It’s a horrible feeling to hear the appraiser say that the home you want to buy is worth less than what you offered. It can leave you feeling helpless. What do you do?
You could walk away from the purchase and hope that you find another ‘dream home’ somewhere else. You could also fight the appraisal value, if you think your fight has some merit. Luckily, there are a few simple ways that you can appeal the low appraisal value. If you go about it the right way, you may be able to get the value increased if there’s enough evidence that it should be higher.
Secure a Copy of the Appraisal
The first step is to get a copy of the appraisal. You’ll need this report so that you can see what the appraiser used to determine the value.
Go over the appraisal and make sure that everything is correct in it. Did the appraiser get the features right? Are the measurements correct? Maybe he listed the wrong neighborhood or grabbed a comparable sale that is not really comparable to the property in question. Remember, appraisers are human, so they can make mistakes.
If you notice any mistakes, bring them to the attention of your realtor and/or loan officer. They can then talk to the appraiser on your behalf.
Get Comparable Sales Information
If you don’t agree with the comparable sales the appraiser used, find your own comparable sales. You will need concrete proof of the comparable sale and why you think it’s a better fit. Maybe you can find comparable sales that are closer in age or size to your home than the appraiser used? If so, you’ll need to provide this information to the appraiser for him to do a Reconsideration of Value.
Ask About Permits
If the seller recently made improvements to the home, find out if he/she obtained permits for the work. If permits were not issued, technically, the appraiser cannot use the improvements in the value. If you can’t get information from the seller regarding the permits, you can try talking with the local county’s government office to see if they have copies of the permits. If no permits exist, you could lose the potential value in the home.
Ask for a Reconsideration of Value
Once you have all of your ducks in a row, it’s time to ask the appraiser to conduct another appraisal. It may be a quick job if he realizes the mistakes he made or that he didn’t use proper comparable sales. If he stands by his original appraised value, though, you may have to take further steps to get the value you need.
Ask for a Second Appraiser
If you truly stand behind the fact that the home is worth more than the seller is saying, you may want to go as far as paying for a second appraisal. Your lender will have to approve this step, but if they see your side of the argument, they may be willing to request another appraisal. Of course, this is more money out of your pocket, so make sure that it’s well worth it.
The Bottom Line
What happens after these steps depends on the outcome of the appraisal. If the appraiser stands by his value and the second appraisal doesn’t show any improvement in value, you can only use the appraised value for loan qualification purposes. This may mean that you’ll have to put the difference between the appraised value and the purchase price down on the home. If you don’t have that kind of down payment or don’t want to take the risk, you may have to walk away from the purchase and find another home.Click to See the Latest Mortgage Rates»