The appraisal on the home we want came back much lower than our offer. Now we can't get a mortgage. Is there anything we can do?
A low appraisal is somewhat unusual. Only an average of 10-20 percent of appraisals come in lower than the asking price.
Although sometimes sellers just overestimate the value of their property, often the problem occurs in competitive markets that are rapidly changing, especially where bidding wars drive up prices.
It is possible to fight back against low home appraisals. The first step would be to examine the appraisal for errors, then check the appraiser's choices for comparable properties. Your real estate agent can help.
* Look for simple errors, such as in the number of square feet in the home and the number of bedrooms and baths.
* Sometimes the appraisal is based on older homes a few blocks away that are not directly comparable.
* Check to see if the appraisal included distressed sales or foreclosures, which tend to bring down the actual value of the home being appraised, according to the Mortgage Bankers Association.
* In some cases, an appraiser can be convinced to search further for comparable properties. If there haven't been many sales in the neighborhood, it's more difficult to find equally valued properties to support an appraisal. Have your real estate agent talk to the appraiser to see if he or she will make a greater effort to find comparables.
* Borrowers can't pick their appraiser, but they can accompany him or her and provide a list of improvements and features in the home that add value.
Sometimes borrowers who are unhappy with their property valuation can ask to have the appraisal reviewed by the bank. If the bank agrees it wasn't realistic, it will order a new one. But the bank has to have a good reason for the second appraisal, and the buyer has to pay for it, usually between $300 and $500.