Disagreements over bank appraisals usually arise when homeowners and home buyers receive an appraisal that is lower than expected. The appraisal affects how much money a lender is willing to lend even if you and a co-borrower have a good credit rating. A lender won’t approve a mortgage or refinance one if a home’s appraised value is less than the loan amount. However, you can dispute a low appraisal, or get it redone, to avoid losing a loan.
Review the Appraisal
You can ask your lender to get another appraisal if you disagree with an appraisal, but examine the lender's appraisal report first to strengthen your case. For example, look for factual errors in the report. Miscalculating a home's square footage and citing the wrong number of bedrooms are examples of factual errors that can lower a home's value. Ask the lender to reconsider the appraisal if you find such errors.
Appraisers use comparable sales to determine the value of a home. Comparables are properties in your area that are similar in style and size to the home you're selling, buying or refinancing. Appraisers often use properties that recently sold as comparables. The appraisal report will show the comparables the appraiser used. Ask your real estate agent to look for different comparables if you disagree with the appraisal. Your agent may find higher-priced comparables than the appraiser did that you can use to dispute the appraisal with your lender.
Consider submitting your loan application to another lender if you want to buy or refinance a home that received a low appraisal. Home values vary from one appraiser to another, even as appraisers try to maintain objectivity in their valuations. An appraisal done for another bank might come back with a valuation that is closer to what you think the home is worth. In any case, ask the new lender to ensure that someone who has knowledge of the area where the home is located does the second appraisal.
Canceling a Sale
Sales contracts usually allow home buyers and sellers to cancel a purchase agreement due to a low home appraisal. A low appraisal works in the buyer's favor because he can offer a lower price for the home. If you’re the seller, you might not want to reduce your selling price if you intend to buy another home with the proceeds. In such cases, you could risk losing a buyer and leave the home on the market while you get another appraisal to decide if your home is overpriced.
Frances Burks has more than 15 years experience in writing positions, including work as a news analyst for executive briefings and as an Associated Press journalist. Burks has banking and business development experience, and she has written numerous articles on consumer issues and home improvement. Burks holds a bachelor's degree in political science from the University of Michigan.