn house.

He jotted a few things down on a form and left.

We put it out of our minds until mid-June, when the appraisal results arrived in the mail. I couldn’t believe what I read.

How could our house, purchased just five years before for almost $300,000, be worth just $115,000?

Didn’t the appraiser notice the pristine renovation? The original fireplace? What about the high ceilings, the plantation shutters, hardwood floors, granite counters and the spacious master bath?

Another shock: The $115,000 valuation was far below what our home had sold for in 2002, before being renovated and enlarged.

I called our mortgage broker, Nicole Ward, in a near-panic. The rock-bottom appraisal meant we couldn’t refinance; technically, we’d owe the bank much more than our house was worth.

Ward quickly talked me off the ledge. The appraisal, she said bluntly, was nonsense. She had consulted another appraiser who told her he’d have easily valued our home in the mid-$200,000s or higher. Ward said she was challenging the appraisal and would get back to us.

What is ‘comparable’?

In the meantime, I scoured the report to try to figure out what had happened.

The appraiser used three recent sales in our area —comparables — to generate what he deemed our house’s market value. But two of those sales were foreclosures. One nearby house had sold “as is” for $129,000. The other, located on a traffic-clogged main street a half-mile and a world away from our quiet street, had gone for just $80,000.

I decided to check on the higher-priced home. Its new owner welcomed me inside and showed off its handsome hardwood floors and shiny stainless-steel appliances. But he laughed when I explained why I showed up on his doorstep.

When he’d bought it, he said, the house was in terrible shape. The floors were covered with damp, mildewed carpet. The water heater was broken. Someone had ripped out and stolen the appliances. The kitchen sink didn’t work.

He’d fixed it up nicely, though it lacked the back porch and dining room our home has. But still, our bank’s appraiser had valued our home much lower than his — before he’d made any improvements.

Another appraiser we contacted was puzzled why the bank’s appraiser had used two foreclosures among his three comparables, when the vast majority of sales in our neighborhood were not distressed, including several that sold in the mid- to high-$200,000s.

The bank’s appraiser, at C&S Appraisal in Decatur, did not respond to a phone call or e-mail requesting comment. A spokesman for Wells Fargo said the appraiser was state certified and had been doing appraisals in the area for 15 years.

Success — and questions

Fortunately, our appeal worked. The appraiser added two comparable homes to his list that carried sale prices of $269,900 and $249,900. That bumped up the average to just below $200,000 — still far below what we felt our home is really worth, but enough to make the numbers work and send our loan through.

A Wells Fargo spokesman said the company takes appraisals very seriously.

“We hate it when we disappoint customers,” said the spokesman, Jay Lawrence. “In this case, there’s a process and it ultimately worked out.”

But the episode raises numerous questions about the appraisal process, not the least of which is how the same appraiser could have come to such startlingly different evaluations of the same house.

I’m certainly relieved we were able to refinance, but the entire affair was unsettling. How much is my home really worth? And I fear the low appraisal likely would have scuttled any attempt to sell the house at any price close to what we paid.

Luckily, we did not buy the home as an investment or with the expectation of flipping it for a profit. It’s our home, the place where we are raising our two kids. To us, it’s priceless.

For now, I have the luxury of not caring what the bank thinks.