Q & A: Home Appraisals, Financing Closing Costs

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Q: We recently had our 2-family home in New Jersey appraised for refinancing. The only other 2-fam in the area is a few miles away and not in a desirable location. We live across from a historic park and pond that can never be developed, and because of that pay higher taxes. The appraiser said there is no calculation for appraisers to consider this type of issue and the location cannot be added to the value of our home. We are concerned he will come in under value and it will affect our refinance.

A: If it is accurate to say you are paying higher taxes because of your location across from the street an historic park, then that means the location was likely valued by the town assessor with a higher assessed value because of the location across from the park-ultimately resulting in your higher taxes. The statement "the appraiser said there is no calculation for appraisers to consider this type of issue" contradicts their role as an appraiser to provide an opinion of current market value to the bank. If it is reasonable to assume that a buyer of your home would recognize the premium for the location, then this should be considered in the appraisal. The appraiser's response could suggest that they were not familiar with your market, a common problem in the mortgage appraisal industry today.

But always keep an open mind-I am not saying that the appraiser was wrong. In fact, the appraiser could have been right about the value and your higher taxes might have nothing to do with the location near the park.

Hiring your own appraiser is not effective in these matters because the bank cannot consider appraisals for mortgages where the bank did not engage the appraiser directly, no matter how competent the appraiser may be.

Banks are now very reluctant to challenge the initial appraisal results. One suggestion might be to let the bank know that you were concerned that the appraiser did not have "local market knowledge" and you want them to engage an appraiser with local experience. I believe the use of this phrase is more effective because their regulators use it, but it is not a guarantee that the bank will reconsider your appraisal by ordering another.

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Q: I am scheduled to close on my refinance, however, we just decided to float down since the rate is lower now than when we locked in about five weeks ago. Will this delay my closing? Will it change my closing costs?

A: It really depends on the lender's float down policy as it varies from lender to lender. If you are electing to float down, the lender should be advising upfront if there is any cost to do so. As for delaying your closing, the float down should only take a couple of days. Depending on when you are intending to close, it should not delay things to any great extent.

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Q: Can you build all closing costs into your refinance? I do not have the cash to close, but my rate is 6.5% on a 30 year and I know they are much lower now and it would greatly help me if I can lower my monthly mortgage payments.

A: If you have the equity in your home to complete the refinance, you should be able to build the closing costs into the mortgage. That is the normal practice for refinancing. The big question is how much equity you have. The best case is having 20 percent including the closing costs. If you do not have that kind of equity, you may have a situation where you need to pay private mortgage insurance. If that is the case, you'll need to evaluate the numbers to see if the savings makes enough sense to refinance.

Dottie Herman is CEO of Douglas Elliman. If you have a real estate question for Dottie, please send it to; Reporters@WPCnews.com