What to do when the house appraises too low?

As anyone attempting to borrow money since 2008 can tell you, it’s not a walk in the park. While credit card companies seem to be back to offering cards through the mail, mortgage lending has gotten tighter as set out in this story from the NY Times.

One consequence of the subprime mortgage crisis is a far more rigid home appraisal process. Borrowers can complain about lower than expected appraisals — which may mean they can’t borrow enough to meet an agreed-upon sale price, or can’t refinance — but lenders very rarely reconsider.

Why the low appraisals?  One reason is that lenders cannot dictate the appraisal value to the appraiser.

Federally enacted rules have set up regulatory walls between loan originators and appraisers so as to shield them from pressures to inflate home values. Now many banks order appraisals through a third party, typically an appraisal management company, which acts as an intermediary.

What to do?

One option is available to borrowers: a rebuttal letter to the lender. If such a challenge is to garner any attention at all, it must lay out solid and objective evidence of where the appraiser went wrong. But without a decent knowledge of appraisal guidelines, that can be difficult to do.

 But the rebuttal better be based on facts and you should have the appraisal in front of you.

You are looking for houses in the neighborhood that have closed within, say, the last six months, and they should be a similar style of house.  If the comparable is a Cape Cod, and you are buying a colonial, well, you get my drift.

Don’t forget to compare interiors, too.  Out dated kitchens and the existence of a swimming pool, for instance, can change the comparable value of two otherwise similar properties.

Is it easy to change the appraiser’s mind?  No.  But as the article recommends, have another bank in mind.

We have worked with several lenders who seem to find sunshine in properties (and borrowers) where others found only clouds.  Let us know if we can help.

Read the full article. 

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

Sphere: Related Content