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How to Appeal an Undervalued Appraisal
You’ve invested time and effort in your search for a new home. You’ve researched neighborhoods, and you’ve thought about the features in a house that are important to you.
Finally, you’ve found the perfect home. You’ve even negotiated a purchase price with the seller.
You’re waiting for your mortgage approval to conclude the sale. To your chagrin, the appraisal undervalues your prospective house. Your lender will not approve the mortgage loan since the appraisal does not support your purchase price.
How can you appeal the mortgage appraisal?
Contact your lender
The first step in appealing the appraisal is to contact your lender and find out the steps of their appeals process. Find out if your appraisal was done by an appraiser or by an automated valuation model.
The automated, electronic appraisal method speeds up the appraisal process and reduces costs—but can produce faulty results. If there was an electronic appraisal, the lender should allow another appraisal by a certified appraiser. The lender may require you to pay for this appraisal.
Study your appraisal carefully
If the appraisal was done by an appraiser, you must provide proof of the appraiser’s error.
Study the report carefully. There may be simple factual errors that reduce the value of the house. The appraiser may have mistakenly marked three bedrooms instead of four.
A simple error could be the basis of the low mortgage appraisal. Politely point out the error to the appraiser, who should then be willing to change the oversight.
Research the comps listed in the appraisal
Note the comparables (comps) listed by the appraiser. These comps are similar houses in the same neighborhood that were sold within the last six months. The appraiser uses the sale price of these homes to help determine the market price of your prospective home.
Note any advantages that your house has over the comps. Perhaps your house is on a larger lot, has a bigger kitchen or was recently renovated. These advantages should prove that your prospective house has a higher market value than the comps. Take pictures of the larger lot and the comps’ smaller grounds to further document your point.
Research other home sales that took place within the last six months, in your prospective neighborhood. You may discover other homes that were sold at prices above the comps listed by the appraiser. These new comps will help support your claim that your house is worth more than the appraiser’s value.
Present your information to your lender who will forward it to the appraiser. Your detective work and careful documentation will help the appraiser reassess his valuation.
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