In our current economy, we are seeing buyers and sellers that are faced with homes that won’t appraise at the contract price. Our real estate appraisers are hired to give the lender the market value on the property so the lender can be assured the collateral is covered. Unfortunately for buyers and sellers, appraisers have to base their opinion on market data from the past – previously sold homes. These are usually homes in the same neighborhood that have sold in the last six months. So for that reason, an appraiser is going to be evaluating a little behind the market. Appraising is an opinion based on database information and opinions vary greatly.
So for those reasons, if you think your appraiser has made a mistake, you can appeal his finding to your lender.
Here’s how to appeal your appraisal if you honestly believe it came in too low:
First you’ll want to finding out whether your appraisal was a full-blown appraisal or an electronic appraisal. More lenders are using automated valuations to speed up the process and cut costs. Very often they are inaccurate.
The AVMs or automated valuation models, are good enough to give lenders an overview of local housing values. But they just won’t do on a house-by-house basis. Neither will so-called “drive-by-appraisals” in which the appraiser never leaves his car to go inside.
If your lender is relying on an AVM or a drive-by, ask to have your place valued by a human being who looks at your specific house, compares it to others in the neighborhood, checks out the community, and does all the things an appraiser is supposed to do. In most cases, lenders will bow to your wishes, especially if you are willing to write the check to cover the several hundred dollars that a full appraisal will cost.
Remember throughout this process that you are dealing with a real human appraiser. By questioning his appraisal you are questioning his credibility. Be careful not to overstep that line.
Of course, you can always ask for a second opinion from another appraiser. And you’ll have to pay for it a second time. To stand any chance of winning your point, the second valuation must be more than 5% higher than the first appraisal. If it is less, it will be considered an acceptable difference. But, even if the second appraisal comes back higher than the first one, it is the lender, not you, who gets to pick the appraisal on which the loan is based. You you may have just wasted your money on a second appraisal even though it proved a higher value.
You can suggest that the appraiser assigned by the lender erred and see if the lender will hire another appraiser to take a second look. You can also find comparable homes (or your Realtor can) and give them to the appraiser to help him. A comparable is a property of the same size and style in the same location that has similar features. An appraiser looks for recent sales of several comparable properties. Normally, however, they limit their search for “comps” to the multiple-listing service (MLS) operated by the local real-estate association. And when they do that, they may not be looking at the entire market. So if you know about other sales in the area that were not done through a Realtor, ask for that info to be included. If you don’t know of any, you can comb through the land records at your local courthouse. Those sales cannot be more than six months old.
Like any profession, there are good appraisers and incompetent appraisers out there. Pray you get a good one when you are selling your home!
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