Here are Three common issues that justify a Home Appraisal appeal:
- Poor Comp Selection — The comparable properties (comps) selected by the appraiser do not accurately or fully represent recent sales in your neighborhood, driving down your valuation.
- Human Error — Even the best appraiser can make a mistake, leave out critical information, or give the wrong square footage.
- Lack of Local Neighborhood Knowledge — Lenders or Appraisal Management Companies often select appraisers from out of town,who may lack understanding of local market amenities and values.
Let’s Take a Look at Each of These Scenarios and How to Handle an Appeal in Each Case:
Poor Comp Selection
Comparable properties, aka “comps,” play a vital role in appraising your home; actually, comp selection is the foundation of your appraisal. Comps are homes in your neighborhood that are similar to yours and which have sold most recently. It is possible for an appraiser to miss a really good comp that may significantly-increase your appraisal. This is rare, but it does happen.
What to do: In this case, simply provide the comp (even better if you have more than one) to the appraiser with an explanation of why you think it should be considered and why you think it is a superior comp than those used in the appraisal report. Be clear and concise.
What not to do: Do not provide comps for homes just because they sold for more than your list price, thinking it will increase your value. It doesn’t work that way, and that can actually end up lowering your home’s value!
To err is human. Appraisers are people just like you who sometimes make mistakes. For example, an appraiser may record the wrong square footage for your home, or fail to mention recent updates. These may be honest mistakes, but they can significantly affect the valuation of your home.
What to do: No one knows your home like you do, so you should be able to quickly spot any mistakes. Be specific and provide supporting documentation to the lender for consideration. If the appraiser made an error on the square footage of your home, then provide supporting documentation(a prior appraisal; or you finished an enclosed patio with supporting permits).
What not to do: Don’t make personal attacks on the appraiser.I was a corporate reviewer for a very large mortgage company in Portland before moving back to Salem. I would read the complaints of borrowers, and some would focus on personally attacking the appraiser, rather than on the information they were disputing. Of course, this was done out of frustration — but it won’t get you the results you are looking for.Always seek to engage the appraiser with respect, even when you are appealing an appraisal.
Lack of Local Neighborhood Knowledge
Lenders or Appraisal Management Companies (AMC’s) often select appraisers from out of town if there is a lack of appraisers, or to expedite a quicker turn time. (Ok, let’s be honest, they may also do this to pay a lower fee, but that is a subject for another day.) There are some potential problems with this:
- a) The appraiser has a responsibility to know the geographic area and to be competent to perform the appraisal. b) The appraiser has a professional responsibility to disclose their lack of geographic competency and what steps they took to familiarize themselves with the nuances of the local market (such as working with a local appraiser or local real estate agent). This will satisfy USPAP (standards for appraisers that appraisers MUST abide by); however, Fannie Mae states the appraiser MUST have the experience, knowledge, and competency required to perform the appraisal assignment before accepting the assignment!
What to do: You have two options in this case. a) If it’s clear that your appraiser isn’t familiar with your neighborhood, you can request that your lender hire a local appraiser. You can also cite lack of local neighborhood knowledge as grounds to appeal the appraisal. In this case you must support incompetency by demonstrating errors in the report. You can ask the lender to have the report professionally reviewed.
What not to do:Don’t let this one go unchallenged; lack of knowledge of your neighborhood and comparable home values can have a huge negative impact on your appraisal.
I still complete mortgage reviews here in Oregon, and I find it frustrating when there is an appraisal from an appraiser who completed an assignment here, but who lives in another state! This happens more often than you might think.These out-of-state appraisers won’t know which amenities in your neighborhood are most attractive to buyers and increase value, or which neighborhood is a competing neighborhood suitable for obtaining appropriate comps if the immediate neighborhood lacks recent sales. This can lead to a poor appraisal. NOTE: Many of these appraisers use local Post Office boxes for their address, but if you google their name and the word “appraiser,” you are likely to find their permanent home location — and it isn’t in Oregon.
Proper Avenue to Appeal the Appraisal
You deserve to have a quality, well-supported appraisal. Fannie Mae states, “… any party… may request that an appraiser provide additional information or explanation about the basis for a valuation, or correct objective factual errors in an appraisal report.”However, if you did not hire the appraiser directly, you must go through your lender for proper referral to the appraiser. The appraiser legally cannot communicate with anyone that is not the client for this assignment. The client is the person the appraiser identifies as the client at the time of the engagement and once the appraisal process has begun, the appraiser cannot add a new client. So please use the proper channels in order to be heard.
Do Not Violate Appraiser Independence
- Don’t focus on value! Do not request a reconsideration regarding a low value. This is a violation of appraiser independence and your lender will not, or should not, make such a request to the appraiser.
- Do not provide information that was only available after the effective date (date of appraisal). That would be a new appraisal because it would require a new effective date. If an active listing at the time of the appraisal has now closed for $20,000 higher and would support a higher value for your property, it cannot be used, sorry.
A few permitted actions that do not violate the Appraiser Independence:
- Asking [the appraiser] to consider additional, appropriate property information, including information about comparable properties, to make or support a valuation;
- Requesting that [an appraiser] prepares a valuation provide further detail, substantiation, or explanation for the person’s conclusion about the value of the consumer’s principal dwelling;
- Asking [an appraiser] that prepares a valuation to correct errors in the valuation;
Provide your appraiser with information up front that you feel is pertinent to your property. I understand that many homeowners or agents are hesitant to communicate directly with appraisers, because they have been told they are walking on sacred ground.The simple rule is not to do anything that is considered to be pressuring the appraiser to increase the value. What is pressuring an appraiser? For example, I have been told, “You need to come to this value or my clients will be out on the street!” That is pressuring the appraiser and should be avoided.
As an appraiser, I appreciate when agents or homeowners take the time to provide me with potential comps, or even another recent appraisal that may have been done on the home. More information helps me to develops credible opinion of value for the home I am appraising. I recognize that I am human and can make mistakes. I want to provide the most thorough, accurate valuation possible; and if you have information for me to consider, then I welcome it!
Choose a Trustworthy Appraiser
Not all appraisers are equal. But at Appraisal Solutions, you won’t have to worry about the quality of our work! We have 20 years’worth of satisfied customers throughout the Willamette Valley. When you need an experienced, local appraiser you can trust, choose us for your private appraisal needs!Read More