How to challenge an appraisal

The following post is contributed by John Wheaton, Redfin Open Book Lender in California

How to challenge an appraisal

After you’ve made multiple offers and toured a lot of homes, you finally get an offer accepted! You’ve done all you can to increase the appraisal value of your home and the bank has already approved your credit and income. You’ve assembled the cash required to close. You’ve started to plan your luau-themed housewarming party. Then, you get a call from your lender, telling you the appraisal came in below your offer price, and it could derail your offer. What now?

First, it helps to understand how an appraisal is calculated. An initial appraiser uses Automated Valuation Models (AVM) to arrive at his number. AVMs analyze public record data, comparable homes, and other databases to provide an estimate price of the home. Then, two or three experienced staff appraisers review it, before it undergoes a final review by the loan underwriter. The people who appraised your home’s value often have decades of appraising experience, though that doesn’t mean they can’t make mistakes or use flawed information. If you believe the appraisal for the home was misdiagnosed, ask your agent what he or she thinks and see what the Redfin Home Value Tool reports. It only makes sense to embark on the appraisal rebuttal process if you believe the appraiser left out or missed pertinent information.

If all signs point to a low appraisal, the next step is to challenge it via a written appraisal rebuttal to your lender. Though dependent on the temperature of your local market, the seller typically has the most to gain by challenging the appraisal, but will need to work with you since they can’t interfere with your loan. Still, your rebuttal may not ultimately be accepted by the bank, requiring that you either make up the difference or negotiate with the seller on price. Being cooperative and helpful with the rebuttal will build goodwill and may help both of you in the end.

Unlike buyers and sellers, appraisers place less value on intangibles like room flow and rely on data and data alone. Successful rebuttals are detail-heavy and include compelling, recent data to support your case. Here are three tips for you and your agent as you write your rebuttal.

Dig up any background.

Talk to the Listing Agent and ask how they came up with their selling price. They may know about a cash sale that never hit the MLS or can explain that a low-value sale on the record was a result of the owners selling it to their kids. Undisclosed purchase information like that can help explain a sale price and could help bump up the value.

How to challenge an appraisal

The devil is in the details, so double-check them.

Hypothetically, let’s say you offered on a three bed, two bath, 1,800 square foot home, but the appraiser calls it a two bed, 1.5 bath, 1,650 square foot home. Try to figure why there’s a discrepancy and explain it in your report. I’ve seen a simple rectangular loft condo measured by three appraisers whose final numbers all differed by 100 square feet. It happens, so be ready to re-measure your square footage. The kitchen may not be updated, but perhaps the vinyl windows are new. Details like that are often missed by even the best appraisers and can impact your home value. Check your home inspection report. There could be crucial details in there to help as well.

Try finding different comparable homes.

Appraisers try to use comps that have closed within 90 days of your contract and within a one mile radius of your home, but they may have chosen homes that aren’t a representative sample. If you can’t find examples within that 90 day window, look for matches 1.1 miles away and 92 days old, as banks will probably still consider it valid. Depending on the pace of closings in your area, some “pending sales comps” in the report might have been recorded at the county, but don’t yet show in the MLS. Your realtor can help dig those records up. Appraisers often require four or more new comps to justify a value change. Use MLS data whenever possible, not something a simple Google search might provide, and avoid referencing Zillow Zestimates. Most appraisers reject Zillow data outright due to its self-reported margin of error (about 9.1%).

Successful rebuttals are exorcised of emotion and contain compelling and reasonable closed sale data. When they’re done well, they can recalibrate the appraisal in your favor. However, sometimes as hard as it might be to accept, the value just isn’t there. Remember that an unsuccessful appraisal rebuttal is not necessarily the end of the deal. Your lender and your agent will have other ideas for how to proceed, and will do what they can to keep your housewarming luau moving closer to reality.

If you’d like more information, you can contact John Wheaton through his profile on Redfin Open Book.

How to challenge an appraisalUpdated By Craig Berry

Thanks to a real estate market that continues to recover, many U.S. homeowners have been enjoying rising home values. Even so, prospective homebuyers and refinancers may still encounter the obstacle of low appraisals.

When you buy or refinance a home, mortgage lenders require an appraisal in order to properly assess the property’s worth and ensure the value connected to the collateral being used – – your home.

What happens if an appraisal is too low?

The issue of a low home appraisal should be of interest to more than just prospective buyers and existing homeowners. An improper valuation can derail a homebuyer’s mortgage loan, disrupting a home’s sale for the seller, not to mention both real estate agents involved in the transaction.

In fact, according to the National Association of Realtors, each month roughly 1 out of 10 real estate agents report that low appraised values disrupted a home sale. Low appraised value can mean a canceled sales contract. Lenders may not be able to approve a mortgage loan if the appraisal is less than the home’s contracted sales price. A delay in closing on a house could also mean paying above today’s mortgage rates.

If a homebuyer receives an appraised value below the purchase price of the home, it may be necessary to change the game plan and pay the difference in cash, get the seller to agree to a lower purchase price, or get a second appraisal opinion.

A low appraisal can impact the purchase or sale of a home, as well as a refinance, in three ways:

  1. The interest rate offered on a mortgage loan may change
  2. Whether or not private mortgage insurance (PMI) is required
  3. The difference in whether or not a cash-out refinance is still possible

Factors considered in home appraisal

What if you believe your home or home-to-be is worth more than the appraisal shows? Can you challenge a low home appraisal?

First, understand how or why appraised values are determined. Here are some factors an appraiser may use when appraising a home:

  • Sales prices of similar homes in close proximity sold in the past six months or less
  • Average time for homes to sell in the subdivision or general neighborhood
  • Price and value trends of homes nearby – values trending upward or downward
  • Supply and demand of homes in current market – shortage or surplus of homes
  • Property condition and construction quality
  • Square footage and gross living area of home
  • Traits of home including bedrooms, bathrooms and distinct features
  • Major home improvements since purchase date
  • Lot size relative to other homes in general area
  • Property zoning
  • Home uniqueness – good or bad way
  • Functional obsolescence

4 steps to dispute a home appraisal

What can you do if you disagree with the appraiser on any of these items? Can you appeal a low home appraisal, and if so, what is the appraisal dispute process? Tip: telling the appraiser, “You’re wrong” isn’t generally the best approach.

Instead, in order to have any hope of over-turning an appraiser’s opinion, gather concrete evidence, including different data than the appraiser used. Here are four steps that can help challenge a low home appraisal:

1. Get a copy of the appraisal. You can only challenge the paperwork if you know what information the appraiser used. While sellers won’t have access to the appraisal, the individual who pays for the appraisal – – typically the buyer in a purchase or refinance – – is the one who can request a copy of the appraisal and review it.

According to the Bureau of Consumer Financial Protection (CFPB), the mortgage lender is required by federal law to provide a copy of the report to the buyer.

2. Look for errors. It’s important to remember that appraisers are human, and appraisals are opinions of value. It is very possible that the appraiser made one or more honest mistakes.

According to Sara Stephens from The Appraisal Institute in Little Rock, AR, “You should check the comps to be sure they have geographic relevance and the same interior and exterior features.” Stephens goes on to say, “You can also hire another appraiser to do a review of the appraisal for an additional cost.”

You can also enlist the help of a realtor. With the help of a real estate professional or an appraiser, buyers can see if your home is placed in the wrong subdivision or neighborhood, square footage is miscalculated, lists incorrect square footage or shows fewer bedrooms and/or bathrooms than is the case.

Provide documentation to support the different “comps,” or point out mistakes regarding such items as the amount of square feet or the number of bedrooms.

3. Point out upgrades and improvements. A home appraiser is in your house for a short time and might miss improvements or upgrades you made that add value to your home. Don’t assume that just because you’re aware of the renovations that took place in your home that an appraiser notices them all.

Talk to the appraiser about these improvements or upgrades in a way that is more informative than condescending. Remember, this is a people business; develop a working rapport with the appraiser and make their job easier by providing a list of improvements and the money spent on each.

4. Request a second appraisal. “If a challenge or a review doesn’t change the appraisal, then a buyer can ask their lender to hire another appraiser,” says Stephens. “Be sure to request someone with geographical knowledge and explain why you are asking for a second appraisal.”

Either the buyer or the seller can challenge an appraisal or request a second appraisal. “A challenge should be based on specific errors rather than opinions,” notes Stephens.

Be optimistic but realistic

When home values began plummeting in 2007, and real estate collapsed in 2008, the Home Valuation Code of Conduct (HVCC) went into effect in May 2009. This reform changed a lot of rules for appraisers, real estate professionals, mortgage lenders and homeowners.

How often do appraisals get changed? Most experts say it doesn’t happen often. However, the benefits of a proper home valuation doesn’t just end with a purchase or sale of a home. Refinance loans, home equity lines of credit, insurance premiums and property taxes are all based on appraised value.

With appraisals influencing so many factors, it may be well worthwhile to challenge a low home appraisal.

How to challenge an appraisal

Points of Interest

A low appraisal can lead to a cancelled sales contract because lenders won’t approve mortgages for more than the home’s value. Our 4 smart moves won’t guarantee the outcome you’re looking for, but they should help protect against honest mistakes. After all, an appraisal is just the appraiser’s opinion.

Low Appraisal Can Hurt Your Sale Price

A low appraisal can lead to a cancelled sales contract because lenders won’t approve mortgages for more than the home’s value. If you believe your home is worth more than the appraisal shows, what should you do? According to the National Association of Realtors, of the 75% of contracts with settlement contingencies, 41% involved appraisal issues.

Most lenders have a process for challenging an appraisal, says Bob Lear, a real estate appraiser for more than two decades. But you must be prepared to point out mistakes the appraiser made in comparing other properties or by missing new or upgraded features in your home.

Our 4 smart moves won’t guarantee the outcome you’re looking for, but they should help protect against honest mistakes. After all, an appraisal is just the appraiser’s opinion.

1. Give the appraiser a reason to change opinion.

Too many people just contact the appraiser and say “you’re wrong,” says Lear, owner of Lear-Annoni Appraisals in Eden Prairie, Minnesota.

That tactic won’t yield a new appraisal.

To get a second look, “you have to provide me different data — data that is different than the data I used,” he said.

Read your copy of the home appraisal, then consider whether you can offer the single most persuasive item: new comps.

A “comp,” in the real estate world, is a point of comparison.

The best way to know what a home is worth, the argument goes, is to compare it to a similar home that has recently changed hands. Adjust the price up or down to compensate for differences, and you’ll know your home’s value.

If a similar home in your neighborhood recently sold for more than your appraisal, especially if the sale took place after the appraisal, bring that to your bank’s attention.

2. Point out poor or missing comparisons.

Look at the comps the appraiser used. He or she might not know all the homes in your neighborhood that have sold recently.

The appraiser will only find comps if they’re listed in the Multiple Listing Service.

If a home changed hands without ever being listed, it’s similar to your home and it sold for more than the appraiser said your home is worth, then that’s new information the bank and appraiser should see.

Short sales and foreclosures can also throw off appraisals of similar homes.

When you bring this to the appraiser’s attention, you might say that this comp was a distressed sale or that, yes, the house down the street sold for less, but it had no plumbing.

It’s tough to find comps for unique properties. If your property is unlike the others in its neighborhood, look at the comps the appraiser used. Are there other comps that are arguably more appropriate?

Lear recalls a duplex in Shorewood, Minnesota: “We did the best comps we could, but the bank needed a comp with the same square footage and the same bedroom number. Those didn’t exist in Shorewood, so the bank accepted comps from a different suburb.”

That could be grounds to dispute an appraisal.

If properties rarely change hands in your neighborhood, that’s another potential problem.

Comps should be properties that have sold within the last 90 days. If your appraiser used older comps, you may be able to show that the market has changed.

3. Highlight the changes you’ve made to your property.

An appraiser might not have noticed your home’s new or upgraded features: a new kitchen, redone or additional bathrooms, updated decor, updated roof, new furnace, updated central air conditioning, finished basement or new fireplaces.

Richard L. Borges II, past president of the Appraisal Institute, a Chicago-based industry group, says appraisers often find it handy to have the owner present during a review of the home because it lets them ask questions and get them answered right away: How old is your roof? How often do you have to have your septic system serviced?

If you aren’t at the home during the walk-through, leave a letter detailing all you’ve done to your home.

If, after the appraisal comes back, you see that the appraiser missed some of the changes you’ve made, let the lender know.

Remember, though, that “the cost of new and upgraded home features rarely equals value, unless something is at the end of its life,” Lear said. “I appraised a home for a gentleman who was transferred six months after he bought the home. He remodeled the kitchen during that six-month period and sold the house for what he paid for it, plus the entire cost of the new kitchen. The old kitchen was from the 1960s, and the house was in an area that was becoming very popular.”

4. Seek a second opinion.

You can attempt to sway your lender to revise the appraisal by getting one on your own.

Lear remembers being hired by a homeowner seeking a second opinion on the appraisal of his home in Edina, a Minneapolis suburb.

Lear found problems with the home’s appraisal and sent his notes to his client’s bank, seeking to have the initial appraiser issue a revision or for the bank to order a new appraisal.

“That appraiser compared the client’s home to six homes in Minneapolis, St. Louis Park and a completely different neighborhood in Edina,” Lear said. “Not one of those is near this house. These are terrible comps.”

Getting another opinion doesn’t guarantee success, but it worked for this homeowner, Lear says.

In the end, you may or may not be able to get the value changed. The appraiser has to answer to underwriters, so they’re not very willing to change values.

Selling a home and buying a new one? Check out current mortgage rates.

How to challenge an appraisalJust before year end I told you that we were refinancing our house again, this time to a 15-year, 4.25% fixed-rate loan. The goal was to drop our interest rate by another .75% and save about $1,600 dollars per year in interest payments.

Unfortunately our house, which had dropped $55,000 in value the last time we refinanced, has dropped a whopping $35,000 more in the last 7 months.

Why? because a few foreclosures and distressed sales in our neighborhood have tanked prices. In fact, not a single non-distressed single family sale has taken place in the last 6 months within one mile of our home.

We got the news on Wednesday of last week and were taken back by the sheer magnitude of the drop. I discussed options with our lender and he suggested we verify the appraisal accurately reflected our house’s worth. If we thought it didn’t, we’d have the ability to ask the appraiser to reconsider his valuation.

Now, this is generally a long-shot. Most appraisers do a reasonably thorough job evaluating a house, and any appeal must be firmly rooted in facts the appraiser either did not consider or incorrectly considered. Of course, appraisers are human and can make mistakes, so diligence is important.

If you’re in this situation, here’s the steps you can take to challenge your appraisal. We made it through Step 4 and determined that the appraisal accurately reflected the value of the house, so we decided to look into other options, and then ultimately cancel the refinance altogether.

Steps to Appeal a Real Estate Appraisal

Step 1: Verify the appraisal contains an accurate representation of your home. Check things like square footage, number of bedrooms and bathrooms, whether your house has a deck, lot size, etc. Make sure that every aspect of the description of your home is correct.

Step 2: Verify that the comparative properties (called comps) used for valuation basis are accurately described. For instance, make sure that a house that claims to have a deck actually has a deck. This can be done by examining tax records and driving or walking by the property. If a house claims to have a deck but actually doesn’t, the appraiser may have made an incorrect adjustment to your valuation based on that information.

(Steps 3-on will likely require the assistance of a real estate professional, such as a Realtor)

Step 3: Verify that the comps chosen are the best possible compartive properties to your home. Remember that recency of sales is going to be one of the most important factors. Real estate agents will have access to multiple listing services that can show all the properties that closed within the last 6 months, and will be able to search the database by region. While appraisers will consider active listings for informational purposes, they are a last resort when it comes to property valuation. Just because your neighbors house is listed 10% above the last sale doesn’t mean the values in the neighborhood have increased proportionately.

Step 4: Verify that the comps chosen were not sold under distress. Distressed sales will likely bring a lower value than a traditional market sale. Even if the appraiser chose foreclosures, however, if the overwhelming number of recent sales in your area were foreclosures, he may use that as a basis for accepting the lower indicated value.

Step 5: Prepare a written challenge. In the challenge you will be writing back directly to the appraiser, so respect, clarity, and brevity are key. If you found deficiencies or errors in the report, create a list of those items you would like taken into consideration that should affect the value. Call the appraiser and ask him for the best way to send over the information — it could be as simple as sending an e-mail.

Under new regulations, lenders are required to select the appraiser for a purchase or refinance to eliminate potential bias in the appraisal. This can have the affect of the lender selecting an appraiser who is not familiar with the territory. This can lead to poor choices in comps or failure to consider all aspects of the property. It is always worth examining the appraisal and ensuring it is built on a solid foundation before resigning yourself to the lower amount.

What do you think? Have you ever challenged an appraisal? Were you successful? Tell us about it!

How to challenge an appraisal

Nothing can kill a real estate deal faster than a low appraisal. If you’re looking to refinance and the bank gets a low-ball estimate from an appraiser, it will likely cause the lender to rescind the offer or stick you with a much higher interest rate. And if you’re trying to sell a home, a buyer with an offer on the table might have to back away if the appraisal pegs the house below the offer price. But you don’t have to silently suffer a low appraisal. These estimates aren’t a hard science and if you feel an appraiser has low-balled your home, here’s how you can make it right.

Understanding the Appraisal

The first step in challenging an appraisal is understanding how an appraiser comes up with the figure. To work out how much a home is worth, an appraiser examines recent sales data in the surrounding area. In theory, this should be able to give you a good idea of the fair market value of your home, but relying on data like this can often lead an appraiser to come up with the wrong price. Not all homes are created equally and the appraiser might have been basing the estimate on a property that only bears a superficial resemblance to your home. For instance, while your home might have a similar square footage to other homes in the area, you might have a finished basement, a recently remodeled kitchen, or a two car garage, all things that should boost your home’s value.

Keep It Up To Date

Another common problem with appraisals is that the economic downturn decimated home values in many areas. But home values have been on the rise over the last few years, and if a home appraiser has used out-of-date data to value your home, it could leave you shortchanged. To ensure that you are getting the best appraisal possible, make sure they are basing your appraisal on the most recent home sales.

Really Sell the Place

The nest step in making sure you get a fair appraisal is to talk the place up while the appraiser is there. Make sure you highlight key features, like a spacious bathroom or a backyard that’s perfect for entertaining. You’ll also want to know some of the nitty gritty details, such as when hot water tank was last replaced and the type of wood used in the flooring. You can further back up your claims by digging up receipts and contracts that show how much remodels and repairs cost. While you can’t expect to recoup the full value of a renovation, you can still use these figures to bump up the price.

Get Someone Local

Because the appraiser works for the lender and not for you, you often don’t have a lot of control over who comes to put a price on your home. However, you can make recommendations or requests of the lender and you should insist they have someone local appraise your home. The bank might not think it matters that much, but an appraiser from the next town over might not really understand the local market. A local appraiser will be better equipped to properly value things like proximity to a good school, or know when a neighborhood has suddenly become the “it” place to live.

Boost Your Curb Appeal

An appraiser’s visit should be treated much the same way you would treat a potential buyer, which means you need to focus on improving your curb appeal. Clean up the yard, do some basic landscaping, and make sure the place is well lit. The same goes for inside the home. While mess and clutter shouldn’t be factored into your home’s asking price, an appraiser might be easily swayed by an untidy home, leaving you with a lower price tag.

Do Your Homework

If good salesmanship fails to get a you a good appraisal, it’s time to dig in and do your homework. You’ll need to find several homes in the area that you think are comparable to your home that have recently sold for more than the appraised price. Hit up sites like Trulia and Zillow, which show recent home sale prices. Dig into the data and scour the images to find homes that offer the same space and amenities as your own. Once you’ve compiled a list, bring it to the appraiser or bank to challenge the appraisal.

If you’re purchasing a home or refinancing your existing property, you’ll need a home appraisal. A home appraisal provides a property value that your mortgage lender uses to determine how much you’re able to borrow. When a home appraisal comes in at a lower value than your agreed-upon price or too low for you to qualify for a refinance loan, there are options to contest the low appraisal value.

How is a Real Estate Appraisal Calculated?

Home appraisals are first calculated using an Automated Valuation Model (AVM), which analyzes data such as public records and the sales price of comparable homes that have recently sold to generate an estimate. Then appraisals are typically reviewed by two or three other appraisers, and finally by the loan underwriter.

How a Low Home Appraisal Impacts the Purchase Process

If you’re purchasing a home and the real estate appraisal comes in with a value lower than the agreed-upon selling price, your mortgage lender may deny your loan application. In this case, you’ll need to negotiate with the seller to lower the price or make up the difference in cash. You can also contest the real estate appraisal and try to get the appraiser to modify the report with a higher value. If you’re seeking a refinance loan, a low appraisal impacts the amount your lender will allow you to borrow.

As a seller, you also want your property to be appraised at a favorable value so that you’re not faced with reducing the selling price to help your buyer secure financing.

What to Do if Your Appraisal Comes in Too Low

If your appraisal value comes in too low to secure financing, the first step is to provide a written rebuttal to your lender. Your written rebuttal should include any pertinent information that you feel the appraisers overlooked in calculating your property’s value. Sometimes, the seller is in a better position to offer this rebuttal, having more information about the property than buyers.

Outline Overlooked Information and Recent Data

Sometimes, appraisal results are skewed due to unique situations relating to properties used as comps. For instance, if a comparable home has recently sold but was not listed on the MLS because it sold before being formally listed, appraisers may not have access to this data unless you point it out.

Another situation that can impact appraisal values is comparable properties recently sold at a low price. For example, if parents recently sold a property to their children for a price far below market value, and this property is included as a comp in your appraisal, it could skew the value of your home downward.

Point Out Any Discrepancies in the Appraisal Report

Carefully evaluate the details regarding your property in the appraisal report. A seemingly simple error such as describing the property as having one bathroom instead of two can lead appraisers to rely on the wrong comparable properties, inadvertently reducing the appraised value of your property.

Such details might include the number of bedrooms or bathrooms, updates such as new windows that aren’t included in the appraisal report, and any other improvements that have gone unnoticed. Look for other comps that have sold at higher prices than the comps used in your appraisal. Usually any property within a mile or so of your home that has sold within the last 90 days is fair game, provided that it has similar characteristics (square footage, number of bedrooms and bathrooms, attached garage, etc.).

Low Appraisal Options for Sellers

If you’re selling your property and your home is appraised at a value lower than you’d like, you can make improvements that will increase the value of your property. If the appraisal is conducted as part of a sale, obviously this is less convenient. If your buyer does not secure financing as a result of the appraisal and cancels the transaction, making improvements before the next offer comes in is an option. Additionally, you might choose to have an appraisal done prior to listing your home for sale and make improvements to boost your property value before listing your home.

If you have questions about the process, a Redfin real estate agent can help.

May 29, 2013 / 2:51 PM / MoneyWatch

(MoneyWatch) Experts estimate that at least one-third of all U.S. homes are assessed at too high a property value for tax purposes. If you think that applies to you, you may be able to appeal your home’s assessed value.

The first thing to keep in mind is that an appeal is a process. To successfully contest an assessment, you’ll need to have the facts and information that support your claim of a lower property value. A properly documented appeal is clearly much more likely to be successful. By contrast, an appeal that simply grouses that your taxes are too high and that your neighbor pays less is likely to fail.

Just as in the real estate market, the specifics will vary from one locale to the next. In general, though, here’s how to go about challenging a property assessment.

Learn the appeals process. Your town’s tax assessment office will have specific procedures for appealing a property assessment. Anyone considering an appeal of their property taxes will need to become knowledgeable about how the process works, who to work with, and what forms and information is required to appeal the assessment on your home. You will also need to know the filing deadlines for when any appeals will be heard for the coming tax year. The point is that you do not want to overlook a simple technicality that could jeopardize your chances of winning an appeal.

Review property tax records. All properties assessed a tax are listed in a public document called a tax roll. Get a copy of the tax roll and what is known as the “property tax card” for your home. The information for these records is the basis for the assessed value of your home and the resulting property tax you pay.

Check to ensure that the tax records are correct in describing the number of bedrooms, bathrooms, and dimensions and square footage. Also check to see that the records indicate the correct year the home was built. If you removed any buildings or filled in an in-ground pool, see to it that the records properly reflect this. If the records state you have a fireplace or a finished basement and you do not, this can result in a higher tax assessment. If any of this information is wrong, you have good grounds for an appeal.

Prepare the appeal. The most common appeals for homeowners are based on either errors in fact (for example, incorrect data used by the assessors in valuing your home) or errors in judgment (where the homeowner believes the tax is based on a home value that is too high). Appeals based on errors in fact are easier to win. Appeals based on your belief that your homes tax value is too high will need to include several appraisals and information on similar property with lower values.

In real estate, there are several circumstances when your entire transaction hangs in the balance, based on the results of an appraisal:

When you are buying a home, you need the appraisal of the home you are buying to match or be higher than the price you have contracted. Conversely, when you are selling your home, you will want to appraisal value to match or be higher than your selling price. And finally when you are refinancing your home, you want the appraisal to be as high as possible.

So what do you do if that all-important appraisal comes in lower than expected?

1. Don’t Panic

Take a deep breath — there many ways to tackle this scenario! Save yourself the stress and don’t freak out.

2. Obtain a Copy

Have your real estate agent or mortgage officer obtain a copy of the appraisal for you so you can review it in detail.

3. Review the Comps

You and your real estate agent need to review the list of homes that the appraiser used for comparison. This is the most powerful tool you have to contest an appraisal. The selection of the comparable homes used can show a wide variety and variances. You and your agent will want to examine the ones the appraiser selected.

Look for these key comparisons:

a. Square footage

c. Location on the block of each home

d. Condition of the homes

e. Age of the homes

f. Amenities of the homes

g. Custom home vs. tract home

4. Look at Homes in the Same Neighborhood

The homes used in the appraisal should be in the very same neighborhood as yours, especially if some of the surrounding neighborhoods are less desirable than yours.

5. Check into the School District

This can be a significant value changer for many neighborhoods. Homes in significantly better school districts are more desirable and generally priced higher than their counterparts in sub-par districts. Be sure all homes in the appraisal share the very same school district. This can make all the difference.

6. Contest the Houses Used

If you find any significant discrepancies with similarities of the homes the appraiser used, have both sellers and buyer agents put together a list of more accurate home comps that would justify the price you need.

7. Investigate Permit Issues

Has the appraiser taken off value for room additions, or upgrades that don’t have permits? Often times, permits are not filed properly originally, or the appraiser was not able to find some of them. An entire room or bath addition is a huge plus for your home’s value. Without a permit, the appraiser can’t include it. So if something is missing a permit, march to city hall and start digging into files to find it yourself!

8. Brag about your House

Compile a list of amenities and improvements! Basically, list all the things that would show your property having higher value than other comparable homes. Granite counter tops, central heating and air, hardwood floors, upgraded bathrooms, location on a cul-de-sac, mountain or ocean views, energy efficient systems, etc. They all matter and should be touted!

9. Scrutinize the Appraiser

Yes, you can even question the bank or mortgage company about the actual appraiser. There are a few key factors that could bring his valuation into question:

a. Did he or she actually enter and walk through home, or did they only do a drive by?

b. Is the appraiser local? Is he familiar with nuances of the neighborhood?

10. Ask the Appraiser to Reconsider

Once you have copies of all your comps and any other supporting documentation, you can present all that to the appraiser and ask them to reconsider their determination. This is usually done via the bank or mortgage company that originally ordered the appraisal.

11. Demand a Second Appraiser

If the appraiser refuses to reconsider his determination, and you and your agent feel there is supporting evidence that would significantly alter the outcome of the appraisal value, you can send a demand letter to the bank or mortgage company to send out for a second appraisal.

12. Order a Brand-new Appraisal

Finally, if all else fails, you or your real estate agent can order your own appraisal. There is a cost for that and you would have to pay for it out-of-pocket. There is no guarantee that it will come in at a better value, but if you and your team feel confident that the value should be higher, than it may be worth the expense. You can also try to have the cost split between the seller and buyer — as it benefits both.

As always, you can get more information on my books, follow me on Twitter, and like me on Facebook!