Not Meant To Be?

As usual, the appraisal took longer than expected and it ended with another crushing blow to our plans to build.  We had hoped it would be finished around the 19th or so, but hadn’t heard anything at that point.  We checked in a couple times the following week and was finally told that Friday that they were typing up the report then.  The bank said they didn’t know what the final amount was, but if there had been any problems, they would have heard about it before then.  They said they planned to call me early the following week to schedule the closing.  We breathed a huge sigh of relief and I began to get excited about the possibility of closing on the loan this coming week and finally seeing the house get started.  Monday, I went to the health department and finally applied for our septic tank permit.  That is supposed to take up to 15 working days.  We finally heard from the bank on Thursday and they said they were getting some questions answered by the appraiser.  We thought that was strange since it was supposedly ok.  Friday afternoon, I got an email from the bank saying that the appraisal came back significantly lower than what we needed.  I was blown away since we had spent the past week under the impression that it was fine.  I called the bank and he said that the appraisal was originally even lower, but he had gotten the appraiser to come up to this final amount.  The bank will only loan us 85% of the appraised value, so we would have to come up with the difference (which we don’t have).

They emailed us a copy of the appraisal later that afternoon which made us even more frustrated.

• The 5 houses he compared ours to are all in neighborhoods and on less than an acre (we have 4 acres).  I know for a fact that at least one was a builder’s spec house.  
• Our house and the comps were all rated as “good” construction despite our house being built with ICF, spray foam, etc.  He also had “None” for energy efficient features in our house and the others.  We know that we likely won’t see a 100% return on the ICF and other upgrades, but it should at least be a consideration in the value.
• He stated that the real estate market is “stable”, yet he appraised our land for 13% less than it appraised for 2 years ago, which was before it was cleared and we did other work to it.  His number was also less than we paid for it.
• He has our land listed as “country” (decreasing it’s value) although he notes that we are only 2 miles from shopping and schools.  While we are in a rural setting, there is a huge neighborhood development 1/2 mile in one direction and the major city limits 1/2 mile in the other direction.  We’re fairly confident we will end up within the city limits at some point.
• There were a handful of other minor issues that would all effect the value.

I forwarded the appraisal to our builder to see if he has any ideas or suggestions.  I also emailed his wife (a Realtor) to see if she’ll email us a report with all the sold listings on over an acre from the past year, so we can see what comps the appraiser didn’t use.  We would have to cut down the size and/or finishes considerably to get the cost down enough, but that would also just reduce the value even more.  David’s first thought was to finish the extra space on the 2nd floor.  If we did it outside of the loan, it would add 2 bedrooms, a full bath and around 1000 square feet while not increasing the budget.  We emailed the bank with that idea and are waiting to find out if it will make enough difference.  We already planned to have those rooms framed with electrical and plumbing, so finishing them the rest of the way on our own shouldn’t be a big deal.

We knew building wouldn’t be easy, but we never dreamed all the problems would come before we ever broke ground.  It’s been over 2 years since we first put our house on the market and we’ve been in the rental almost a year already.  3 days ago, I thought we would be breaking ground within the next month.  Now, we don’t know if it will even be this summer or this year.  Everyone says it will work out, but part of me wonders how much longer we should go on before we give up.  The problem is that we have so much invested already – over 2 years of designing the house plus the cost of having the final plans drawn up, the land and all we’ve put into it, etc.

For now, I guess we’ll see what the builder and the bank has to say.  We will probably contact a local credit union we talked to before.  They will allow us to finance a larger percentage, which will work out even with this low appraisal, but they couldn’t guarantee us that they’d do the loan we need.  We also weren’t impressed with their customer service.  So, it’s hard to say how that will turn out.  I found a few other lenders that I will call tomorrow, but it’s hard to find any that do construction loans anymore.