In Some Cases Appraisers Make Mistakes
The lender wants to know the home fist before fully approving your mortgage loan.
Essentially, the value of your home will establish what loan programs you qualify for and, what mortgage rate is available to you.
Lenders depend upon licensed home appraisers to confirm a home’s “certified” value.
Sometimes, an appraiser determines the property’s value to be below what’s required for a specific loan program.
When your appraisal comes in under the estimated value, as a buyer or refinancing homeowner, the options you have are a few.
Appeal the Home Appraisal
Although appraisers use standard procedures and formulas to determine the home’s value, an appraisal is still the opinion of the appraiser, which means it is subjective.
An appeal may be warranted, if you’re able to provide documentation to support to an argument such as:
When the appraiser uses older “comparable properties”
The largest impact on a home’s appraised value is the recent sale prices of similar homes in the immediate neighborhood, preferably on the same street.
If the appraiser is using a nearby home which has less rooms (bedroom and bathrooms), and significantly less square footage, when another more comparable property is available, it is unreasonable.
An experienced Orange County real estate agent can help you locate more recent comparable sales.
When the appraiser leaves out home improvements
Appraisers work consists of investigating your home utilizing public records data.
This information public record has your home’s most recent sale price, the number of bedrooms and bathrooms, and a couple of other stats which an appraiser can use to come up with a range of estimated values on your home.
This method is known as an automated valuation model (AVM). The AVM is an “appraisal” without actually physically viewing your home; the on-site inspection will then be used to confirm what the appraiser has already found through public records.
If public record information is lacking some pertinent information, your home’s appraisal may leave out some major improvements made to the home.
To illustrate, if you’re taken out the old dust & bacteria filled carpeting and replaced it with Brazilian hardwood or ceramic tile floors, your appraiser wouldn’t not know that and would likely be missed.
A Common Situation is When the Appraiser Doesn’t Know the Local Area
Occasionally, a home is quite a distance away from the appraiser’s normal area, so an appraiser may drive 100 miles or more to conduct a appraisal.
When appraisers are unfamiliar with the neighborhood, the data from public record information tends to come into play more in determining value than the subject property’s features.
If you think that the appraiser doesn’t thoroughly know the neighborhood, this can be a good reason for an appeal.
When the Appraiser Commits a Mistake
Humans make mistakes, and appraisers are human. We all make an honest mistake. For that reason, it’s a good idea to look at your home appraisal and determine if there are any errors.
The errors on the report, if they occur, are likely to be wrong square footage and lot size; incorrect number of bedrooms and bathrooms; and, no mention of fireplaces, patios, or balconies.
Be prepared to show evidence of the mistake on the appeal.
If the appraiser or lender won’t fix the obvious mistake, then you take your business elsewhere where they will fix problems.
Starting your loan over may postpone the closing, but without a good appraisal, the closing may not ever happen.