Appraised value goes down

anneyaro6666 · Joined: 25 Dec 2005 Posts: 1 0.08 Dollars($)

what happens when you have an appraisal on a 10 acre raw piece of property which needs developed, you recieve an appraisal for the bank to close the loan. It is used to close the loan. A year later in this hot market the property is developed and has become the most desirable place to build an estate home, 70% of the lots are sold. The developer goes back for more financing to finish a couple of items, but has gone beyond development requirements for first loan. The bank calls for new appraisal and it comes back lower than before development. I guess my question is based on one point of view the market just devalued quite alot, how is this possible and are there any case laws to help me?

jerry · Posted: Sun Dec 25, 2005 11:25 pm Post subject: RE

Hi,

When the first appraisal was done, I guess the market values of similar properties in the surrounding areas were high and that is why the appraised value was satisfactory.

The loan amount and the sale price depend on the appraised value and since the current market value seems to have depreciated and the developer's loan requirement has changed, that is why the bank has asked for a second appraisal.

Since the market has devalued, the appraised value and hence the loan amount at present has come out to be much lower than the first. Also, if the developer in this situation wants to sell the lots then he will suffer loss. This is because the appraised value for the second time will be much lower than the initial estimated sale price.

As far as I know, there is no legal action to be taken in this case. Still you can consult an attorney for your satisfaction.

For more information on this topic please visit our section on appraisal.

Thanks,
Jerry

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