About 6 years ago we had our home appraised for refinancing and it came in at over 210K.  As seniors with no children we decided a reverse mortgage would be a wonderful solution to our money issues and I went on www.homes.com, entered our zip code and zoomed to our block which consists of 6 duplex houses.  According to the website, each of the individual halves of those duplexes are valued at 179 to 181K, so we pursued a RM.  The company sent an appraiser to our home (which we did not have to pay for), and she spent maybe 20 to 25 minutes looking through the home and taking pictures.  Imagine our dismay when her appraisal came in at only 139K, which was not enough to cover our existing mortgage plus the home equity loan we’d taken out several years ago.  We were turned down for the loan.

Do we have any recourse? – Scott

Hi Scott,

The short answer is, “yes”, you do have options.  The long answer is that the effectiveness of the recourse will depend on a lot of different things so please forgive me as this response is going to get a bit long.

Firstly, the appraisal process is a lot more than the physical inspection.  The appraiser will generally spend quite a bit of time researching your property, the sales in the area and your property’s sale history through public records long before he or she ever visits your home.

By the time the appraiser does the walk through of your property and measures things, he/she typically already has a good feel for the market and that inspection is more to verify condition, look for any upgrades/deficiencies or needed repairs, verify size and room count (as public records are many times incorrect), and to be the lenders and HUD’s eyes and ears in the field.

Then the appraiser will also do a physical inspection of all the comparable sales chosen to be certain that those properties are the most similar to the home being appraised to determine a value.

When you use an online value on a website, they often do not take into consideration individual property characteristics, any specific neighborhood factors or other influences that might affect values.  Some online valuations are very close but we have seen some that are off by many thousands of dollars.

The appraiser will only consider valid sales within 4 – 6 months of properties similar to yours that do not require excessive adjustments to determine the value or HUD will not accept the appraisal (there are some provisions to allow for older sales but we won’t go into all that here).

For example, if your home is an attached home with 2,000 square feet, the appraiser cannot use a single family detached dwelling with 3500 square feet as a comparable sale to determine the value.  Now having said that, if you are aware of several sales of other homes like yours, attached and similar in size and condition, that sold for amounts higher than the value of $139,000 the appraiser assigned, you have every right to rebut the appraiser’s value using factual information.

The information from the website is not considered adequate as the online sites often cannot differentiate between attached and detached homes, neighborhood factors or influences, etc. and therefore this information is useless but sales of other homes that closed in the last 6 months that support your claim to a higher value can do a great deal.

I have to warn you though, to be of benefit, you must be able to show why your sales are more reliable as an indicator of value than the sales the appraiser used.

These would include homes that are more similar, closer to your home or sold more recently.  If you find older sales that are farther away and not very similar or not more similar to your home than the ones the appraiser used, then your chances of having the value raised will not be very good.

To be successful, you must be able to support that the sales you located that support the higher value are more similar, closer and recent, not merely higher sales prices of other dissimilar homes or the appraiser has simply to brush them aside stating that they are not as comparable as the sales he/she used and as such were not considered.

Remember, the appraiser is the licensed “expert” and if it comes down to two different houses and it’s your opinion or the appraiser’s as to which one should be used and neither are clearly more similar, newer and closer, the appraiser’s education, expertise and lack of emotional standing in the transaction wins.

You should have gotten a copy of the appraisal.  Take a look at the comparable sales used and many times you can even enlist the aid of a local realtor and ask if they are aware of any sales that fit the description I laid out above.

You may be delightfully surprised to find some sales or you may find out that the website you visited was unable to differentiate the nature of your property and was “averaging” your property with detached homes in the area which appraisal practice does not allow.  Either way, it would be good for you to know if you do have any room for a rebuttal.

If you find that there is no room for rebuttal at this time, don’t give up!  Keep looking for “For Sale” signs in your neighborhood in the coming months.  It could be that there just aren’t any recent sales of your type of property available right now to support the higher value but the next few may be just around the corner and may sell in that $180,000 range (or higher) and values tend to rise toward summer.

You can start again with a new appraisal after 6 months (don’t know how long it’s been since you did the last appraisal and I know you’d rather not incur additional costs but this is a second option if the rebuttal doesn’t work).  If you see any new For Sale signs, call on them and find out how much they are listed for but even more importantly, check on them after they sell to find out the final price at which they close.

The listing price may help you to get a feel for what the values are doing but it doesn’t really count until it’s sold and closed (after all, anyone can list a home for any amount they choose, the proof is in the meeting of the minds between an informed seller and an informed buyer when the house sells).

I wish you the best and if we can be of assistance, please let us know.

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