Appraisals are almost always required in the home-selling process because they determine how much your property is worth without bias. When you get an appraisal on your property, though, you might be disappointed by the value if it’s lower than expected. If it does come to that, you shouldn’t be too worried because we’ve compiled some tips that will help you make the most of an unfortunate situation. But first things first …

What is a Home Appraisal?

An appraisal is when an unbiased, professional third party (generally an appraising service) comes to your home to assess it and determine its value. Property appraisals are a nearly ubiquitous step in the home-selling process. When selling or buying a home, an appraisal will show if the home is worth the listing price. The appraisal value is dependent on a number of factors including location, market, condition, comparable properties in the area, etc.

Appraisals are often ordered by banks in order to determine whether the mortgage that a homebuyer requested exceeds the value of the home. If the appraisal doesn’t come in at or above the agreed upon price, the buyer will have to make up the difference out of pocket or abandon the deal, a scenario which nobody wants.

Get your own appraisal

This will cost you some money, but it will be worth it in the long run. Getting an appraisal on your house before putting it on the market will allow you to pick an accurate selling price and completely avoid the hassle of overestimating your home’s value. Of course, the market can change quickly, meaning that your appraisal and the bank’s could differ. Even if it does, though, the closer you are to the bank’s appraisal, the more likely your house will sell; getting your own appraisal will get you as close as possible.

• Check the outside of your home: First impressions are everything, so you want everything outside your home to look incredible, since that’s the first thing the appraiser will see as they walk to your front door. That doesn’t mean you should spend thousands on landscaping; cleaning up the outside will do just fine. Remove leaves, clutter, and be sure to have a freshly mowed lawn the day of the appraisal. It might even make sense to check the forecast in order to schedule the appointment on a sunny day, since sun makes everything look nicer!

• Stage the inside: Staging a home can be a lot of work, but the extra money it’ll add to your appraisal makes it totally worth it. Getting rid of clutter will make the home feel much bigger on the inside. You should also get rid of any messes you might have lying around, and dust and sweep everything!

Dealing with a bank-appointed appraiser

If you already have a buyer and are now facing a bank-appointed appraisal, consider the following strategies based on your specific scenario.

In the moment: Talk to the appraiser

• During the appraisal itself, talking to the appraiser can help them see the value in your home. To come up with an accurate estimate of the price of a home, an appraiser looks at the homes in your area that are similar to yours and then adjusts the price how they see fit. Things that make them adjust prices are swimming pools, extra bathrooms, and other niceties.
• In order to get a higher appraisal, try pointing out improvements that you’ve made to the home. Be sure to provide a detailed list, with before and after pictures if possible. Also, ask for permission to accompany the appraiser as they walk through your home so that you can point out every point of value to them.

Worst-case scenario: Reduce the price of your home

• If your home appraises lower than the listing price, a price reduction is the simplest solution. This is a last-ditch resort, but it’s often the only way to keep the buyer and lenders interested in your home. While you may be losing some money, you’ll cut out a lot of stress and save a lot of time. This is the best option for trying to save the deal before the buyer walks away completely.

Alternative option: Appealing the appraisal

Appealing the appraisal is another option to fix the situation if you feel your home has been under-appraised.

This is a multi-step process:

Step 1: Speak to the buyer

The first step is to talk to the buyer and find out if they’d be willing to pay the higher price, which usually means they’ll have to pay a higher down payment. Oftentimes, buyers will refuse to go a cent higher than the appraised value of a home, but it’s still worth a try. If they do end up going along with the agreed-upon contract price, they’ll probably help you with the appeal by talking to their lender. This step is key, because you can’t appeal the appraisal without the permission of the buyer. Be sure to treat the buyer nicely; you don’t want a petty personal conflict to cost you thousands of dollars.

Step 2: Review the appraisal

Obtain a copy of the appraisal report from the appraisal company. A federal law requires them to give it to you within 30 days of receiving a request. Once you have the report, you’ll need to use some detective skills to find discrepancies that could be present in the report.

Check if the appraiser noticed differences between your house and the similar houses that they compared them to; those differences could determine if the appraisal can be appealed or not. Examples include: lot sizes being different, different number of bathrooms (including full/half baths), and kitchen appliances (stove, dishwasher).

Step 3: State your case

You’ll need to contact the lender and get in touch with their appraisal appeal department. Almost all lenders have appeal procedures that they follow, known professionally as “reconsiderations of value”. Be sure to obtain the buyer’s permission before making your case to the appeal department. If you found some discrepancies in the initial appraisal, present them to the lender as clearly as possible.

You can then request a second appraisal, which you will pay for out-of-pocket at upwards of $200 dollars. Ultimately, the decision is completely up to the discretion of the original appraiser, who will review the discrepancies that you identified and decide if they’re worth pursuing further.

Step 4: Negotiation

Negotiation is key throughout the appeal process, but it becomes particularly important at the end. If worse comes to worst and the appeal is rejected, it’s likely that the buyer will want to drop out of the deal. That’s because they’ll feel like they’re overpaying for a property; in addition, they’ll have to cover the cost between the loan and the agreed upon price up front, which can be pretty discouraging.

If it’s only a few thousand dollars and the market is tight on housing, however, you might be able to negotiate a deal that will convince the buyer to stick with your home. Or, your final option would be to lower the price.