What do I do when my Appraisal Comes in low?
Appraisals missing value by a lot or just a little has been on the rise. I have disputed more appraisal in the last two years than in the previous 14 yrs of my career. However, if this happens to you know that you have options, as with life the mortgage industry has many exceptions to the rules & there is a process for disputing the value of any appraisal for purchase or refinance. The good news is, you do have options.
These options are, close the new loan with the reduced appraisal & possibly a reduced loan amount. Dispute the value of the home & hope that the appraiser is logical & sees the comps your way. If it is a purchase, you can renegotiate the sales prices, dispute the appraisal, cancel the loan or bring the difference in appraisal value & purchase price to closing on top of your down payment and closing costs. In the mortgage world we say that if you send 10 appraisers to the same property you will receive 10 different values, so just because the home did not appraise today does not mean that you are overpaying for a home or getting a bad deal.
When doing a ROV (Reconsideration of Value) the first thing to do is to analyze the appraisal in particular the comparable grid. There are several areas that you will need to look at to determine if it is even worth doing an ROV in the first place. The comparable grid lists the subject property on the left-hand side of the page & then in row fashion list the top three comps so you can see the differences in the homes, then the appraiser applies a dollar value to the differences. This part is very subjective & is where you can identify if the ROV is worth the time & headache. First of all, start at the bottom of the grid where it states the net & gross adjustments, if this number is double digits, then you have a really great chance to get a value improvement. As a standard many appraisers like to gross & net adjustments at less than 5% so when the gross & net adjustments are 12%,14% or even 20% then you know that you have a better chance to get a higher value with the ROV. Once those numbers are confirmed then look up the page at the actual adjustments you want to look at the square footage & room count adjustments after that you will go to the quality of construction & condition adjustments. Finally take a look at the very top of the grid at the sales date & purchase price.
Once you have analyzed the comparable grid you will go to the MLS and try to find three recently sold homes that are more closely related than the comps that the appraiser used. For instance, if there is a large square foot adjustment the look for home closer in size or if there is not a room count adjustment point it our in your ROV. Next look at the quality of construction & the condition of the home, if there are large adjustments, you will need to pull photos of the properties & analyze whether or not that your home is as nice or nicer, also look deep into the appraisal & read where they define the Q1-5 & C1-5 make sure that your home is accurately described. Then finally draw the boundaries of your search to as close to home as possible & make sure that the close dates are nearer than what was used. Your whole goal with an ROV is to reduces the adjustments so that your comps can be added with greater significance to your appraisal, giving you a higher value.
