HELOC appraisal issue

[littlebird]

My husband and I bought a house in Miami's MiMo neighborhood in 2014 for $290k w/ 20% down. It's a legal duplex, 8,000sq ft lot, 3br, 2ba downstairs and 2br, 1ba upstairs. According to Zillow, our house is estimated to sell for $475k (their private zestimate is $507k). The median home value in 33138 is $413,300. 33138 home values have gone up 13.3% over the past year and Zillow predicts they will rise 2.2% within the next year. The median list price per square foot in 33138 is $307, which is lower than the Miami average of $412. The median price of homes currently listed in 33138 is $510,000. The median rent price in 33138 is $2,200, which is lower than the Miami median of $2,300.

We want to do renovations to the house (hurricane windows, bathroom renovations, etc) so applied for a HELOC with Third Federal. Immediately, they send us an automated, driveby appraisal valuing our house at $330k. They used comparables that were 2 years old, had our zoning incorrect and the house listed as single family. I pulled together 15 comparables and wrote a detailed list of what was wrong with the appraisal and after a month, they said "We're sticking with the drive by". So, it was a massive waste of our time. 

We don't want to go through this again. Is there any bank that has a better reputation with appraisals? Third Federal said they wouldn't even look at our appraisal dispute until the loan application was complete and the underwriters had officially denied the loan based on the appraisal. That took a month. 

I'd love any advice on the best way to avoid this. We've already wasted so much time AND had to go through our first hurricane without impact windows (luckily the hurricane mostly missed us). 

Thanks in advance

[StartingOver10]

You have a couple of distinctive issues here:

• Zillow is not accurate in any sense of the word.  The Zestimates are automated valuation type algorithms that do not take into account the condition of your current property, the view, the type of property (except in a general sense) and other very important criteria needed in an appraisal.  In fact, the CEO of Zillow sold his own home in California this year and the Zestimate for his home was off by 40% (yes, you read that right).  In other words, in his case, the zestimate was $1.75 million and he was only able to sell it for $1.05 million.  This is not uncommon.  The zestimates are known to be off - substantially either higher or lower. 
• The drive by "appraisal" (not worth the pixels it took to produce) suffers from the same bad information that the zestimate utilized. 

You need a lender that will give a loan using an actual appraisal.  HELOCS are underwritten by fewer lenders. You are better off using a small regional lender and ask them straight out if they use automated valuation systems or if they will send out an appraiser. Stay away from the big box banks - they are very conservative right now. The lender has two ways (essentially) to turn you down:  either by saying (1) you don't meet their qualifications  OR (2) by saying the property doesn't meet their standards (condition or value or both).  

If you really want to know what your valuation is (approx) have a Realtor provide you a free CMA so you can see the comps that are available to be used. There is no guarantee that any appraiser will use those comps, but you can at least see what your market is doing specifically. Make sure you get an experienced Realtor. You can make a decision on the feasibility of your proposed project by reviewing the comps used.  Then find a lender. Remember, the lender is the one that hires the appraiser. You just pay for it. The appraiser is there to protect the lender, not provide a service to you. The lender is the client of the appraiser.

Edit:  Maybe you need to look at a renovation type loan rather than a HELOC. 

[DallasLoanGuy]

zillow is absolutely USELESS

[littlebird]

I understand Zillow isn't that accurate but from what we've seen in our neighborhood, it doesn't seem that far off - I should have provided more information. Our good friend is head of a realty company here and lives in the neighborhood. There is almost no inventory - things are being bought up above asking and he said our house is easily worth $450k. The 15 comparables within 1/4 mile he helped me pull also show that.

Anyway, my problem was that their drive by appraisal had flat out errors (wrong zoning, saying our home was single family when it's a legal duplex) and they refused to change that. 

We are going to go with a local lender, as recommended. From what I found about home improvement loan, the interest rate was higher. We are also doing fairly substantial work so need a decent amount. I'll ask the lender about our options though so we can weigh them all.