What To Do If Your Appraisal Comes In Low And How To Challenge It

Selling your home may be a daunting process. Not only do you have to deal with the headache that comes with moving, but you also want to make sure you can sell your home for a good price. You may have added a new coat of paint to the outside of your home and replace the garage door. Even with the improvements you have added to your home to increase curb appeal, there is still the risk of getting a low appraisal. Although this is a situation no one wants to be in, it can happen. However, if you find yourself in this predicament, you can fight it.

The Things An Appraiser Looks For

Most states require the appraiser to be qualified as well as certified. They must follow the Uniform Standards of Professional Appraisal Practice established by the Appraisal Foundation. The appraiser will make notes about your home’s layout and condition. The length of time it takes to complete an appraisal depends on how big your home is and the state it is in. The inspection can be as little as 15 minutes or as extensive as three hours.

Appraisers will look at the year your home was built as well as its dimensions. They will note your neighborhood attributes and the zoning classification of said neighborhood. An appraiser will also take into consideration the different spaces you have in and out of your home. This can include your garage, your driveway, the basement, and the attic. They may also document the materials that cover your walls and floors.

If you have some atypical improvements in your home, the appraiser may also take that into consideration. Your light fixtures, patio, and appliances may also affect the appraisal. They will also note the condition of your home, including any repairs that are needed. Once the appraiser is finished with the inspection, the appraiser will look for similar homes in your area that have been sold in the last year and their selling price. All of this is important in the appraiser deciding the market value of your home.

The appraiser will then write a report of 10 pages or less and send it to the lender. It usually takes a week to write the report. If the appraiser is for an FHA or VA loan, the process may take longer as the lenders demand a more detailed report.

Reasons for a Low Appraisal

There are a few reasons why your home may have been appraised lower than you expected. One reason may be that the market is moving faster than usual. This can lead to present prices outpacing comparative sales. The same is true if the market is moving slower than usual. In this situation, the lack of worthy comparative sales can make it difficult to figure out a home’s market value.

Usually, by the time a house is being appraised, the market has already shifted. Due to the fact that real estate brokers are the ones pushing the real estate market to higher price levels, they may have to be the ones to educate the banks on how the market is functioning.

Another reason for an appraisal that came in low is the comparative sales, or comps, in your area are just plain bad. The last property that was sold in your neighborhood may have been rundown when the new owners bought it. Even though those neighbors have since fixed up the home, public records are not going to reflect that. If you have a lot of foreclosures and private sales amongst relatives in your neighborhood that can also affect the number of good comps in your neighborhood.

It may be that most of the comps in your neighborhood have sold for your asking price. However, if one of the comps the appraiser chose sold for a cheaper price, then the average will drop. This may cause your home to be appraised at a lower amount than your asking price.

An appraiser can research why certain outliers exist with comps. This can involve looking through public records of a sale or contacting the broker who was involved in selling the property. However, most appraisers don’t do that.

If you, unfortunately, had your home appraised by an appraiser who is still wet behind the ears, they may not be familiar with the local market. An untrained appraiser may be the reason your appraisal came in low. The Appraisers Trends Study from March 2017 that was conducted by the National Association of Realtors found that only 20% of newcomers were trained. The study also found that compensation and regulation were just some of the issues that impede training. It also found that the workload is very high with 35% of those surveyed completing over 300 appraisals in one year.

It may be that your appraisal came in low because it was not thorough. There are some places, like New York City, where an appraiser will inspect the property with the listing broker. However, in many places, the appraiser may just do a quick drive-by and look over the outside of the property. Some of them can’t even be bothered to step out of the car.

If you have spent some money on repairs on your home but haven’t cleaned up, this can also affect the appraisal value of your home. Your home has to come across as beautiful in order to get a good appraisal.

How to Challenge a Low Appraisal

So, your appraisal came in low, but it is not the end of the world. There are a few ways how to challenge a low appraisal. First, review the appraisal report for errors. The report should be ready in less than a week after the appraisal. However, you will have to request one. It may take up to 30 days for the lender to send the report to you.

Go over the basic data in the report to make sure it is accurate. Basic data includes the square footage of your home as well as the number of bathrooms and bedrooms in the house. It is also good to review the way the appraiser has described the features of your home in the report.

If your appraisal came in low, the appraiser may have been unaware of your smart home features or energy-efficient appliances. For example, your car’s safety features may play a role in getting the best insurance rate from your car insurance company. Most appraisers are willing to correct mistakes they have made regardless of it changing the property value or not. Finding errors in your appraisal report is one way how to challenge a low appraisal.

You can ask for a new appraisal, provided you can show how the first appraisal that came in low was wrong or a problem. Your lender will then ask a more qualified appraiser to inspect the home. However, you will have to pay for this service.

You can also make a formal complaint if you believe the appraiser was unqualified. You can either file the complaint with the appraisal board in your state or another appraisal organization that is appropriate for the situation at hand.

If you find that you cannot challenge the appraisal, you can try to negotiate with your potential buyer. You have to make a decision as to whether you will maintain the asking price at the number you want or are you willing to lower it to the value the home was appraised for. Contact the buyer’s agent. It may be possible to save the deal. The buyer may be willing to pay a larger down payment as a way to make up the difference between the asking price and the appraisal. They can also pay private mortgage insurance. You could perhaps help make the deal happen by covering the closing costs of the buyer.

Working with a reputable real estate agent means that your agent has done the homework for you in figuring out the value of your home. The fact that your agent has done the work means there is a big chance the appraisal is wrong. You can, therefore, challenge the appraisal through an appeal process called Reconsiderations of Value.

Grounds to Appeal

There are a few reasons why an appeal is appropriate after an appraisal. One reason may be that the comparable properties were not analyzed properly. For example, the appraiser may have chosen houses that were sold five years as comps versus recent sales. It may also be that the appraiser has disregarded or was unaware of financial concessions. The gross living area could have been miscalculated. You can also question the adequacy of the appraiser’s inspection.

Contact ExcelAppraise If Your Appraisal Came In Low

Homes are appraised low for a variety of reasons. It could be that the appraiser was inexperienced and doesn’t know your neighborhood very well. There may be some bad comps in your neighborhood. The appraiser may have been unaware of the energy-efficient washer and dryer combo you have in your laundry room. Working with a professional real estate agent or broker can help to mitigate a low appraisal.

Hiring an appraiser can also help in challenging a low appraisal. At ExcelAppraise, we use the best technology of today, such as lasers, to take an accurate measurement of your home. We also take into account features in your home, like solar panels, when appraising your home. Unlike a lot of appraisal companies, We offer a free quote. Call us at 1-801-882-2292 or request a free quote today!

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