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Disputing a Low Home Appraisal

By Brian Kline | April 30, 2018

Rapidly rising home prices and bidding wars set the stage for appraisals coming in that don’t support the value of mortgage loans being asked for. Seasonal changes are another factor affecting current appraisals. Springtime appraisals may be based on comparable sales that closed during the slower winter months. However, purchase offers are made based on today’s hot market and pending sales. Although not always successful, there are things both the seller and buyer can do to improve appraisals that come up short.

Some argue that inexperienced or out of town appraisers are to blame for low appraisals.

Two separate NAR surveys found substantial issues with appraisals. A survey targeting Realtors® found 22% of the respondents faced appraisal issues. The other survey, targeting Mortgage Originators, found 55% of the respondents reported appraisal issues. Both surveys are slightly dated based on sales between November 2016 and January 2017. Still, it’s safe to assume the issues haven’t changed substantially.

Preparing Before the Appraisal

The seller should already have most of these in place in preparation for showing the home to prospective buyers. Start with curb appeal. Make sure lawns are mowed and plants are tended to before the day of the appraisal. Have the interior of the house clean and presentable as if being shown to prospective buyers. Make sure any appliances that go with the sale are clean and in good working order. Ahead of time repair any electrical problems, leaking faucets, or other plumbing issues.

Prepare a list of additions and improvements that can be given to the appraiser. Include copies of related permits. If you don’t have copies of permits, you can check with your appropriate county or city government office. The appraiser is only there for a short time and can miss these improvements if you don’t point them out.

You should also mention routine and common maintenance work performed to demonstrate the home has been kept in good repair. Things such as repairing loose floorboards, regularly inspecting the roof, and replacing bathroom caulk. However, don’t be overbearing while the appraiser is there. Make sure the appraiser knows where you’ll be in the house and available to answer any questions but let them do the job.

Make sure the appraiser has a pleasant visit. Make sure the inside temperature is appropriate for a hot or cold day. If you have pets, make sure to leash them or see if a friend can pet sit for a few hours. Bad smells are very off-putting. Don’t boil cabbage just before the visit, eliminate pet and other odors without using an overwhelming fragrance.

Actions to Take After a Low Appraisal

Mistakes do happen. If you receive a low appraisal, you may be able to correct it. The first thing to do is request a copy of the appraisal report. The seller doesn’t receive a copy but can request one through the buyer’s agent. Check every detail in the report for accuracy. You may find simple but glaring errors that you can have corrected or reevaluated. It could be as simple as a paperwork error of checking the three bedroom box when the four bedroom box was supposed to be checked.

If you do find errors, contact the lender to appeal the appraisal. This is done more often than you might think. You’ll need to have your facts and paperwork straight. It’s important that you substantiate any claim with evidence.

In today’s fast appreciating market, you may need to provide updated comps. It’s very possible that a home increases in value after the appraisal. Especially if the difference between the appraisal and loan amount is minor. Have your realtor do some research to find out if this applies to your home. Then, have your agent meet with the appraiser. Your agent needs to be prepared with updated comparable sales, pending sales, and listings as well as know about any improvements that justify your higher valuation.

The sale’s agent also needs to emphasize the neighborhood and community amenities. An appraiser coming from 30 miles away isn’t going to know the nuances of the neighborhood the way an agent does. This could be a valid reason for a value appeal.

A final remedy is paying for another appraisal if you’re convinced the first appraisal is too low. However, be aware that the buyer’s lender might not accept an independent appraisal because lenders typically use appraisers they trust.

Certainly, you have other appraisal tips to share. Please leave your comments.

Author bio: Brian Kline has been investing in real estate for more than 35 years and writing about real estate investing for 10 years. He also draws upon 30 plus years of business experience including 12 years as a manager at Boeing Aircraft Company. Brian currently lives at Lake Cushman, Washington. A vacation destination, a few short miles from a national forest. With the Pacific Ocean a couple of miles in the opposite direction.

Brian Kline has been investing in real estate for more than 30 years and writing about real estate investing for seven years with articles listed on Yahoo Finance, Benzinga, and uRBN. Brian is a regular contributor at Realty Biz News
  • 4 comments on “Disputing a Low Home Appraisal”

    1. " A house with broken appliances, plumbing issues, bad landscaping, etc. is worth less than one where those issues are fixed, so of course it would receive a lower valuation from the appraiser. " Or the actual cost of a Dishwasher, etc could be factored out of the value. But, appliances are not a fortune of money.

    2. The article makes some very good points but allow me to offer an appraiser's perspective.

      First, the article suggests that the appraisal either "supports the value of the mortgage loan" or it is wrong. Appraisers are tasked with developing an opinion of "market value," not supporting a particular value or loan amount. Sometimes an appraisal below the amount needed to support a loan may be incorrect, but sometimes it means that the borrower overpaid for the property, or believes it is worth more than it actually is.

      Second, many of the "spruce-up" items recommended do not influence the appraiser to value the property higher, they raise the actual value of the property. A house with broken appliances, plumbing issues, bad landscaping, etc. is worth less than one where those issues are fixed, so of course it would receive a lower valuation from the appraiser.

      Third, if the home "increases in value after the appraisal," that does not mean the appraisal was low, it means that the market changed AFTER the appraisal was done. Each appraisal has a Date of Value, and market increases that occur after that date do not mean the property was worth more ON the Date of Value.

      Fourth, the reason a lender will not accept an appraisal paid for by the property owner is not just because they "typically use appraisers they trust" but because for federally-related transactions, banking regulations require that the lender engage the appraiser.

      Finally, and perhaps most important, if is far better to provide any relevant information BEFORE the appraisal is completed than to try to appeal it afterward. If you have sales you believe are relevant, provide them to the appraiser. If there are upgrades or improvements that you believe are relevant to value, provide them to the appraiser, along with permits and other documentation if you have it. Once the appraisal is completed, it is very difficult and time-consuming to try to change the lender's decision.

      1. Thank you very much Matt. Your perspective is greatly appreciated. I especially like your last comment.
        Thanks again,
        Brian Kline

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