It's a matter of appraisal
WASHINGTON — How do you fight back when an appraiser wrecks your sale, purchase or refinancing with a lowball valuation?
Disagreements over real estate values are nothing new, but agents, builders and sellers say current market conditions — plus recent changes in federal rules that effectively encourage banks to use in-house or affiliated appraisal management companies — are magnifying the problem.
Polls by the National Association of Realtors also have documented widespread frustration over faulty valuations, and the association ranks them among the major causes of contract cancellations.
So what can you do to lessen the chance that a botched appraisal will torpedo your transaction?
Be proactive. Federal rules allow you to provide the appraiser your own comps — recently sold properties of a similar size, condition and amenity levels in your immediate market area. Your realty agent can help you pull them together before the appraiser arrives. Or for a fee of $200 to $300, you can hire an experienced local appraiser to assist you.
Sara W. Stephens, president-elect of the Appraisal Institute, the largest group in the industry, says "if you know there are comparable sales in the neighborhood" where the price was affected by a divorce, financial distress or heavy seller concessions to the buyer, "make sure you call the appraiser's attention to" these factors. And give the appraiser a list of all the value-enhancing upgrades and improvements you've made, including dates and costs.
Accompany the appraiser during the inspection. Ask questions crucial to competency: Where are you based? How long have you been in the business? What type of certifications and professional designations do you hold? Are you a member of the local multiple listing service — a treasure trove of data for any accurate appraisal? Do you know local agents or brokers who can supply pending sales information and guide you on neighborhood price trends?
If the appraiser doesn't have good answers, you're more likely to end up with a poor appraisal. Alert the lender to your concerns as early as possible.
Always ask for a copy of the appraisal report — it's your right under federal law. If the value comes in low, check everything from selection of comps to the accuracy of property measurements. If you find serious mistakes and the appraiser refuses to make corrections, appeal to the lender. Most have procedures to follow regarding "reconsiderations of value." Ask for a second valuation by a locally competent appraiser, even if that costs you more money.
Finally, if the lender stonewalls you and the deal falls apart, consider filing a complaint with your state appraisal board. You can find contact information at bit.ly/u7GCri.
Kenneth R. Harney can be reached at email@example.com.