What Do You Do When the Appraisal Comes in Low ?

Just recently, I have had 2 appraisals come in low. Both properties were in the $200K range.  One came in $17K low and the other came in $55K low.   With the wrong agent involved, these deals can easily blow up.  I recommend keeping your cool and begin to do some of the following:

1. Request a copy of the appraisal report and review - It is important to see the report so you can analyze it, assess it and see where they may have been errors.  For example, on our two, one of the appraisers forgot to classify a finished basement and the other forgot to classify a 2nd full bath.
2. Assess Comparable Sales that were used - Look at the comps that the appraiser used.  Do they make sense ?  Are they inferior ?  What types of adjustments were made ?  In both reports in our case, the appraisers used comps that were in a different section with lower values.  Also, both used a comp that was under a train line without making any adjustment for location.
3. Examine Other Comparable Sales that were not used- Study your MLS and look for other properties that are better comparables that may have not been used by the appraiser.
4. Let the Mortgage Professional know that you will be asking for a reconsideration of value. In most cases with the new appraisal rules, the mortgage company needs to begin the process in order for the appraiser to speak with you or to begin the reconsideration of value process.
5. Write a letter to the appraiser and the mortgage professional- State your case.  Go over the adjustments, the inferior comps that may have been used, and the better comparables that should have been used.

For this really to work, you really need to know your market inside and out, have a strong reputation in your area and be a consummate professional.  Yelling at an appraiser is certainly not going to help your case.  And just sending higher priced comparable sales that are not good comparables for your subject property will make you look desperate as well.

Also, pick your battles.  Believe it or not, sometimes the appraiser is right. There is no need to go through this time-consuming exercise if the appraiser is on the money.  Try to negotiate the deal with the buyer and seller on these cases and save your fight for another deal.

So what were the results in our 2 recent cases ? The one that was $17K low came up $9K.  We were able to negotiate the difference between buyer and seller.  And the one that was $51K low came up $51K !!  How about that ?  Am very proud of that one.

To summarize, know your market inside and out, understand the appraisal process, be a professional, pick your battles and get more of your deals to the closing table !

Good luck !

And for you buyers and sellers out there reading this, all the more reason to have an experienced, seasoned and knowledgeable Realtor to represent you during your process.  Nothing against inexperienced or low producing agents, but you get what you pay for !  Which in my experience is more deals not making it to the settlement table.