When you get your home appraised, you root for that appraised value to come back as high as possible. However, the job of an appraiser is to provide an impartial opinion of value, not bend to your wishes. They assess the condition and features of your individual home and put it into the context of your surrounding market. So it’s natural to wonder, what can lower appraisals?
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The appraisal process involves looking at a combination of factors specific to your property (such as its structure, condition, and size) and which direction the local market is headed at the time that the home is appraised. If there are any red flags in your home’s condition or the market is cooling down, your appraisal could take a hit. Knowing what impacts the final number can help you prepare and potentially boost your home’s value.
To make sense of it all, consult this guide to the common variables that may reduce your home’s appraised value and whether there’s anything you can do to help your property’s value shine.
3. Your appraiser included a bad apple in the comps pool
The comparable properties your appraiser selects will ultimately influence your home’s appraised value. Your appraiser will be skilled in selecting and reviewing comps, so most of the time, the sales data will be spot on.
However, let’s say that there are two identical homes in the same location, but the appraiser pulled the lower value of the two to appraise your home. It turns out one of them was a divorce sale. The owners were in a rush to sell to move on quickly, so it sold for less. In this case, you might have a case that would prompt an ethical appraiser to own up to the mistake and modify their report.
What can you do about it?
If you and your agent have already created a CMA to help price your home on the market, then you probably have a good idea of the comps in your area and can share what you know with the appraiser. While it’s not recommended for you personally to be on-site during your property’s appraisal, you can ask your agent to be there for assistance.
Naples-area agent John Krol makes it a point to attend his sellers’ appraisals to offer perspective on selected comps. “I just want to help the process any way I can to make sure it goes smoothly and the comp properties are reflected in the property’s value,” Krol says.
4. Market conditions are changing quickly
Sometimes, the real estate market changes faster than the available sales data. Ideally, appraisers will look at homes sold within the past 90 days, but in some cases, they may have to go back further than that. It’s also important in this case that the appraiser is geographically competent, i.e., familiar and in touch with the area and price trends on the neighborhood level.
What can you do about it?
This is another matter of comps integrity. You should confirm that the comps selected in the appraisal are as recent as possible, and reflect the final sales price of the property, not the listing price. Your real estate agent should be able to help you with this.
5. You have a unique property
Maybe your home has something most properties in your area don’t, like a spectacular view, specialty garage, or custom-built features. There could be a concern that the appraiser won’t know how to price these features, and could undervalue them, leading to a lower appraised value.
What can you do about it?
First things first, have a sanity check with your agent to confirm the feature is indeed a value add. “I’ve seen some koi ponds in my experience,” says Minik, “but in reality, they’re not a ton of added value. I don’t necessarily think everybody’s going to see a lot of value in that.”
However, if you’re selling a high-end property with lots of special amenities, and you’re worried about whether the home will appraise before closing, Minik recommends sellers obtain a pre-listing appraisal. This can dispel any anxieties you have about the value of your home and reduce the odds that the lender’s appraisal will come in under the contract price.
How to challenge a low appraisal
If your home’s appraisal comes in lower than expected, you may have options to dispute it. Here’s how you can push back effectively:
- Request a copy of the appraisal report: Review it carefully for errors in square footage, missing upgrades, or incorrect comps. Even small mistakes can impact the final value. If you find discrepancies, you can present evidence to request a correction.
- Provide better comparable sales: Sometimes, appraisers use outdated or less relevant comps. Research recent sales of similar homes in your area, ideally within the last three months. If you find stronger comps, submit them as part of a reconsideration request.
- Showcase missed home upgrades: If the appraiser didn’t account for certain improvements, provide proof such as receipts, permits, or contractor invoices. Emphasize major updates like a renovated bathroom, new HVAC system, or upgraded flooring. Highlighting these enhancements can help support a higher appraisal value.
Ready for the appraisal?
The appraisal process can be stressful, mysterious, and somewhat out of our hands as homeowners and sellers. But doing what you can to better prepare your home for the appraiser can remove some of the anxiety around the process. Knowing what to expect also may help you command the highest appraisal your home is capable of getting.
While some factors, like market trends, are beyond your control, addressing maintenance issues and improving your home’s overall condition can make a difference. Small upgrades, curb appeal, and a well-kept home can help you put your best foot forward.
If your appraisal comes in lower than expected, don’t panic. You have many options to challenge it or adjust your pricing strategy. To navigate the selling process with confidence and maximize your home’s value, consider partnering with a knowledgeable real estate agent who can provide expert guidance and market insights.
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