In the process of obtaining a refinance and just got my appraisal back, and it was a fair bit lower than we expected. There are a few points where I concede that "reasonable minds may differ" as to comparable property adjustments, but I was perplexed by the following:
1) I live in a ~50 home neighborhood, built in the 1970s, with very similar house structures of modestly varying size and quality.
2) Two houses have sold on my street in the last 6 months, one more updated than mine, and one equal-or-less. They sold for about $270/sq. ft, with prices in the mid to high $400,000's.
3) 18 months ago, the house literally next to mine sold for $240/sq. ft., and that house required an extensive renovation to update the home to even approach the level of finish in my home.
4) The comparable houses listed in our appraisal report run the spectrum of $214 – $330/sq. ft., with an average and median in the $250s. The appraisal report estimated our house at $216/sq. ft., lower than anything I have seen in my neighborhood by at least $30/sq. ft.
The reason? Our home was renovated some years in the past, and a bedroom was converted into a den, and our 2 car garage was converted into a 1.5 car garage to increase finished living space. This ultimately turned my 1500 sq. ft. (finished living space) home with 4 bedrooms, into a 1900 sq. ft. living space home with 3 bedrooms and a den. However, when the 1900 sq. ft. home is stacked up against the three other 1500 sq. ft. homes without such modifications, the appraiser penalized my home value.
400 sq. ft. of added living space was valued at $16,000 ($40/sq.ft.), yet I was penalized $10,000 for the garage adjustment and $10,000 for three bedrooms.
Obviously markets vary, but does this make sense? How is a home that has 25% more living space worth less than the same structure with a larger, unfinished garage? Further, would it be worth fighting over the tiny value attributed to the increased square footage?
Thanks in advance for your input!
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