Can a low home appraisal be disputed by the homeowner for a mortgage refinance?


I am refinancing my home, and the appraised value seems low. Can I dispute the appraisal?

The first (and most important step) is to read the entire appraisal report. Many times a borrower has not been provided a copy of the appraisal by the lender and just knows the value opinion conclusion – or he has a copy of the appraisal but only looked at the value opinion conclusion.

Obviously, a homeowner is interested in the bottom line, but if you do find yourself disagreeing with the value, it’s important you understand (by reading the report) the reasoning the appraiser used when developing the value opinion.  Telling the lender, “But the house is in really good condition”, “We just put new flooring and landscaping in”, “The house down the street just sold”, and so on may be futile if the appraiser already addressed those specific items in the report.

Once you’ve read the entire report, remember that the appraiser’s client (the party he is working for) is the lender in the case of refinances, purchases, and home equity. Since you’re not the appraiser’s client, calling him up or visiting him at his office won’t typically shed any light on your questions, since he can discuss specifics of the appraisal with his client only. (Even if you paid the lender for the appraisal, you are not the appraiser’s client.) Often, though, an appraiser is willing to discuss general appraisal methodology with callers, but will try to steer clear of any specifics related to a particular report.

So, what CAN you do? After you’ve read the entire appraisal, talk to your lender. If you found errors that could truly affect the value of the property or you identified better comps than what the appraiser used, then provide the information to your loan officer, who can in turn forward it to their appraisal or underwriting department. The lender must review the information and can choose to forward the information to the appraiser if it is deemed “appropriate”. Per federal rule, the lender should not simply forward information from a borrower, agent, or loan officer to the appraiser if it isn’t in some way “appropriate”.

For example, if the appraiser placed a left-swinging door on the sketch, but it’s actually a right-swinging door, that’s probably not substantial enough to forward to the appraiser in most cases. But if the bedroom count is wrong, that could be a factual error that may have an effect on value. Another example: Finding a new “comp” that is outside your own subdivision in a subdivision that is newer, has superior quality, or has larger properties may not be an “appropriate” method for including a comp, and the lender might choose to not even forward that information to the appraiser for comment, if it is clear the sale you found wouldn’t even appeal to the same potential buyer.

If you found comps (sales of similar properties) you truly believe are better than those used by the appraiser, write down why you think they’re better and supply that reasoning to your loan officer. Compared to the appraiser’s, are your comps more similar in condition, upgrades, room count, levels, location, age, size, general appeal, and so on? If you can’t actually cite why your sales are better to use than the appraiser’s, then are they really better? And remember that searching for comps by price will always result in sales that sold in the range you’re looking for – even though those properties may not be at all similar to your own property! Searching by price is generally not a good method for finding comps.

While it might be tempting to tell your lender “But I know it’s worth more”, that really doesn’t give them anything useful. The lender and the appraiser speak “market”: For a market value opinion, value comes from what buyers pay sellers on the open market. The sales themselves prove the values in the marketplace.

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