Appraisals Can Be Challenged: Here’s How!

If you’re refinancing or selling your home, your lender, or the seller’s lender, will want an appraisal to determine the home’s value and ensure that it’s good collateral for the mortgage. That means, in most cases, it must appraise for at least the amount of the loan.

The lender will send an appraiser to your property to prepare an appraisal, which will be based on factors including comparable and recent sales in the neighborhood, your home’s condition and features, any improvements or upgrades you’ve made.

Because an appraiser takes so much into account, their appraisals can often be off by a lot. In fact, low appraisals are much more common in today’s real estate markets, one that has seen prices return to pre-recession levels in a relatively short period of time. When appraisals do come in low it usually results in either the buyer walking away or the lender declining the loan.

But a low appraisal is not always the end of a refinance or home sale; there’s a lot you can do to earn your home the appraisal it deserves. Here are seven actions you can take to dispute a home appraisal that’s too low.

1. Check Every Detail of the Appraisal

If you don’t like the value an appraiser has determined, the first thing to do is study the appraisal meticulously. An appraisal is composed of two main things: the home value, and the data upon which the home value was based.

So, if you plan to challenge the appraisal, you’ll need proof that the appraiser made an error or misjudged something, he said. Errors could be very simple but glaring mistakes, such as the appraiser checking two bedrooms instead of three, according to Realtor.com. That’s your best bet to improving your appraisal value.

2. Contact Your Lender and Request a Value Appeal

After you have thoroughly gone over the appraisal of your home and are sure it’s not right, the next thing to do is contact your lender to appeal the appraisal. Yes, this is a thing, and is commonly done, said Merrill. He’s also quick to point out that it’s tough to convince lenders to change their valuation, but it isn’t unheard of.

If you’re going to pull this off, you’ll need to do some homework; it’s important that any claim you make be substantiated with evidence.

3. Provide Updated Comps

Some of the most important data used to determine your home’s value are the comparable properties in the area that have sold. The appraiser will rely greatly on those sales figures to value your property. There are many reasons these could be misleading, from the chosen properties being new homes, foreclosures or short sales to the values becoming outdated faster than the appraiser expected.

Between when the appraiser first saw your home and the end of the reporting process, your home might have risen in value. Have your realtor do some research and find out if this is true for your home.

4. Point Out Upgrades and Improvements to the Appraiser

A home appraiser is in your house for one day. You live in it day in and day out. So it’s only natural that he might miss improvements or upgrades that you made that add value to your home. Just because you are aware of the renovations that took place in your home, doesn’t mean the appraisers are. Convey these improvements or upgrades to appraisers in a way that is more informative than condescending. You get more with Honey than with Vinegar.

5. Have Your Sales Agent Meet With the Appraiser

If you have received a low-ball appraisal, having your realtor meet with the appraiser could help. Your agent has a stake in this, too, and should be more than happy to do this.

Make sure your agent is armed with the comparable sales and listings, along with improvements and unique attributes of your property that justify your own valuation of your home. The last thing you want is to subject yourself to another inaccurate appraisal because you and the appraiser are looking at different data.

6. Appeal an Appraiser Who Doesn’t Know the Area

Every neighborhood and community has its own unique attributes. That’s why it’s critical that your appraiser is familiar with your particular area. If he’s not, he might rely strictly on cold, sometimes old, data that doesn’t reflect all that your home has going for it.

For instance, it’s perfectly fine to ask your appraiser questions, specifically about where he does most of his work. If it’s 50 or 100 miles away, he might not be the best fit for giving a value to your home. It’s best to contact your lender right away with any concerns, said Merrill. An appraisal by someone who doesn’t know your area could be a valid reason for a value appeal. You can research and find appraisers through the National Association of Realtors.

7. Try Another Lender and Get a Second Opinion

After a low appraisal of the property, the lender, whether for a refinance or sale, is going to be gun-shy. Lenders are less inclined to approve mortgages for more than the home’s appraised value. At the very least, any property that appraises for less than it is being listed at is a red flag. More than likely, the lender will decline the loan and changing his mind will be tough, so try a different lender.

One strategy to counter a low home appraisal is to get a second opinion: Try another lender and start all over again with a new appraisal. Most of the time, the second appraisal, with the new lender, will stay within five to 10 percent of the first. But that difference might be enough to get the loan approved. You’ll have to pay for a second appraisal, but getting the loan to go through at the desired amount could be well worth it.