You just had an appraisal done, but it seems to be flawed – what’s next? Well, for starters, you should contact your lender describing the error found and any factual support you have – a lender can’t do anything for you based on your own personal objection, so be sure to stick to the facts. Ask what the procedure is to address these concerns and how you can fix them. Some common errors that could be incorrect are: bed/bath count, a large discrepancy on square footage reported and adjustments for differences between the subject and sales comparables.
If you believe the appraiser selected comparables that were not the most similar, submit a list of closed sales to be considered. To prove an error, you must be able to explain why they are different and not of equal value to yours. Keep in mind that active listings do not support a different value. Until those listings are sold, the market has not accepted the prices. Nobody knows if they will sell at all, or if they do, at what price. All the information you provide to your lender will be relayed to the appraiser who will then review and respond. If after disputing an appraisal, you still feel that it is not accurate, you have a few more options.
The first thing you could do is order an appraisal review – this is when another local appraiser reviews the reports to verify data and provides their opinion on the comps selected as well as the value. If they feel there were better comps or the value is not supported, they will note this in the review. Depending on the type of review ordered, the review appraiser may also provide additional comps and their own opinion of value.
Another option is to order a full 2nd appraisal, which is separate from the original appraisal. This would give you a new report from another local appraiser to determine their opinion of value. Remember, appraisals are opinions, so the values will not match exactly. Be mindful of AIR (Appraiser Independence Requirement) when ordering a 2nd appraisal – AIR does not allow a 2nd appraisal to be ordered unless one of the following criteria has been met:
- The 1st appraisal is flawed and the reasons why are clearly documented in the file.
- It’s part of the lender’s pre-established appraisal review or QC process.
- A 2nd appraisal is required by law
Make sure you have these bases covered if you choose to order a 2nd appraisal.
Appraisals don’t always come in at your desired value, but if you know how the appraisal process works, you will know how to identify any concerns of error when reviewing your appraisal and the appropriate data needed to address them.