4 smart moves to challenge a home appraisal

for sale sign in front of a house.

Here's a nightmare scenario for anyone trying to sell a home: a deal-killing appraisal that shows your house isn't worth nearly as much as your sale price.

This is not an uncommon occurrence.

Each month, about 1 of every 10 real estate agents reports that low appraisals scuttled a home sale, according to the National Association of Realtors.

A low appraisal can lead to a canceled sales contract because lenders won't approve mortgages for more than the home's value.

But if you believe your home is worth more than the appraisal shows, what should you do?

Most lenders have a process for challenging an appraisal, says Bob Lear, a real estate appraiser for more than two decades. But you must be prepared to point out mistakes the appraiser made in comparing other properties or by missing new or upgraded features in your home.

Our 4 smart moves won't guarantee the outcome you're looking for, but they should help protect against honest mistakes.

After all, an appraisal is just the appraiser's opinion.

Smart move 1. Give the appraiser a reason to change opinion.

Appraisals by the Numbers

Source: National Association of Realtors

Number Explanation
76% Realtors who reported appraisals with no problems.
6% Realtors who said a low appraisal caused a sale delay.
9% Realtors who said a low appraisal led to a renegotiated sale price.
9% Realtors who said a low appraisal led to a canceled sale.

Too many people just contact the appraiser and say "you're wrong," says Lear, owner of Lear-Annoni Appraisals in Eden Prairie, Minnesota.

That tactic won't yield a new appraisal.

To get a second look, "you have to provide me different data — data that is different than the data I used," he says.

Read your copy of the home appraisal, then consider whether you can offer the single most persuasive item: new comps.

A "comp," in the real estate world, is a point of comparison.

The best way to know what a home is worth, the argument goes, is to compare it to a similar home that has recently changed hands. Adjust the price up or down to compensate for differences, and you'll know your home's value.

If a similar home in your neighborhood recently sold for more than your appraisal, especially if the sale took place after the appraisal, bring that to your bank's attention.

Smart move 2. Point out poor or missing comparisons.

Look at the comps the appraiser used. He or she might not know all the homes in your neighborhood that have sold recently.

The appraiser will only find comps if they're listed in the Multiple Listing Service.

If a home changed hands without ever being listed, it's similar to your home and it sold for more than the appraiser said your home is worth, then that's new information the bank and appraiser should see.

Short sales and foreclosures can also throw off appraisals of similar homes.

When you bring this to the appraiser's attention, you might say that this comp was a distressed sale or that, yes, the house down the street sold for less, but it had no plumbing.

It's tough to find comps for unique properties. If your property is unlike the others in its neighborhood, look at the comps the appraiser used. Are there other comps that are arguably more appropriate?

Lear recalls a duplex in Shorewood, Minnesota: "We did the best comps we could, but the bank needed a comp with the same square footage and the same bedroom number. Those didn't exist in Shorewood, so the bank accepted comps from a different suburb."

That could be grounds to dispute an appraisal.

If properties rarely change hands in your neighborhood, that's another potential problem.

Comps should be properties that have sold within the last 90 days. If your appraiser used older comps, you may be able to show that the market has changed.

Smart move 3. Highlight the changes you've made to your property.

An appraiser might not have noticed your home's new or upgraded features: a new kitchen, redone or additional bathrooms, updated decor, updated roof, new furnace, updated central air conditioning, finished basement or new fireplaces.

Point them out.

Richard L. Borges II, immediate past president of the Appraisal Institute, a Chicago-based industry group, says appraisers often find it handy to have the owner present during a review of the home because it lets them ask questions and get them answered right away: How old is your roof? How often do you have to have your septic system serviced?

If you aren't at the home during the walk-through, leave a letter detailing all you've done to your home.

If, after the appraisal comes back, you see that the appraiser missed some of the changes you've made, let the lender know.

Remember, though, that "the cost of new and upgraded home features rarely equals value, unless something is at the end of its life," Lear says. "I appraised a home for a gentleman who was transferred six months after he bought the home. He remodeled the kitchen during that six-month period and sold the house for what he paid for it, plus the entire cost of the new kitchen. The old kitchen was from the 1960s, and the house was in an area that was becoming very popular."

Smart move 4. Seek a second opinion.

You can attempt to sway your lender to revise the appraisal by getting one on your own.

Lear remembers being hired by a homeowner seeking a second opinion on the appraisal of his home in Edina, a Minneapolis suburb.

Lear found problems with the home's appraisal and sent his notes to his client's bank, seeking to have the initial appraiser issue a revision or for the bank to order a new appraisal.

"That appraiser compared the client's home to six homes in Minneapolis, St. Louis Park and a completely different neighborhood in Edina," Lear says. "Not one of those is near this house. These are terrible comps."

Getting another opinion doesn't guarantee success, but it worked for this homeowner, Lear says.

In the end, you may or may not be able to get the value changed. The appraiser has to answer to underwriters, so they're not very willing to change values.

Selling a home and buying a new one? Check out current mortgage rates.

  • SissyO

    This VA dude appraised my house for $25k less than a conventional appraiser 6 months ago. When I asked him to reconsider because the other properties did not back to the 17th T (only 8 in the whole neighborhood do) he said my view wasn't a sweeping view and why did someone pay less than I was asking on the market at that time? Total asshole. I have requested a reconsideration of value. He's supposed to be a veteran. What a fucking sell-out. Also, probably just hates country club types like me.

  • SissyO

    That's not true. There are many factors you can use to appraise. If that were true, due to the loser foreclosures, nobody would get the true value.

  • SissyO

    Especially the VA loan appraiser system. $450 in VA? Lenders encourage before receiving the appraisal or them even showing up? Yeah, that instills a lot of faith in the feckless government system. Just more fleecing and degrading the veterans they are supposed to be supporting.

  • DA

    Greg. what if an appraiser values a property on false information such as the size of a lot. the lot is a combined 1/2 acre lot (unity of title) but the appraiser is appraising it based on the buyer splitting the lots up and building a second home. The lot is united as 1 lot and recorded with county and city. how can he carelessly support that information?

  • me

    The real question is what can be done to the "appraiser" who is screwing people over.Is there legal recourse or a licensing board or something to stop there shysters?

    • LW

      Yes, go to your states Appraisal Board and file a complaint. Enough marks against them, people will take notice. Even one isn't a good sign, they can lose their license and be fined. File a complaint.

  • tr

    We are going through this now, I live in San Diego, ca we had our home approved 29, 000 lower than then the home identical to ours. We have Solar panels installed and what is happening is the appraisers need to take courses in appraising homes that have renewable energy. We are trying to get it changed now but are having big problems. I even sent a copy of my contract showing I own my panels and value (20,000) and I have to find and send more info. My neighborhood is going to have this problem until education is done, so my neighborhood Council came up and wrote a bill got it passed and approved through Senate 9 renewable Energy bill AB1381). Now we have to wait for the Realtors Assoc. to train their appraisers. This will help a lot of people ,but in the mean time I have to fight.

    • Bob

      Solar panels are an eyesore. Many people wouldn't dream of blighting their home like that for a few AA batteries' worth of power (only on sunny days). It is better to think of this like a pool. Some people want them and some people don't; they do not increase your home's market value.

      • tr

        Well, you are the first to give a negative comment. So let me school you on Solar panels
        #1 your bill is lower and they are worth it my bill was 200.00 a month now it is 0
        #3 I'm not sure where you live, but here in California they do make home value go up because we are an energy saving state.
        #4 there is a bill in the Senate (AB1385), that issues that home owners get the correct appraisals on their property if they have Solar panels. LOOK IT UP
        Appraisers will have the opportunity to go for education with this Bill to give the correct appraisal.

        • Bob

          A few points that may help here:
          savings of $200 on a $20,000 investment require 100 months to break even. So this investment makes one cash flow negative for over 8 years; last average I read was that folks sell their homes after 7 years meaning this investment is unlikely to pay off for most homeowners.

          It doesn't matter what state you live in; the market dictates the value of your home. I stick to my guns in saying that a lot of folks don't want to see solar panels on their home. They are not attractive and I sincerely doubt that they will allow for recouping the full investment. Many folks who want them may wait for advantageous (to everyone but taxpayers) government policies subsidizing these investments; this may accelerate your break-even but also decreases the value of the investment (one may rather buy a home without panels and take advantage of such programs than pay an extra $20k for your home).

          Finally, the government re-education program for appraisers is frightening. If the government is stipulating that appraisers overvalue solar panels defaults will hit harder government entities, banks, mortgage insurers, investors, and others when they cost cannot be re-couped through the foreclosure process. It is this sort of government meddling that will set the stage for the next housing crisis and hurt all of the folks employed by the entities I mentioned above, all taxpayers, and especially homeowners.

          By the way, I do appreciate the civility of this discussion and I don't want you to believe that I am pushing back on this point to be argumentative. There are many folks who may see things the way I do and not see solar panels being valued at their cost to the average homeowner.

          What I will say is this: the person trying to buy your home felt it was worth what the offer price was and that should hold substantial weight. For them to make an error of the dollar-value magnitude you described, with the advice of their real estate agent, there would have to be some substantial factor not considered during the course of your deal. I do not believe the answer is the solar panels, but some appraisers may fail to properly weight the evidence in front of them indicating the market has worked the way it is supposed to.

          • chuckasaurus

            Not only are solar panels hideous eyesores and a terrible, pie-in-the-sky "solution" to long term energy, solar panels negate the warranty of the roof unless the roofing system and the solar array supports were designed together (meaning an engineered system designed and built specifically to house solar panels and the infrastructure). I have yet to see homes retrofitted with solar panels do a total tear off of the roof and engineer built in supports that work with common roofing materials. The solar panel "contractor" is not a roofer and simply slaps some sealant/caulk under the supports and screws the panel supports to the roof, creating numerous breaches in the roofing barrier. No roofer or roofing material manufacturer is going to honor a warranty after another "contractor" drills holes through their work. If your roof needs replaced in 5-10 years or experiences catastrophic damage, how much is the $200 electricity savings going to offset the $10,000 - $26,000 cost of a new roof (that is no longer covered by warranty, if it had one) AND the additional cost of removing and reinstalling the solar panels? One massive hail storm and all the money saved may a well been flushed down the toilet.

  • Joel

    You need to understand that what you see as sqft is not what the way it is calculated or compared. Anything above grade is calculated and compared separately from basements. Also, amenities such as porches and garages are not included in sqft. This allows for more accurate comparisons both on a sales comparison and replacement cost analysis. This is a highly regulated industry that is accountable to banks, federal govt regulations, and state govt regulations. The way they are laid out and calculated is for underwriters and the uniform appraisal database to understand and will not make sense to most people not involved specifically in the industry. Realtors are great at showing a home and marketing but are (in my market) historically bad at understanding what a home is worth. I say that as I am both an appraiser and a broker. Remember, the appraisal is for loan security and by nature is going to trend on the conservative side of error.

  • Joel

    Sounds like an FHA. The home owner is ultimately responsible for securing access to crawl spaces and attics. If the appraiser didn't see it, that's sort of a two way deal. Also, the appraiser is not a home inspector and is not to test mechanicals. They are to observe if they are operating. If it's cold, you don't want them operating an AC unit as it could do damage to the unit. I don't know why you're expecting an appraiser to do what only a licensed inspector does.

  • Joel

    C4 also applies to homes that are aging and may have some outdated components. Regarding being on a main road, that is something that should be considered but not in place of location. Locality of your property is one of the most important assets that a buyer will look at and should be relevant to the appraisal.

  • Joel

    I would look for differences in lot size, amenities, foundation, and garages as those will cause varied price per sqft.

  • bronxron

    what BS...I had appraisal for refi with Quicken loans...the appraisal came back 100 grand less then going sales....I even sent comps to justify...quicken did nothing...I lost out 450 plus in the 3's rate...I wound up with another mortgage company house apprased as I thought 358k I was able to get some cash out but loan in 4's..now my credit rating went down because of looking again thanks to quicken and do they care nooo if your getting a loan get all the facts I even had a truth in lending statement.....soo this other company Perennial mortgage I stated how I had such issues with quicken they found me a loan I had to pay another 450 this is 3rd time because rates dropped again I want it in the 3's....they got a loan and I noticed it was from quicken loans...I said I told you how I felt about quicken she insisted this loan is outside of quicken they are just the originator..and that perennial has a lot of say....the appraiser came and said hi I'm from quicken loans...my wife almost slammed the door..lol...anyway this appraisal came in at 350k and I was ok with that....then I had the loan officer go on vacation never letting me know...then I had her tracked down in florida and she insisted everything is a go...the rate 3.75...so I get loan at 4.25 higher then my 4.12...they say its because my salary was broken from 60k to 55k and could not count guaranteed bonus which was in taxes with track record as income...this should have been known from the start...so now I am out another 450...appraisal fee and truly feel like I need some recourse...I played by the rules and wasted months with liars and cheats....plus as an added bonus my credit went from 740 to 706...that's just from these running credit saying oh it wont effect your rating...well guess again it does and another thing they have ratings when your looking for motgage..poor good excellent then after you give info and you see your rate makes excellent it changes it goes poor good very good excellent making a new level which cuts you off off advertised rates...anything in financial industry these days seems like you better NOT trust any broker and outfit...and if something isn't right or your instincts tell you something isn't right get out......truth in lending does not mean truth in lending....and appraisal reports you pay for which are held to such high regard are not even trusted by other banks....so the way I see it is they are all ripping off and know it so they don't even trust themselves or appraisers...and that's a shame....oh the icing on the cake..i got a late Friday email it came from quicken loans thru perennial...it was a readjusted mortgage..it wasn't as good as id like but it would work...I called pereniial..they said that was a mistake that should not have gone out....what do you think? I say they should honor it and quicken loans should refund one of my appraisal fees the one they ordered and came back 100 grand low like 256k...and yes it was comps but cpomps used were shortsals flooded homes and bad area my area had comps that were right on....we even got the listed sales and sent them to quicken who said they sent them to appraiser but he stood his prideful ground...well like I said I had 2 arraisals done after one only a month later and came in at 358k...so this is what a consumer is up against...and its truly sad...im all for living in a tent on land...too bad my wife isn't lol lol

  • bronxron

    the worst thing is we really have no recourse....the appraisers word is what they go by...yet another bank wont honor it..which kind of means to me the appraisers word is the appraisers word unless another bank is asked to honor it...and to me 450 for an appraisal is money I just don't have....a new mortgage place that sent me info has a 695.00 appraisal rate...says I will get back at closing...I don't think so....first get back means its rolled into mortgage and id be paying interest for 30 years on it..lol but 695..i thought 450 was high....I think there should be an arbitration court...I mean I have 1st appraisal 256k second 358k 3rd 350k...one stands out and I deserve my money back

  • bronxron

    that's horrible I have been thru this still going hru this stomach in a knot...I don't trust them yet I have to pay 450 and have good chance of wasting it...I am by no means rich...I am what used to be considered middle class..except I don't think there really is a middle class anymore...if I made less money id have more options...if I made more money id have more options...im stuck in the middle not meeting anyones terms just missing them...and do not belive that your credit score wont go down..they call it a soft pull...lol well mine went from 740 to 706 and I didn't look ir get any credit other then mortgage companies checking it.

  • Anthony-Keri Kilmer

    We are in the middle of this right now. Appraisal came in at almost $27,000 less then purchase price. My husband went through the appraisal with a fine tooth comb. Doesn't fly with us. The bank is in on fixing this along with our mortgage broker. This what was wrong: He used houses for comps that were not the same style or even close to the same style, he fudged the mileage on the comp houses, they were further away then stated on report by 2.5 miles or more, he missed the pool (said there was none), he said we have no gutters, clear as day there are gutters with adequate run off, said there was no attic, didn't count the four seasons room as square footage of home (room is insolated, new floors, has heat and central air and a fire place ), said we didn't have a deck (huge deck with a wrap around wheel chair accessible deck), said we had bottled gas when we have public, said we have individual for ac when we have central air, counted family room and one bedroom in finished basement but didn't add to square footage of home, counted the shed as dwelling (lol) and he missed adding in all of the upgrades, new wood floors, new carpet, new tiled bathroom, added heat and central air to garage, new windows, new oven, fridge, cooktop, sink and upgraded plumbing, added French doors,gutted room off kitchen with new walls, wiring flooring, lighting, new window and door and kept hookups from dryer and washer. Appraiser is going "back" to the home today (don't think he went to begin with ) and if it still comes in at the same price or way under value, the appraisal company is giving us a free second appraisal. Hows that for messed up???

  • LW

    Had appraisals done one year apart with $70K difference between them. The 2nd one was lower and the first one was used to get the mortgage. Don't know which one is negligent, but filed a COMPLAINT with the State's Appraisal Board and the Attorney General of the State responded. Everyone who is experiencing problems should file a complaint with your State's Appraisal Board, so licenses can be voided. It's unfair and seems like a scam - which it is. Next step is to sue the Appraisor(s). Be sure to file a complaint, at least it is a heads up to the Board and they can see the scamming.
    Good luck to everyone, it's a horrible situation to be in....

    • Anthony-Keri Kilmer

      I agree. My post is above. They sent to same appraiser back and he only went up $5,000. So our mortgage broker and kindly paying for a rushed second appraisal that the bank approved. Thank goodness.

  • Paul Francis

    It's basically a big Ponzi scheme, bank rep says they cannot communicate with appraisers, while the CEOs of banks, appraisal firms, and credit ratings firms all play golf together and wine n dine. Meanwhile, they are low balling people making impossible to shop for a better rate, and forcing people to pay PMIs. The criminals blew up the economy in 2008, and we are all STILL paying for it!