Can You Challenge a Low Home Appraisal?
Home appraisals are unbiased opinions of a home’s fair market value or worth.
Prospective homebuyers and homeowners wishing to refinance an existing mortgage will need a home appraisal to finalize their transactions with a mortgage company.
Sometimes a transaction is disrupted by a low appraisal, resulting in a dispute of the presented opinion of value.
Impact of a low home appraisal
A low appraisal can prevent one from obtaining mortgage financing or refinancing. The reality is that mortgage lenders will not approve a mortgage for a homebuyer when the contract sale price exceeds the appraisal. Neither will the lender approve a loan for a refinancer if the loan requested exceeds the home’s market value.
A home being bought or refinanced must be of sufficient value to perform as collateral for the loan. Should a borrower default, the mortgage lender can then use the home to recoup its losses.
You can challenge a low home appraisal
A home sale/purchase or an application for refinancing need not be terminated because of a low appraisal. A buyer, seller (through a buyer) or refinancer may challenge the appraisal if he or she deems that the home’s value exceeds the appraisal presented by the lender.
A challenger’s best offence is to find new compelling facts—not opinions or suppositions—to make a case to the real estate appraiser or lending agency for the revision of an appraisal.
6 steps to challenge a low home appraisal
Here are steps a challenger may use to dispute a low appraisal.
- Start with a copy of the appraisal
Request a copy of the appraisal. If you are the seller in a sale/purchase transaction, try obtaining a copy through the buyer. Unless you know what is in the appraisal, you have little grounds on which to base your case. Knowing what is in the appraisal can guide you in terms of your own research for new data that might refute the appraisal.
- Examine the appraisal for errors or omissions
Perform a thorough review of the appraisal report. Search for any errors or omissions. Check that the home’s vital statistics have been accurately documented, including:
· Square footage
· Number of bedrooms and bathrooms
· Size of lot
· School district
· Property zone
An error that appraisers sometimes make is underestimating the allure of a neighbourhood. An appraiser unfamiliar with the area might ascribe a lesser value to a home if he or she is unaware of a neighbourhood’s desirability.
- Check the suitability of comps used by the appraiser
Reviewing comps is an effective means of challenging a low appraisal. No two homes are exactly alike, and this sometimes introduces a degree of difficulty in finding suitable comps with which to compare a home. This is especially applicable to one-of-a-kind properties.
Assess the comps used by the real estate appraiser and supply a list of overlooked properties that make better comparisons to the home. Ask a realtor to help you.
Home values can be negatively impacted by short sales and foreclosures recently completed in an area. Point out any recent foreclosures and short sales that may have contributed to a lowered value. Use the information to appeal to the appraiser through the lender to revise the appraisal.
- Highlight upgrades and improvements
Strategic improvements and upgrades made on the home can increase its value but may have been overlooked by the appraiser. If you have added a new roof, a patio or a room, make a list of the improvements and present it to the appraiser. This could be grounds for disputing the appraisal.
Statistically-based computer applications like automated valuation models used to produce home appraisals save on time and money. But they fail to capture any improvements made within the home. Provided that there was no physical inspection of the property, insist on a site visit.
- Make an appeal for a new appraisal
If you have found sufficient evidence that an appraisal is questionable, present the matter to the real estate appraiser and make an appeal for a new appraisal.
- Commission your own appraisal
If the appraiser remains unmoved by the evidence you have presented, and you are relatively certain the value of the home is higher, you may opt to arrange your own appraisal and appeal to the lender. Ensure that the new appraiser you choose is one that the lender will approve. Bear in mind that the appraisal cost would be yours to pay.
Challenging an appraisal takes time and sometimes money and, in the end, there’s a chance that with all your efforts, you may not be able to overturn the appraisal results.
Do you need a speedy, accurate appraisal in Vancouver?
Give us a call if you have questions or order an appraisal online today.