How to Dispute a Low Appraisal on Your Home

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Once an offer has been accepted on your home, the buyer’s lender will order an appraisal on the property to make sure its current value is in line with the mortgage amount. Usually, the appraisal closely matches the agreed-upon purchase price, but there are times when it doesn’t.

If your home’s appraisal comes in low, it’s quite possible that the deal may fall through. That’s a distressing possibility, but the result doesn’t have to be a negative one. There are some things you can do to dispute a low appraisal and ensure a successful real estate transaction.

Get a Copy of the Appraisal Report

If you don’t know why the appraisal came in low, you won’t really know for sure until you get your hands on the appraisal report.

Sellers don’t usually get a copy of the actual appraisal report when their home is being valued. Typically, this report is given to the lender who will then base the loan approval on the home’s value established by the appraiser. The report is also given to the buyer if the property does not appraise high enough to secure a loan, so you would have to request a copy from the buyer’s agent.

Once you have a copy, go through it with a fine-toothed comb with the help of your real estate agent. Look for any potential discrepancies that have mistakenly brought down the value of your home. Even the simplest error can affect the appraisal, such as erroneously detailing the home as a 2-bedroom home instead of a 3-bedroom, or miscalculating the square footage.

Fixing these mistakes can help to increase your home’s appraised value, so it’s important to identify them if they exist.

Ask Your Lender to Have the Value Appealed

While an appraisal requires the use of standard formulas and procedures to establish the value of a home, it’s still subjective to some degree. The point of view of the appraiser has an impact on the appraisal, which can be argued if you’ve got ample evidence to back up your claims that the appraisal is not accurate.

In order to make a value appeal work in your favor, it’s essential that you collect enough proof that the appraisal report shows some inaccuracies that have brought down the value of the home. You’ll want to be able to have enough evidence in your corner that validates your claim of a flawed appraisal.

Go Over the Recent Comps

Using the wrong set of comps can throw off the appraisal, so you may want to determine whether or not the list of comps used for your home’s appraisal were appropriate. If you identify any disparities between your home and the properties used by the appraiser, your agent should pull up their own list of comps that more accurately reflect the true value of your home.

Pulling a new list of comps is often the most compelling evidence needed to contest an appraisal. The most important comparisons to look for in previous listings include:

  • Location
  • Square footage
  • Lot size
  • Age
  • Condition
  • Style
  • Upgrades and improvements
  • Finishes

Ideally, the comps selected should be very similar in all of these categories in order to get the most accurate reflection of the current value of your property. Armed with this information, you’ll have a stronger case to fight the original appraisal.

Look For Any Permit Issues

Any improvements made without a permit cannot be included in an appraisal report. If you’ve added a bathroom or completely remodeled your kitchen, these improvements should increase the value of your home. But if the permits required for these updates were not filed properly when they were initially applied for and approved, the appraiser will likely not be able to locate them. And without a copy of the permits, these improvements won’t be included in the report.

If that’s the case, you will need to make a trip to your local government office and request to have the permits located. This is certainly not a pleasant job, but finding the permits can give the value of your home a boost on the appraisal report.

Make the Appraiser Aware of Any Improvements

Perhaps the permits you applied for have been filed appropriately and can be easily found, but maybe the appraiser just missed the improvements completely. This can happen from time to time, especially if the appraiser is rushing through the process. If any upgrades that would affect the value of your home were mistakenly glossed over, get in touch with the appraiser and make mention of these improvements.

Request a Second Opinion

Consider asking the lender to have your home reappraised. If you have enough evidence in hand to back-up your claims that the original appraisal has some flaws that affect the value of your property, the lender may agree. Rather than having the same appraiser sent back to conduct a second appraisal, you may want to ask for a different one.

If the lender does not agree to pay to have another appraiser sent in, you can always hire another one yourself. Sure, this will cost your money out of your own pocket, but if you’re convinced that your home is valued higher, it might be worth it. However, it should be noted that the buyer’s lender might not accept the second appraisal since lenders generally work with their own appraisers.

Ask Your Agent to Consult With the Appraiser

Your real estate agent wears many hats in a real estate transaction, and yours can prove to be very helpful in a low-appraisal situation. If your appraisal comes in lower than you expected, ask your realtor to consult with the appraiser. Your agent will go into the meeting with a new set of comps and other evidence in hand to prove your case.

The Bottom Line

Finding out that your home has been appraised at a lower amount than what it sold for can be a harrowing experience. But the deal doesn’t have to die at the appraisal. There are steps you can take that can result in a higher appraisal and a successful deal. Work with your real estate agent to identify where the appraisal went wrong and what you can do to dispute it.