How to Challenge a Low Home Appraisal

Home prices have increased considerably over the past two years, which has resulted in many sellers receiving multiple bids on their properties. This can result in a bidding war that drives prices up. Despite the high values of many homes, a home must still be appraised before the sale can go through. Lenders require appraisals to make sure that the amount of money they’re lending matches the home’s value. There are times when sellers receive low appraisals that indicate the home is worth less than anticipated. If you find yourself in this situation, there are ways to challenge a low home appraisal.

Factors Considered During a Home Appraisal

Before learning about how to challenge a low home appraisal, you should first know what factors are typically taken into consideration by an appraiser. The main factors that an appraiser uses during this process include:

• Home improvements that have occurred since the purchase
• Square footage of the home
• Primary home traits, which include bathrooms, bedrooms, and notable features
• Construction quality and property condition
• Sales prices for similar homes in the area that were sold in last six months
• Price trends of nearby homes
• Average time that nearby homes remain on market
• Property zoning
• Lot size

How to Dispute a Low Home Appraisal

In the event that you disagree with a low home appraisal, there are steps you can take to dispute the appraised value for your home.

Obtain a Copy of the Appraisal

The first step that occurs when disputing a low appraisal is to obtain a copy of it so you can have a look at it. The paperwork can only be directly challenged if you’re able to identify what information the appraiser ended up using. Keep in mind that the buyer is usually the person who has the appraisal. You can request a copy of this document for review. Mortgage lenders are legally required to provide buyers with this report.

Mention Improvements and Upgrades

When you speak with an appraiser, it’s highly recommended that you mention any improvements or upgrades that you made to your home since you purchased it. Some of these upgrades might have been overlooked during the appraisal, and by leaving the out of the equation, could lower the value of the appraisal substantially. Make sure that you aren’t condescending or argumentative when speaking with the appraiser. You can simplify this process, which will help your case, by providing the individual with a detailed list of the improvements as well as the cost of each.

Search for Potential Errors

Appraisers are human and will make mistakes from time to time. These are typically honest mistakes that are made because of how extensive the process can be. Make sure to look at local comps of similar properties to determine what homes in your area were priced at when they were sold. A Realtor can help you with this process. Some potential errors that can be made during an appraisal include miscalculated square footage, too few bedrooms being listed, or incorrect comps.

Request an Additional Appraisal

The three steps mentioned previously may allow you to obtain a higher appraisal from the person who initially appraised your property. However, it’s possible that your dispute with the original appraiser will fail. If this occurs, the next option available to you is to request an additional appraisal. Your lender should agree to do so. Make sure that you request an appraiser who has geographical knowledge. It’s also important that you tell the second appraiser why this request is being made, so that can go to bat for you, per se.

What to Do if Your Appraisal Challenge Fails

In the event that all of the aforementioned suggestions have failed, there are steps you can take to make sure that the lender provides the borrower with enough money to secure the loan. These steps include:

• Reducing the home’s sale price to match the appraised value
• Asking the buyer to provide enough money to cover the gap between the appraised value and sale price
• A combination of the two options mentioned above

Receiving a low appraisal on your home is always going to be a frustrating situation. However, you can dispute a low home appraisal by obtaining a copy of the appraisal, looking for any errors, mentioning improvements and upgrades to your home, and requesting a second appraisal. If all else fails, the price of your home can be lowered to facilitate a smooth transaction.