I cannot tell you how often I get phone calls from local real estate agents about bad appraisals on properties they are trying to sell. Usually the complaint is the appraisal has come in lower than the sales price. Of course we all know market value and contract price are not always the same, right? But very often in these situations there is a legitimate complaint because the appraisal just doesn’t seem to be well-supported. In cases like this I recommend the following points for preparing a solid appraisal rebuttal or reconsideration of value:
- Put it in writing: Don’t just say things like, “this appraisal is bad”. That does nothing to provide support for why you think the appraisal is not adequate, and it does nothing to propel the conversation forward. Don’t just make a phone call either. It’s better to put your thoughts on paper in a logical manner so the lender and appraiser can digest your well-reasoned argument.
- Be specific: Provide specific support for why the value opinion is different in your mind. It does nothing to only say “value should be higher”. Pick apart the comps in the report and any other properties you think are truly comparable too. Maybe you know the neighborhood really well, so you could point out something the appraiser really missed that impacts value. For example, you might say, “Comp 1 has zero upgrades and backs to a commercial property, yet the appraiser considered this property equal to the subject and did not make an adjustment. Why was no adjustment made?” Or maybe you’d say, “Comps 1-3 were all short sales and sold within 10 days of being listed. These sales appear to have sold quickly and below market value. Why was no adjustment given in the report for the distressed nature of the sales?” You might consider mentioning important information about neighborhood boundaries if inappropriate comparables were selected. Make sure to include marketing information on the subject property too (how many offers did you have?) as well as a list of all upgrades and costs too. Lastly, are there any big differences between the reported square footage or bed/bath count in the appraisal report in comparison to what you know to be accurate about the subject property?
- No pressure: Remember not to pressure for a higher value. Just stick with the facts in the marketplace as they relate to the value of the subject property. As much as possible, try to illuminate the market so it can speak for itself. You are asking the appraiser to reconsider the value, not meet your sales price.
- Be humble: You might be right, but you could also be wrong. There may be a very good reason why the appraiser made a certain adjustment. If the appraiser got it right too, then let the appraisal stick. There is no sense in trying to fight something if you don’t really have a case.
- The big picture: Focus on big picture items that impact value like proper comp selection and proper adjustments in the report. It probably doesn’t alter value if the appraiser made a spelling error, right? Put your energy into things that really matter.
- Bullet points: Be systematic in your presentation. Don’t write a novel, but organize your thoughts into 5-10 specific bullet points so the appraiser and lender can easily digest your reasoning. Avoid lengthy paragraphs and emotional points void of logic and specific data.
- Be professional: Be nice even if you don’t feel like it. The way you ommunicate reflects upon you and your company.
- Ask pointed questions: This goes back to being specific. Ask the appraiser to explain why certain adjustments were made or not made. Try to understand the report and ask the appraiser to explain himself.
- Opening Paragraph: Include something like the following at the beginning of your letterhead: “After reviewing the appraisal for [address] by [appraiser], we would like to request further clarification and investigation by the appraiser. We would like to ask for a reconsideration of value based on the following points:”
- Closing Paragraph: “All things considered, we would humbly ask the appraiser to take a second look at the information above as it relates to data and adjustments in the appraisal report. The information above may impact the overall value of the subject property. We appreciate your time and consideration, and we can be reached with any further questions at 916-xxx-xxxx. Respectfully,”
Let me know if you have any questions or need my assistance for a property you are working on. I cannot be an advocate for you, but I can provide you with market insight or a second opinion of value.
Have you experienced any success with appraisal rebuttals? Any tips to share?
UPDATE: I wrote a helpful piece on BiggerPockets.com about how to challenge a low appraisal. I included a downloadable format to use. It incorporates the content above, but includes the updated document. It’s free. Go get it HERE.
If you have any questions, or real estate appraisal or property tax appeal needs in the Greater Sacramento Region, contact Lundquist Appraisal by phone 916-595-3735, email, Facebook, Twitter or subscribe to posts by email.