Can You Fight an Appraisal? Here’s How to Challenge It

A property appraisal represents an impartial, professional opinion of a property’s market value. Licensed appraisers, independent experts, conduct these assessments to determine real estate worth. Appraisals are a foundational step in various real estate transactions, including buying, selling, or refinancing a home, as they inform financial decisions.

The primary purpose of an appraisal is often for lending, ensuring the loan amount aligns with the property’s actual market value and serves as adequate collateral. While appraisals aim for accuracy, instances may arise where the reported value appears inaccurate. Understanding the appraisal process and report components can empower individuals to identify potential discrepancies.

Understanding the Appraisal Report

A standard residential appraisal report is a comprehensive document providing a detailed analysis of a property’s value. It typically includes key sections: property description, neighborhood analysis, comparable sales data, and reconciliation of value. The appraiser considers numerous factors, including the property’s location, size, condition, specific features, and recent sales of similar properties.

Appraisers use three primary valuation approaches to arrive at their opinion of value. The sales comparison approach is the most common method for residential properties, involving analysis of recent sales of comparable homes, known as “comps.” Adjustments are then made to the sale prices of these comparables to account for differences in characteristics like size, age, and features between the comparable properties and the subject property.

The cost approach estimates value based on the cost to replace the structure, minus any depreciation, plus the value of the land. This method is often applied to new construction or unique properties where comparable sales data may be limited. The income approach, while less common for typical residential properties, is primarily used for income-generating properties like rental homes or commercial buildings, valuing the property based on its potential to generate income.

Identifying Errors in an Appraisal

Reviewing an appraisal report involves scrutinizing specific details to identify potential errors that could affect the valuation. Factual errors include incorrect square footage, an inaccurate number of bedrooms or bathrooms, or a misstated lot size. The report might also fail to list existing amenities or upgrades, significantly impacting value.

Issues with comparable sales frequently form the basis for an appraisal challenge. An appraiser might use properties that are too far geographically, dissimilar in age, style, or condition, or sales not conducted at arm’s length. The appraiser may also overlook more recent or relevant sales that better reflect current market conditions in the immediate neighborhood.

Inaccurate or unjustified adjustments made for differences between the subject property and comparable sales can also lead to an undervalued appraisal. These adjustments should properly reflect the market value of features like a garage, a swimming pool, or recent renovations. The appraiser’s judgment of the property’s condition or construction quality might also be a source of error. A failure to adequately consider current local market trends or specific neighborhood influences can also result in an inaccurate appraisal.

Gathering Evidence for a Challenge

Successfully challenging an appraisal requires thorough preparation and collection of specific supporting documentation. Begin by conducting a detailed review of the appraisal report to pinpoint factual inaccuracies or questionable assumptions. Cross-reference the data in the report with your own records and property details.

Identifying alternative comparable sales that the appraiser may have overlooked or undervalued is crucial. Search online real estate portals, public records, and consult a local real estate agent to find recent sales of highly similar properties. Good comparables are typically sales within the last six months, located in the same neighborhood, with similar characteristics in size, age, condition, and features.

Documenting property improvements not fully accounted for in the appraisal is important. Gather receipts, permits, photos (before and after), and invoices from contractors for significant upgrades or renovations. For factual errors like incorrect square footage or lot size, compile official documents such as surveys, property tax records, or floor plans to provide clear evidence. Collaborating with a local real estate agent can offer a professional opinion and help identify strong comparable sales.

Navigating the Appraisal Dispute Process

Once all supporting evidence has been meticulously gathered, the formal process of disputing an appraisal typically begins with the lender. The lender, or the party who ordered the appraisal, serves as the initial point of contact, rather than directly approaching the appraiser. You will submit your compiled documentation and a written explanation detailing the basis for your challenge to the lender.

The most common formal procedure for disputing an appraisal is requesting a Reconsideration of Value (ROV). In this process, the lender reviews the evidence you’ve provided and may then ask the original appraiser to reconsider their valuation. The appraiser will be presented with your additional information and may be prompted to provide further analysis or make adjustments to the report.

The lender acts as an intermediary, facilitating communication with the appraiser and ensuring your concerns and evidence are formally reviewed. If the appraisal appears to be a result of fraudulent activity or gross incompetence, a formal complaint can be filed with the state appraiser licensing board. This is a regulatory complaint about the appraiser’s conduct, distinct from a direct appeal of the valuation, and should be considered a last resort.

Possible Outcomes of a Dispute

After initiating an appraisal dispute, several outcomes are possible. The most favorable result is often a revision of the appraisal value upward. This occurs when the appraiser or lender agrees with the presented evidence, leading to a higher valuation that aligns more closely with expectations or market realities.

However, the appraisal value might remain unchanged, as the appraiser or lender could find the original valuation accurate despite the challenge. In some cases, the lender might decide to order a completely new appraisal from a different appraiser to obtain an alternative opinion. If the appraised value still falls short of the agreed-upon purchase price, negotiation between the buyer and seller may be necessary, involving the seller reducing the price, the buyer increasing their down payment to cover the difference, or other concessions.