By: Ilyce Glink and Samuel Tamkin
Q: You’ve had a bunch of letters lately involving appraisers and I wanted to share my story.
My experience with appraisers is they sometimes use very sketchy information. My first experience involved getting an appraisal on a property prior to getting a home improvement loan.
None of the homes in my very stable neighborhood had sold in the past three years so the appraisal was based on a similar home in a much less desirable part of town. It came in very low, barely enough to get the loan approved. Fortunately I was dealing with a local bank and the loan officer recognized the problem. In today’s world I wonder if I would have gotten that loan.
Years later, a friend became an appraiser after retirement. I know from his conversations that he was often flying by the seat of his pants. My point is this: don’t be afraid to challenge a low home appraisal, including getting your own experts to counter the appraisal.
A: Thanks for your letter. You are right in some respects. Appraisers perform a valuable service in the home buying process when a lender is involved. While your situation isn’t unique, if there have been no sales in a particular area, the market may be quite hard to judge: for an appraiser or only other real estate professional.
If you were to talk with a real estate appraiser or real estate agent, they both might be using their best information to come up with a value for your home. In fact, you might not find a real value unless you actually had a good faith buyer willing to sign a purchase contract for your home.
When you are refinancing, you can’t quiz real buyers on what they would pay for your home. In this situation, the appraiser must rely on practice guidelines and the home appraisal in the end could be too low.
You can contest your home appraisal but doing that is harder today than it was in years past. To avoid some of the past problems with appraisers and undue influence from lenders, the lender may not have the ability to deal directly with the appraiser. In most situations, the lender may have to deal with an intermediary company.
The challenge process might be slow and may not produce the result you may be looking for. Ultimately, if you and your lender recognize that there is a problem, the lender might order a second home appraisal. And then, perhaps the second appraisal might be in your ballpark. Be forewarned that in many cases that second appraisal could still be low due to the specific market conditions in your neighborhood and the lack of market activity.