How to Challenge an Appraisal

When you are preparing to purchase, refinance, or sell a home, you will first need to acquire a home appraisal. The only exception to this rule is in the rare event that you are selling your home to a buyer who is paying the full amount in cash.

If your home appraisal is lower than you believe is fair, you have the option and the right to challenge it. Today, we are covering precisely how to challenge a home appraisal efficiently, effectively, and with the full power of all applicable laws.

To print the USA government’s guide to challenging your home appraisal, please click here.

Reconsideration of Value

If you have reason to believe that your home is worth more than the amount at which it has been assessed, you are eligible to ask that your lender give you a reconsideration of value (ROV.) At your request, your lender will reassess your current evaluation and incorporate any new information that may influence your home’s value.

During this process, you will be able to present your reasoning behind questioning the evaluation. Furthermore, you have the right to ask the appraiser to:

• Amend all errors in the appraisal
• Provide additional explanation, evidence, and details to support the appraisal
• Take into account further property information, up to and including even more assessments of comparable properties

Obtain Your Own Copy of the First Appraisal

To challenge a home appraisal report, you must first obtain your own copy and find out what it contains. As a homeowner, you are not entitled to a copy unless you have paid for the appraisal yourself. If the buyer paid for it, though, they will be entitled to a copy, and may well be willing to allow you to examine it.

Once you have access to a copy of the report, scrutinize it. Find any errors such as the incorrect number of bathrooms, omission of a finished basement, or an incorrect calculation of square footage. Rarely, a home may have been listed under a different neighborhood than the one in which it is located. As you can see, every single detail of the assessment should be examined before you give up on challenging the report.

Challenging the Comps

The comps, or comparable properties, are usually the single largest factor influencing the results of an appraisal process. Comps are usually located nearby, are of a similar age, and have similar square footage. To be a valid comp for the purposes of appraisal, a property must have been sold within the past six months. Properties sold under foreclosure or as the result of governmental seizure and auction are not eligible to be used as comps.

Clearly, there are numerous criteria upon which a comp can be challenged, and invalid comps are certainly grounds upon which you can challenge an appraisal. Likewise, if a valid comp has not been included in the appraisal, you can demand that they be considered as well.

Were Your Improvements Considered?

Often, as a homeowner, you will have made significant improvements to the property while you have lived there. However, it is not uncommon for an appraiser to miss such improvements, especially when it comes to comps.

If you have expanded your home, added a granny unit, finished and insulated a basement, or massively updated a kitchen or bathroom, make sure it has been factored into the appraisal. If not, please ask that it be included in all calculations.

Is Your Appraiser Familiar with Your Area?

Because a lender cannot preferentially select an appraiser, you may be delegated to an appraiser who does not have experience assessing properties in your area of Middle Tennessee. This does not mean that the appraiser is bad at their job, or will not do their best on your behalf, but it does mean that they may not possess the qualifications required to accurately appraise a home in your area.

If your appraiser usually works more than fifty miles from your location, you may have grounds on which to appeal to your lender and request another appraisal. However, this is not a guaranteed path to successful appraisal, especially because of the breadth of knowledge that one can gain from the internet with respect to real estate. If your original assessor can demonstrate their knowledge of your area, your lender will likely uphold the original assessment.

The best way to avoid working with an appraiser who you feel is not qualified is to research the assigned person before the appraisal. Based on your objection, you can request that your lender send someone else to handle the job.

Ruling Out Appraisal Bias

Unfortunately, there are times when an appraiser’s personal biases against the race, ethnicity, or orientation of a homeowner, especially in comparison to the racial, ethnic, or political composition of the neighborhood, result in an unfairly low valuation of the home in question.

Such practices are illegal, of course, so if you have reason to suspect you are the victim of an assessor’s illegal bias, you have the right to demand this injustice be amended.

The Takeaway

There are sound and valid reasons to challenge an appraisal, and we encourage you to explore these options. Please note, however, that even when you bring these reasons to your lender, you are not guaranteed to receive a more favorable valuation.

When a lender passes an appraisal to the review committee based on problems with the report, there is a chance that the home’s value could decrease rather than increase. Therefore, you must be prepared for whatever result is declared fair and valid.

If you and your lender cannot agree on the value of the property in question, your only remaining recourse is finding an alternative bank through which to obtain financing.

If you would like assistance navigating this process, please consult with your agent. We are always here to help with all real estate matters!