An appraisal dispute is when parties argue over a property’s estimated value. When the value is lower or higher than what one of the parties expected, it can have various consequences, such as making it more challenging to acquire a loan. This can stall property sales and make the selling process more complicated.
If you’re experiencing an appraisal error on your home, you can dispute it with your lender.
Read the rest of this article to learn about:
- Common appraisal dispute consequences
- Common appraisal disputes
- How to deal with appraisal disputes
- How to prevent disputes from occurring
- When to consult a lawyer
What are Common Consequences of Incorrect Appraisals?
Home appraisals are important for various reasons.
- Getting a loan approved. The property value needs to match the loan amount. If these numbers aren’t aligned, the loan could get rejected.
- Providing assurance to the buyer and seller. A correct appraisal prevents buyers from paying too much for a property. They want to know that the purchase price is just, while sellers want to know that they are asking a reasonable amount.
- Mortgage refinancing. If a homeowner needs to refinance their mortgage, the appraisal can assist them with how much equity they have, influencing the new loan’s terms. If it’s not correct, it can lead to issues and disputes.
What are Common Appraisal Disputes?
There are various issues that can cause disputes surrounding loans. These include:
- Discrepancies. If the appraisal is lower or higher than expected, buyers could feel like they’re being forced to pay more for a property, while sellers might feel they’re not getting enough money for the sale.
- Bias. There could be accusations or suspicions of bias during the appraisal process, such as unprofessional behavior or discrimination.
- Insurance disputes. Since the appraisal value outlines the insured amount when claiming for damages, homeowners might enter disputes if they believe the appraisal doesn't match the cost of repairs required for their claim.
How Can You Dispute a Home Appraisal?
You can dispute a home appraisal in the following ways.
Get a Copy of the Appraisal Report
This is the first thing to do when dealing with an appraisal issue. While sellers don’t usually get a copy during the selling process, they can ask for one from the buyer’s agent.
Review the report closely to find out why the valuation is erroneous. Check that the appraisal reflects your home condition accurately, such as in terms of any improvements that have been made on it. You should also confirm that all property details are correct, such as square footage and the number of rooms.
Check Comparable Properties
Looking at the prices of recently-sold properties in your area can give you an idea of your home’s value. To ensure they’re accurate, you should request that your local real estate agent provides you with updated comparable property appraisals.
Dispute the Appraisal with Your Lender
If you have gained the comparable properties (or “comps”) from your real estate agent, you can send your lender a letter requesting that the home appraisal be changed. This is known as a reconsideration of value (ROV).
Usually, if your original valuation is a minimum of 2 percent lower than the asking price, lenders will reconsider the valuation.
File a Complaint
In cases where you suspect a lower appraisal is due to discrimination, you should report it by contacting the Department of Housing and Urban Development.
Negotiate with the Buyer or Seller
You might be able to negotiate with the other party about the appraisal issue. For example, if the appraisal has caused the buyer to not acquire financing, the seller might lower the purchase price. Sometimes negotiations between parties are an effective way for both to have a fair outcome without having to escalate the situation legally.
How Can a Lawyer Help You With an Appraisal Dispute?
If you’ve tried to request a second appraisal (with supporting documentation included) from your lender but they won’t consider your request, consider legal guidance.
Hiring a lawyer from ContractsCounsel, an online legal network connecting clients with vetted lawyers for appraisal disputes, can help you throughout the process.
Consider Mediation or Arbitration
If your attempts at getting the appraisal rectified are unsuccessful, your lawyer might suggest that you consider an alternative resolution method: namely, mediation or arbitration. These strive to keep your dispute out of court, so they’re less time consuming and expensive.
- Mediation is when you hire a third-party mediator to facilitate communication between you and the other party. Instead of telling you how to resolve the dispute, a mediator will encourage you to talk about your options and find a solution together.
- Arbitration is more formal than mediation. It involves hiring a third-party arbitrator who will collect both parties’ evidence and deliver a final, legally-binding decision on how the parties can resolve the issue.
Consider Taking Legal Action
Although a last resort, your lawyer might suggest taking legal action if there was misconduct or discrimination involved in the dispute. They will gather evidence to support your case and represent you in court.
How Can You Avoid an Appraisal Dispute?
You can sometimes prevent an appraisal dispute with a bit of planning.
- Work with local appraisals. If these know the area well and have years of experience, it minimizes your risk of an erroneous appraisal.
- Be present at the appraisal. It shows the appraiser that you’re serious and supportive, while ensuring they do a thorough job.
- Select a fair market price, based on research and recent local sales in the area.
- Check the appraisal report before closing on a sale. This will prevent errors from going unnoticed.
Do you need a lawyer for an appraisal dispute?
Contact a lawyer from ContractsCounsel. All lawyers on the platform have strong credentials, are vetted on the platform, and have earned years of experience in appraisal disputes to help you navigate the situation with ease.
