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What If Your Home Doesn't Appraise?

Written by on Tuesday, 07 January 2014 2:19 pm

Housing markets are constantly changing, heating up or cooling off. For that reason, bank appraisers are hired by lenders to make sure your home is priced fairly and to current market conditions.

Appraisers use a formula that includes historical trends, pendings, solds, features, amenities and days on market to make sure that your home's current value reflects housing conditions in your market.

Your home's market value has nothing to do with what you paid for it, how much money you need to retire or how much you need to buy your next home. Your real estate agent's market analysis doesn't determine market value - only a range of prices so you can choose a listing price that will help your home sell quickly.

Outside forces such as the economy can cause your home to depreciate. So can allowing your home to deteriorate by not making repairs and updates that keep up with buyer demands.

So what can you do if your home doesn't appraise? You can amend the contract to the appraised price or lose the buyer.

But wait, you may have other options. You can challenge the appraisal.

In some cases, banks use appraisal management companies that hire out-of-area appraisers, or they use low-cost appraisal products like automated appraisals instead of a full professional exterior and interior appraisal.

This is where your real estate professional really earns her stripes. She can determine what kind of appraisal was used to arrive at the home's valuation. If the buyer paid for a full appraisal and only received a drive-by, for example, the appraisal won't reflect your home's interior condition, so your new kitchen won't count.

Your agent can also examine the homes that were used in the appraisal and determine if the comparables are truly similar or not. If not, you have a fighting chance.

Have your agent provide an updated CMA (comparable market analysis.) It could be that new market information is available, such as homes that have sold recently that will help your case.

If the other comparables aren't in your favor, you may have to lower the price so you can proceed to closing.

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  About the author, Blanche Evans


  • Comment Link Caldwell Valuation Services Monday, 17 February 2014 2:17 pm posted by Caldwell Valuation Services

    One thing agents can do to help improve appraisals is give accurate and detailed information about your listings, including updates and renovations as well as needed repairs. If the seller left a Corvette in the garage report that also. More detailed information makes for better reports. Remember also that lenders want to see verified closed sales in the report. While prices may be increasing, higher listings and pending sales won't always support a purchase offer.

    If you challenge an appraisal, have verified market data to support the challenge. And make sure the alternate comparable sales you supply aren't already in the report. Yes, that has happened to me several times.

  • Comment Link Hank Miller Thursday, 16 January 2014 11:34 am posted by Hank Miller

    Best we can do to get ahead of stupid is provide usable and appraisal appropriate data that supports our position BEFORE the report is written.

    But, something about horses being led to water.....sometimes its all for naught

  • Comment Link Bill Gassett Thursday, 16 January 2014 11:03 am posted by Bill Gassett

    Agreed Hank but in every industry there are people that are exceptional at their work and others not so much. I have had the pleasure of being involved in numerous circumstances where the appraiser obviously was not well qualified to be performing the function they were hired for by the lender.

    I have met just as many real estate agents that don't know squat about common sense valuing methods as well.

    Don't know how you get out in front of stupid as you mention. We are never privy to a poorly constructed appraisal report. We are often times at the mercy of people who have no business doing what they are assigned to do.

  • Comment Link Hank Miller Thursday, 16 January 2014 10:55 am posted by Hank Miller

    Bill -

    The market is always right, the appraiser is just the lender's insurance policy. You are correct in that many appraisers are out there that shouldn't be - and that's due to what's gone on with the industry and the special help DC has provided - like they're presently doing with the mortgage biz.

    My point is that a smart agent knows how to read the tea leaves - get in front of possible issues because once these things are in, they're in.

    You can't fix stupid but you can at least try to control it for the short time that you have to. Being proactive is always best.

  • Comment Link Bill Gassett Thursday, 16 January 2014 6:49 am posted by Bill Gassett

    Hank Miller - your comments assume an appraiser is always right which is not the case.

  • Comment Link dean Wednesday, 08 January 2014 11:24 am posted by dean

    Suggestions to help be on same page as appraiser includes - 1) defining your neighborhood boundaries.
    2) Vip = pay attention to supply and demand & market trends. this will dictate/determine most of what you do in developing your opinion of market value
    3) Comp search - bracket subjects sqft. range by ~15% on high and low side to hopefully get nice size population of potential comp sales & listings with past 3-6 months
    4) pay attention to marketing time and exposure time.
    5) where does you subject home fall in regards to your neighborhood. Fixer upper? fully remodeled & high end amenities? middle of the road - moderate updates nothing fancy? Focus your attention on the comp data that most closely matches/represents your home. Toss out outlier/atypical unless of course your home is also an outlier type/atypical.
    6) pay attention to lot sizes, uses and locations of homes and comps(views, % of useable lot, detrimental locations, ie - next to traffic, commercial influences, invasion of privacy from neighbors,,etc).

  • Comment Link Hank Miller Wednesday, 08 January 2014 8:51 am posted by Hank Miller

    You can challenge the appraisal or you can stick a wet hand in a toaster, both will get the same result.....challenging an appraisal is pointless - get ahead of the issue.

    Listing agents should complete a cma based on the same criteria and appraiser will use - there should not be a "surprise". Also, the agent should meet the the appraiser out there, provide them with an info packet and APPROPRIATE comps that meet the required criteria.

    And even if you "win" an appeal, is a buyer going to accept that? That would be one stupid buyer's agent and an even stupider buyer to let that happen.....

    If agents would educate themselves as to how appraisers work and underwriting requirements, we'd have fewer issues and fewer upset sellers.

  • Comment Link TomB Wednesday, 08 January 2014 6:09 am posted by TomB

    Never list your home as the highest in neighborhood or make an offer in the most expensive home in the area.

  • Comment Link Yanni Raz Tuesday, 07 January 2014 5:03 pm posted by Yanni Raz

    I'll tell you what if, if that happens the same thing that happened in this last bubble will happen again . You can't buy a house with an ARM expecting it to raise in price. Rookie mistake!

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