Home Buying » Home Buying Guides » How to Dispute a Low House Appraisal
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How to Dispute a Low House Appraisal

When a home appraisal comes in at a much lower value than your agreed-upon price, it may cancel your deal. Here are 7 ways to challenge a low home appraisal
Author: Russell White
Russell White

Writer, Contributor

Experience

As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO

Experience

Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.
Author: Russell White
Russell White

Writer, Contributor

Experience

As a finance geek and Content editor with 13 years of journalism experience, Russell makes sure every article has the right flow, edits for accuracy, and consumer value. In addition, Russell contributes his own ideas about budgeting, savings, and credit cards.

Review & Fact Check: Baruch Mann (Silvermann)

Baruch Mann (Silvermann)

Financial Expert, The Smart Investor CEO

Experience

Baruch Mann (Silvermann) is a financial expert and founder of The Smart Investor. Above all, he is passionate about teaching people how to manage their money and helping millions on their journey to a better financial future.

We earn a commission from our partner links on this page. It doesn't affect the integrity of our unbiased, independent editorial staff. Transparency is a core value for us, read our advertiser disclosure and how we make money.

Table Of Content

House prices can fluctuate over time, which can make planning a home purchase a challenge. However, there is data that shows the most common price brackets of property purchases. In this chart showing 2020 NAR Trends data, you can see that the most common price bracket for home purchases is $200,000 to $250,000 at 15%. However, this is closely followed by the over $500,000 bracket at 13%. The least common price bracket is the $75,000 to $100,000 at 3% of property sales.

Price of Home Purchased

If you’re looking to get a mortgage loan or you’re looking to get a refinance loan the  lender is going to look at your income, your debt-to-income ratio and your credit score. Being approved means that you need to meet the requirements that they have set for each of these categories.

At least, if the house you’re looking to buy is able to meet the appraisal. If it’s valued at or above the loan amount that you need from the bank you should be able to get the loan. If it’s not, you’re going to have trouble getting a loan. That’s where you need to know how to dispute a low house appraisal.

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What Affects Appraisal Value?

There are a number of different factors that will go into determining the value of your home. And those factors come from a qualified appraisers.

They have to go through a series of specialized training processes to be able to appraise houses. And they may have to follow specific standards as well. And that’s why they’re looking at:

  • Home Size: How big is the house that you’re getting appraised?
  • Home Location: Where is the house that you’re getting appraised? Some neighborhoods are going to be worth more than others.
  • Home Age: Just how old is the house? This could affect some of the building materials or the quality of the home. An older home may need more work earlier than a new one.
  • Curb Appeal: What does it look like from the outside? If the outside of the house is in good shape and the landscaping is good you’re going to have a better value. If it looks rough on the outside your value could suffer.
  • Construction: Is the house on a basement or a slab? Is there an attic? Is there a driveway? What is the driveway made of? What size is the driveway? What are the walls made of? Is there a garage? All of these things affect the value.
  • Utilities: What kind of utilities does the house use? Does it have a fireplace for heating? Is there a patio or energy efficient appliances? Are there additional services like a sauna? All of these things could also affect your value.
  • Appliances: What type of appliances are in the house? How old are those appliances? Are they in good repair? What about things like the HVAC system or the plumbing and electrical?
  • Renovations: Have there been any renovations done recently? If there have been then you might get a higher appraisal price than if there are repairs that still need to be completed.

Buying a home is considered one of the most stressful events in life after the death of a loved one or a divorce. So, what are the most difficult steps of the home buying process. In this chart of 2020 NAR Trends data, the most common difficult step was finding the right property.

Over 50% of home buyers found this stressful. However, paperwork, savings for a down payment and understanding the purchase process also ranked highly. On the positive side, almost 30% of those surveyed experienced no difficult steps.

Most Difficult Steps of Home Buying Process

How Often Do House Appraisals Low?

Low home appraisals do occur in some occasions, but not frequently. A report by Fannie Mae shows that appraisals come in low only 8% of the time. When this happens, the parties may appeal the low appraisal and request a new appraisal. Key triggers of a low appraisal may include current market conditions and declining property values in the neighborhood.

Nevertheless, a majority of home appraisals come at the right price, and you can avoid a low appraisal by getting a home appraiser who is familiar with the area, and pointing out home upgrades during the appraisal.

What Are Your Options?

If you want to dispute a low house appraisal, there are some steps you can take after getting the appraisal report. Let's review them.

1. Look At the Report

Make sure that if the appraisal comes in lower than you expected you actually take a look at it. Consider what factors were marked down and where you lost some value. You can talk to the appraiser to get a better idea or you can get information mailed or emailed to you. As the seller you have a right to this information and you can review everything. You can also dispute anything that you see on the report. This is especially important if you see an obvious error like a difference in square footage or a difference in the number of bedrooms and bathrooms. Once you’ve checked the obvious, go over everything else you can find.

2. Look for Problems

Take a close look and see if there are any easy mistakes. That means looking for things that are obvious to the naked eye. So, writing down the wrong neighborhood or address could be a problem that changes your appraisal value. Putting down too few bedrooms or bathrooms or not recording the garage are other factors that should be considered.

Make sure that you are approaching the lender to make an appeal if you notice any kind of problems with the appraisal. It happens quite frequently, but you need to have your facts in order and you need the paperwork to prove your claim.

Because the appraiser doesn’t spend a lot of time in your home it’s entirely possible that they could miss something in the process. As a result, you want to make sure you’re looking very carefully at everything and pointing out any upgrades, improvements or changes.

3. Look for Permits

You need to have permits for any of the upgrades and improvements that you’ve made for your home. If you didn’t get those permits then you may not be able to count the changes that you’ve made. That means the appraised value of your home may not be as good as what you thought it was going to be. If you do have permits but they aren’t found by the appraiser make sure that you’re doing what you can to get those permits so you can present them. You can get them from the county or city government in your area, whoever issued the permit in the first place.

4. Do Your Own Research

Make sure you look at the comparable homes in your area to find out more about your value. Look in your own neighborhood and similar neighborhoods and make sure you’re looking at homes that are very similar to yours. This will help you get an idea of what your value is going to be and what changes or improvements are going to help.

Look at the sales of homes including how much they were listed for, what amenities they had and how much they actually sold for. Then, point out those prices and those amenities to your agent or your mortgage lender. This could help you increase your value.

You should also be looking at information for houses that weren’t listed but still sold. Get as much information as you can and make sure you present it to your appraiser and your lender to get a more accurate accounting of the value for your home. Look for houses and properties that are as similar as possible to yours to get good comparable.

The location of a property can be a massive factor when choosing a home. But, what determines your neighborhood choice?

In this chart using 2020 NAR Trends data, the quality of the neighborhood was the most popular factor. This was followed by the convenience to work and the overall affordability of the homes. At the other end of the scale, walkability, larger lots and convenience to recreational facilities and schools were the least important factors.

Factors Influencing Neighborhood Choice

5. Make Your Case

You’re going to need to work with your agent to create a good valuation for your home and to prove it. They want to make sure your house appraises well because the higher the sale price the higher their commission. So, they’re going to want to help you to make sure your home is presented in just the right way. Talk with your agent and find out about all of the different things that you should be including in your home features. They’ll help you see what the most important features are and what the things are that you absolutely should be including. They’ll also help you point out where the problems are with the original appraisal and what the value of the home should be.

6. Ask for a Second Opinion

You don’t necessarily have to go with the report that the first appraiser gives you. You can request a second appraisal be done to get a different valuation. You want to make sure that you have an accurate valuation and if you feel that the one you’ve been given is inaccurate for some reason make sure you get someone else to come out and get a new one.

You may have to pay for a second appraisal, but if you feel that the one you’ve gotten already is far too low it might be worth it to shell out the extra money in order to get a better appraisal.

After all, if your house doesn’t appraise high enough you’re not going to be able to sell it for the asking price unless the buyer can come up with more money to put down instead of taking out a larger loan.

7. Hire Someone Else

If you want, you can even hire someone entirely on your own. This means doing your own research to find an appraiser and then making sure they get the job done. You’ll also have to make sure that they have the qualifications that your lender requires or the appraisal may not count for anything. If you can get a better valuation on your home, however, you might be able to make a good enough return on the investment you’ve made.

How to Negotiate After a Low Appraisal?

If you want to keep the deal moving after a low appraisal, you can approach the seller for a negotiation. In a cold market, the seller may be willing to negotiate instead of letting the deal fall through. You can request the seller to reduce the asking price to the appraisal value and close the deal. If the seller is reluctant, you can mutually agree to split the difference. For example, if the difference between the appraised value and the offer price is $30,000, you can offer to pay $15,000 in cash, while the seller drops the price by $15,000. You can also agree to extend the contract appraisal contingency to allow some time for a second appraisal to create a win-win situation.

How to Challenge a County Appraisal?

If you disagree with the county appraisal, you can challenge the appraisal by calling your county auditor or filing an online appeal. You should have the facts and information to support your appeal. You should provide all the evidence you have such as sales price of similar properties in your neighborhood, professional cost estimates of upgrades and structural fixes in your property, and any recorded documents. A property documented appeal made before the end of the tax year may be considered, and the county may approve an appeal to re-appraise your property.

FAQs

A qualified appraiser determines your home value based on the aspects of the property, visual inspection, current market trends, and recent sales of similar properties in the neighborhood.

The appraisal process involves a visual inspection of the property and the appraiser must inspect the interior and exterior and note any conditions, upgrades, or structural defects that could affect the property value.

The appraiser considers key home aspects such as the square footage, amenities, floor plan functionality, number of bedrooms and bathrooms, garage & driveway, roof type, etc.  

If you had an appraisal contingency, you can renegotiate the offer price to come to an agreeable price with the seller. If the seller is not willing to adjust the price to an agreeable price, you can cancel the contract and take the deposit.

If you did not have an appraisal contingency, you could lose your deposit if you cancel the contract. You can choose to come up with the difference between the offer price and the appraised value to close the deal.

A low appraisal may be a good thing for the buyer only if the seller agrees to lower the asking price to match the appraisal value. However, in a hot market, a low appraisal may be a bad option for the buyer since the lender will only finance the purchase up to the appraised value.

This means you will have to raise the difference out-of-pocket to close the purchase. However, you should be aware that, by paying out-of-pocket, you will be paying more than the assessed market value of the home.

Home appraisals may lowball by 30k or even more. For example, if a property is listed for $300,000, it can be appraised for $270,000 or even lower.

When this happens, the buyer's lender will not approve the loan for the listing price, and the buyer may be forced to come up with the difference i.e. $30,000. If you believe the appraised value is incorrect, you can challenge the appraisal and request a new appraisal of the property.