Appraisals When There's Barely Any Comps?

[Anonymous]

Ok, to try and put this in a nutshell: We live in rural New Mexico and are trying to buy 4 acres and put a modular home on it. I tried to find comps in our area, but they're extremely few and far between. We've started the application process and our LO is working on scheduling the construction appraisal (this will be a 2-close loan). Here's where I get worried:

-Purchase price including land/home/construction is approx $232,200 (may end up being less since our builder estimated high on the foundation)

-We will be putting down 10% which comes to $23,200

-Permanent mortgage will be for $209,000 after downpayment and when the loan converts once the home is on the land and we get a CO.

Here is where I am confused: our bank is saying the appraisal amount/value would need to be around $262,000. I am not sure where they are getting that number, and if we even stand a chance since there's barely any comps let alone new construction in our area. Any insights appreciated! I just don't know how an appraiser will be able to make a reasonable or accurate conclusion when I think maybe 3 homes here have sold in the last 6 months within a 3-mile radius... 

[iv]

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@Anonymous wrote:

Here is where I am confused: our bank is saying the appraisal amount/value would need to be around $262,000. I am not sure where they are getting that number, 

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They are working backwards from the $209,000 loan amount.  An appraisal of $262,000 is enough to provide 20% equity with a loan of $209,000.

I'm not familiar with your area, but limited nearby/recent comps... the range in both distance and time that the appraiser looks at has to expand.  This is likely to mean that they are somewhat more conservative in their estimate, though. (As the comps aren't as... comparable.)

[Anonymous]

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Thanks for your reply! I am still confused about that number, however, as I can't seem to get 20% to add to 262,000 either on the $209K or the $232K loan. So it's still not making sense to me.

I am very nervous about the appraiser being conservative - there are about 2 homes that sold fairly nearby (within 3 miles) with the same approx. square footage and # of rooms that are both slightly older, and both sold for much higher but I don't know how much that will help us. I guess we just have to wait and see, it's just extremely nervewracking to wait... I guess we're better off doing this now before we sink a ton of money into everything but we've been working toward this for months, so having it all hinge on the appraisal is super stressful.... !

[iv]

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@Anonymous wrote:

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Thanks for your reply! I am still confused about that number, however, as I can't seem to get 20% to add to 262,000 either on the $209K or the $232K loan. So it's still not making sense to me.

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$262,000 x 0.8 = $209,600  (they rounded off here - and would likely be able to accept a home value of $261,250 as a minimum)

If the house appraised at $262,000, the maximum loan amount you could take, while still having 20% equity is $209,600.

If the house is worth $262,000; and the loan is $209,000; then your equity is $53,000 - which is just over 20% of $262,000.

Your lender may have other options at a higher than 80% LTV, but they will be more expensive, in terms of APR and/or PMI.

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@Anonymous wrote:

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I am very nervous about the appraiser being conservative - there are about 2 homes that sold fairly nearby (within 3 miles) with the same approx. square footage and # of rooms that are both slightly older, and both sold for much higher but I don't know how much that will help us. I guess we just have to wait and see, it's just extremely nervewracking to wait... I guess we're better off doing this now before we sink a ton of money into everything but we've been working toward this for months, so having it all hinge on the appraisal is super stressful.... !

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If those comps are in a similar neighborhood, and of similar construction (not just size), then that's actually really promising.

[Anonymous]

Thanks, that's very helpful Yes, the two that sold are fairly similar (I believe they're both one-story like ours) but I think one might have a garage. We are not getting a garage, but we are building a deck so hopefully that can boost the numbers a tad as well. I just hope my builder gives the appraiser as much info. as possible. He's been doing this since 1997 so thankfully it's not new territory for him.