A bank appraisal is a necessary step in the home buying or selling process. Since it is a decisive factor on how much the lender will be willing to loan to the buyer, waiting for the results can be heart-wrenching. If the appraisal comes in significantly lower than the house is under contract for, the entire deal is in jeopardy.

 

An appraisal is an opinion of value. The appraiser establishes that value by comparing the house you are buying/selling with other properties with similar features (size, age, condition, number of bedrooms and bathrooms, etc.) that recently sold in the neighborhood: those properties are known as comparables or “comps.” Since two houses are rarely exactly the same, the appraiser adjusts each feature if they are better or worse than the subject property.

 

If you are convinced that the bank appraisal is not accurate, there are some steps you can take to dispute the results.

 

 

1. Ask for a copy of the appraisal

In a bank appraisal, you are not the client: the lender is. Although the appraiser is not at liberty to give you a copy of the appraisal, you are entitled to ask the lender for one. The first step to disputing a bank appraisal is to have a thorough look at the report, which describes which comparables the appraiser has used and how much those comparables were adjusted for.

 

 

2. Make sure that there are no mistakes on your house description

The appraiser only spends a relatively short period of time in your house and may have missed some significant features that may affect the results of the appraisal. Check if the data the appraiser used is up to date and if he/she took into account recent improvements.

One thing to carefully consider is if all the proper permits were pulled for the improvements were made. Unfortunately, if it is not the case, the appraiser cannot include them in the appraisal.

 

3. Find comparables

Finding the appropriate comparables is a crucial element of any appraisal, and it is most likely where you will find discrepancies with your own opinion of value. Don’t hesitate to ask for help from your real estate agent to find comparables supporting your views.

Some things to look for in a comparable include:

 

  • Did the comparable sell recently (less than six months)?
  • Is the comparable a distressed sale, like a foreclosure or a short sale?
  • Is the house located in the same neighborhood?

 

 

4. Request a Value Appeal from your lender

Once you have identified which issues may have led the appraiser to conclude to a lower opinion of value and which comparables can support your views, you can request a value appeal from your lender. You can provide the appraiser with the research you have done to help him or her change the value.

If you provide enough evidence, the lender may request a second appraisal.

 

 

5. Get a second opinion

As a last resort, your best argument would be to order for an appraisal yourself at your own cost. However, it is up to the lender to accept the result of that appraisal or not. Most likely, lenders prefer to use their own appraisers.

Although you can dispute an appraisal ordered by the bank, it is a complicated process that will require a lot of research and a solid argument on your part. The lender has the last word in terms of accepting the challenged value or not, and there is no guarantee of success.