Leaving your home’s value up to a standardized form doesn’t inspire confidence, and appraisers can be downright wrong. Thousands of appraisals happen every day across the country. Even if a fraction of those opinions are botched, it could affect your wallet.
This article is for you if you’re wondering, “What can I do if I’m not happy with my appraisal?” Read on to understand how an appraisal can turn sour in the first place and what to do when appealing.
How Could Appraisers Get It Wrong in the First Place?
An appraiser’s function, in most cases, is to determine what the house is worth for the lender. In other scenarios, they give the homeowner a current update. The difference between price and value is a sticking point during housing market transactions. Price is arbitrary, where value is fundamental. Strategic pricing occurs during the listing. The home might be over, under, or right on fair market value.
Appraisers use numerous tools and comparable homes in the area to determine value. While this technique is accurate, real estate isn’t an exact science. So, what are some common ways these licensed professionals can miss their mark?
Lack of Local Market Knowledge
Appraisers who are new to the market could appraise a house incorrectly because of limited market knowledge. For instance, if you walk across the road and the neighborhood is entirely different—which is common in many cities across the country—homes’ value could vary significantly.
Poor or Missed Comparisons
Appraisal comparisons are pivotal when determining value. Let’s say an appraiser is determining your house’s value by using three other homes as points of reference in the neighborhood:
- Bill’s house sold for $280,000
- Myron’s house sold for $450,000
- Savannah’s house sold for $450,000
The average of these three homes equals $393,000. Therefore, your place is valued around this amount.
Why did Bill’s home sell for less? Well, it happens to sit right next to an active railroad track. Bill’s house shakes when trains pass by, and it’s worth less than other houses in the neighborhood. This is an example of a poor comparison. Some appraisers will investigate to figure out why—others could include it in their appraisal.
A Quick-Moving Market
When markets are hot, it’s challenging to provide accurate comps. The current prices could reflect a higher value because of rising demand in the housing economy. If 20 people just moved into the neighborhood, and your home is the last option for sale, there should be a premium price tag. Appraisers might not account for this and only consider past sales.
How to Appeal Misguided Appraisals
The first step to combat a misguided appraisal is putting an appeal in writing. It’s tempting to pick up the phone, call the lender and make your case as a lawyer does to a jury. It’s ill-advised, as crafting a short-and-sweet letter will yield better results.
Focus on sharing the contrast between an appraiser’s report and your personal market experience.
Use Systematic Presentation
When writing an appeal, use proper formatting and analysis to keep it simple. It’s important to highlight the projected miscalculations. In an organized fashion, state your concern, point by point, and give a brief explanation of findings.
Ask Pointed Questions and Provide Examples
Specificity holds weight when making your case. Ask pointed questions such as, “Why did the appraiser choose this comp instead of this one?” Then provide examples within the letter for the appraiser’s consideration. When you point out problems and provide solutions, it can help reframe the value proposition.
Additionally, be humble throughout the process. When making suggestions, you should be making just that—suggestions. Use words such as “consider” or phrases like, “What do you think about this comp?” Maintaining professional stature will only bolster your case.
Don’t Pressure Appraisers Towards a Specific Value
When appraisers get their license, they put in over 1,000 hours to become certified. Now, that doesn’t mean they won’t make mistakes. Steer clear of pressuring appraisers towards value suggestions when formulating your appeal.
An attempt to put a value on your own home is biased. It can come off as harsh or aggressive to professional appraisers. The best chance you have of flipping an appraisal is sticking to facts and pointing out market evidence that justifies additional consideration.
Final Words
The appraisal process works for most. However, if you find yourself questioning an appraisal report, don’t hesitate to appeal. With full comprehension of how appraisers generate an opinion on value, you can analyze related comps and market conditions to develop the best rebuttal. Start with a one- or two-page document and explain why you believe your house deserves additional consideration. Using systematic presentation and pointed questions, eloquently make your points. These methods will boost your chances to overturn the decision—hopefully raising the perceived fair market value of your house.
