As many sellers and buyers are discovering just how much their homes have been affected by the housing crisis they are finding out that their homes have severely decreased in value, at least according to appraisers who are hired to inform lenders what their homes are valued at, and many times the sellers are feeling that these evaluations are too low.
A homes value is what a willing buyer might pay for it, but over a period of several months values can rise and fall. To appraisers these valuations are based on previous sales and thus appraisers are always slightly behind what the market is actually doing.
Appraising is not an exact science and each appraiser has a different way of seeing things. They are human and they do make mistakes and if you feel that your appraiser made a mistake then you can appeal the report to your lender.
Yes, homeowners can request that their lenders provide a more thorough evaluation of their property and to find better comparable sales in their area or at least challenge the ones that the appraiser used in their evaluation.
As more lenders today are turning to third-party appraisal-management companies to do appraisals instead of just hiring appraisers directly the importance of a correct and fair appraisal is even more critical.
If you feel that the appraisal on your property was too low, you must first find out if your appraisal was an electronic one or a full scale appraisal. Today, in an effort to save time and money, lenders are using more automated evaluations, especially in the home-equity area. Sadly these types of evaluations are very inaccurate and could cost you money if this type of appraisal is used for the sale of your home.
These automated valuation models, are good for a broad spectrum view of local housing values in the area but they are not good for a house-by-house basis. Additionally, "drive-by appraisals", won’t be accurate either. This type of appraisal is where the appraiser simply drives by the home checking to see that the home is there and the appraiser never leaves the car to go inside the home.
Should you find out that your lender is basing your home appraisal on an automated valuation model or a drive-by, you should ask to have your home valued by an appraiser who will perform a full, on-site evaluation and compare your home with others in your neighborhood. Also, they need to check out the community as well.
The good news is that most lenders will concede and will follow your wishes as long as you are willing to pay the several hundred dollars it takes to pay for this type of appraisal.
However, if a full, on-site appraisal was used the first time and you still feel that the evaluation was too low it may be more of an issue to deal with because now you are dealing with humans and not machines. At this time your appeal cannot be seen as an exercise in futility and thus it will have to be handled with as much diplomacy as possible.
You might, nicely but firmly, suggest that the appraiser made a mistake and that you would like a second opinion. If you do ask for a second opinion from another appraiser you will be required to cover the cost of that appraisal as well and with luck on your side you may win your claim only if the second valuation is more than 5% higher than the first evaluation.
Even if you win your case and prove that the value is higher your lender is the one who gets to decide which appraisal the loan will be based on.
This article is for informational purposes only. Individuals should consult with qualified professionals on each individual's particular situation. This article should not be construed as legal advice.