When buying, refinancing, or selling a home, the appraisal establishes its estimated market value for the lender. However, appraisals sometimes come in lower than expected, which can jeopardize mortgage approval or sale agreements. An appraised value dispute is the formal process through which a borrower or seller can challenge a low appraisal that does not accurately reflect the property’s true value.
Why Might an Appraisal Be Lower Than Expected?
Appraisals are professional estimates, but errors or oversights happen due to:
- Factual inaccuracies: Incorrect home details such as square footage, bedroom/bath counts, or missed features like garages or renovations.
- Inappropriate comparable sales (comps): Using out-of-date, distant, or non-similar properties as comparables can skew valuation.
- Unnoted upgrades: New improvements like kitchens, roofs, decks, or energy-efficient windows may not be included.
- Rapid market changes: A quickly appreciating market can make recently sold comps outdated.
How to Dispute an Appraised Value
- Obtain your appraisal report: Lenders must provide a free copy of the appraisal upon request, as required by the Equal Credit Opportunity Act (ECOA).
- Review the report carefully: Check for factual errors, verify photos, and analyze the comps used. Consult your real estate agent for help identifying stronger comparables.
- Contact your lender: Direct your dispute through your lender, not the appraiser.
- Submit a Reconsideration of Value (ROV) request: This written appeal includes a detailed letter, documentation of errors, and suggested comps more appropriate than those used.
- Wait for the lender’s response: The appraisal may be revised, the original upheld, or a second appraisal ordered.
Common Appraisal Errors to Identify
- Incorrect square footage or room counts.
- Use of distant or dissimilar comps.
- Ignoring recent home improvements.
- Failure to account for current market trends.
Options if the Dispute Fails
If the appraisal remains low, alternatives include negotiating a lower sale price, increasing your down payment, ordering a second appraisal, switching lenders, or backing out under an appraisal contingency clause.
For more on appraisal disputes and related terms, see Comparable Sales (Appraisal) and Property Appraisal Review.
Additional Resources
- Consumer Financial Protection Bureau: What to Do if You Think Your Home Appraisal Is Too Low
- IRS guidelines on home buying and appraisal issues
Challenging a low appraisal takes patience and evidence but can protect your financial interests during a home purchase or refinance.