Why is My Home Appraisal Lower Than I Estimated?

Why is My Home Appraisal Lower Than I Estimated?

So you did all you could to get your home prepped and ready for the appraiser. You painted the walls, refinished the floors, fixed the leaky plumbing and crossed your fingers when the appraiser arrived. Then, your nightmare is realized – your appraisal is lower than you expected for a home like yours in your neighborhood. So how did this happen? There are two common culprits when it low appraisals.

Reasons for a Low Appraisal

There are two main reasons why an appraisal may come in lower than your expectations. When you find yourself in this situation, be sure to consider that:

  • Appraisers are more cautious than they have ever been. The housing market is in full recovery and that is in part due to more stringent appraisals. Just a few years ago, the housing market suffered a rash of foreclosures, and appraisers received much of the blame due to what were seen as inflated home values. Since then, they have been much more discerning in their home appraisals, which is good because accurate appraisals help people into homes they can actually afford. Professional appraisers are dependent on their licenses and must adhere to a code of ethics, so they aren’t about to put those licenses at risk by producing generous appraisals.
  • The appraisal could simply be inaccurate. Lenders are not perfect and while they usually obtain fair appraisals sometimes they can get slightly inaccurate information. Some lenders use Automated Valuation Models or AVMs. These are programs that take in real estate market data like comparable sales, market trends and tax information to produce an estimate of a given property. These can be beneficial because they really speed up the lending process, but if the market undergoes a sudden change, the estimate could be a bit off. This situation can be complicated further because the Home Valuation Code of Conduct (HVCC) keeps lenders from communicating directly with appraisers. Lenders who want appraisal data have to rely on appraisal management companies whose pool of appraisers may be unfamiliar with the area and provide a lower than expected appraisal. Lenders have the best intentions for their clients, but sometimes they are put into a difficult spot in regards to appraisals. 

What To Do If Your Home Appraisal is Low

If you receive a lower than expected appraisal from the buyer, don’t panic. The home selling process is rarely perfect, and your real estate agent is familiar with the scenarios. In some cases, your real estate agent may feel they have grounds to appeal the appraisal if they find it represented the home inadequately. Your real estate agent may look into the latest comp data to see if the buyer’s appraisal seems to be based off of old comps or comps that don’t accurately compare.  Your real estate agent may even recommend having an appraisal of your own done before listing the home, and then providing that appraisal to the buyer’s appraiser and lender. This may help the two numbers from straying too far apart.

If the lower appraisal seems fair under further scrutiny, it is likely that other buyers’ appraisals will yield similar results. So, you may need to really evaluate what your lowest acceptable price will be. If buyers won’t meet that price, you may need to adjust your terms or take it off the market until you address some of the issues discovered in the appraisal.

If you need help selling your home, contact the experts at Creig Northrop Team today. 

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