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A low appraisal could derail a home sale, but the first appraiser may not have the final word. Learn when it’s worth hiring a second appraiser.
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A home appraisal is an expert’s opinion of how much a home is worth. Appraisals help lenders decide if the home is worth as much as its asking price and often influence a lender’s decision on how large of a mortgage loan can be extended to home buyers.
Because of how critical appraisals are to mortgage lenders, they can become a major roadblock when the appraisal comes back lower than the asking price. In this situation, buyers may have to cover the difference with a bigger down payment or renegotiate the sale price with the seller. However, in some cases it might be a good idea to request a second appraisal on the home in question, especially if you believe the first appraiser was wrong.
When it might be a good idea to get a second appraisal
Second appraisals aren’t rare, and might in fact be requested by a fair-minded lender who finds problems with the first. But if your lender is about to roll with an appraisal you disagree with, you can do a few things to demonstrate that your home is worth more.
One is to request a copy of the original appraisal and inspect it with your real estate agent. It’s entirely possible that an appraiser made a mistake — such as miscalculating square footage or omitting new renovations — especially if it was a desktop or drive-by appraisal. With these types of appraisals, an appraiser doesn’t enter your home and may have misjudged aspects of your property or overlooked entire sections of it, such as a newly renovated basement.
If the appraisal report checks out, you can still question it by asking your agent to run new comps. Comps (or “comparables”) are recently sold properties that share features with the home in question and are located in the same area. For example, three houses of roughly 2,000 square feet, three bedrooms, and one-and-a-half bathrooms might be considered comps for a fourth house with the same qualities. If the comps on the home in question have sold for higher values, that’s a good sign the first appraisal was off.
To be fair, appraisers typically run comps, too. But if an appraiser is less familiar with a given area than your real estate agent, they may have chosen weak comps.
Finally, I would also get a second appraisal if you think the original was influenced by racial bias. It’s not uncommon for homes within communities of color to receive lower values than identical houses located within white neighborhoods. In fact, according to research by Dr. Junia Howell, homes in white neighborhoods often enjoy nearly double the value of identical homes in communities of color. If you believe a discriminatory appraisal has devalued your home, you can request a second appraisal, as well as contact the Property Appraisal Valuation Equity (PAVE) taskforce to connect with a fair housing specialist.
How to request a second appraisal
If you have solid evidence to contradict the original appraisal, you can ask the lender to reconsider the home’s value. Also known as a “reconsideration of value” or “ROV,” this process involves presenting the lender with facts — such as a list of more accurately priced comps or showing omissions or errors within the first appraiser’s report — to justify getting a second appraiser’s opinion.
If the evidence is compelling, most top-rated mortgage lenders will approve the second appraisal request and hire another appraiser. Unfortunately, lenders are probably not going to foot the bill for a second appraisal, even if the first appraiser was their choice. More likely than not, the seller and home buyer will have to work out a deal — splitting the cost, for instance, or adding it to a seller’s concessions.
Even if a second appraisal slows down the home-buying or selling process, it might be worth the hassle to get an accurate valuation of your home. Sticking with a lower appraisal could mean selling a home below the desired price, or forcing the buyer to walk away simply because they don’t have enough money to cover the difference. Talk with your real estate agent to get their perspective, but if you think the appraisal is wrong, investigating their report or running your own comps could help you get a fair valuation of your home.
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