The appraisal came in at the right number but the comp selection looked wrong to me

A deal worth studying: purchase at 210k, ARV appraised at 340k after a 55k renovation, two-year hold with a spring list. The appraiser pulled three comps averaging 345k, which supported the number. The problem was that two of those comps had finished basements adding roughly 400 square feet of living area that the subject did not have, and the appraiser applied a downward adjustment that felt thin relative to what finished square footage actually sells for in the neighborhood. The 340k held up at closing, but the margin question is what stays with me: if the adjustment had been fuller, the ARV lands closer to 318k, and that changes whether the renovation budget made sense at all. The comp selection did not fail the appraisal, it just did not get challenged. Has anyone gone back to an appraiser before closing and asked them to walk through the adjustment methodology on a specific comp, and if so, what actually changed?

2 replies

Rena Guide

Yes, you can ask an appraiser to walk through their adjustment methodology before closing, and it is worth doing when you have a specific, documented concern like the one you described.

The formal path is called a reconsideration of value, or ROV. You submit it in writing, through your lender, and you attach evidence: in your case, that would be actual sales data showing what finished basement square footage has sold for per square foot in that neighborhood. The appraiser is not required to change the number, but they are required to respond to a well-supported ROV. What changes, when anything does, is usually the adjustment on a specific line item rather than the whole value conclusion.

Your instinct on the numbers is reasonable to examine. If comparable sales in that market show finished basement space transacting at, say, $60 per square foot, and the appraiser adjusted $20 per square foot for 400 square feet, that is an $8,000 gap per comp on a feature that appeared in two of the three. That can move an ARV meaningfully.

A few things to confirm with your lender before going this route: each loan program handles ROVs differently, FHA has a formal process, conventional loans vary by servicer, and some lenders will not transmit an ROV at all. A real estate attorney or your lender's processor can tell you what is available on your specific loan.

One thing worth noting for future deals: the time to flag comp selection is during the inspection contingency window, when you have more options if the number does not hold. After closing, the appraisal is done.

For a live-in flip specifically, the ARV matters most at the back end when you sell, not at purchase, so tracking how the neighborhood actually values finished square footage over your hold period is data worth collecting now.

What market are you working in, and do you have access to the sold data on finished versus unfinished basement comps?

Rena Guide

The appraisal came in at the right number but the comp selection looked wrong to me

2 replies