A friend of mine, who is an agent, called me the other day complaining about an appraisal that was completed on one of her listings. The appraiser (from a neighboring county) arrived at a value almost $45,000 under the contract price. She asked me if I could take a look at the appraisal and provide any insights that I might have.
It’s not unusual for values to come in lower than the contract price; and we all know that value and price are two separate things. However, there was such a large discrepancy, it warranted a closer look. After reviewing the appraisal, I did notice some issues that were of concern.
I recommended that the she ask for a Reconsideration of Value. A Reconsideration of Value is a formal request submitted to the lender asking their appraiser to consider additional information and/or sales data that might aid the appraiser and cause them to change their opinion of value.
Here are the steps that I suggested she take:
- Go through proper channels. The appraisal is the property of the Lender who ordered the appraisal. You will have to submit your request for Reconsideration of Value to the Lender, usually in writing. The Lender will then decide whether or not the request has merit. If so, they will forward the request to the appraiser for review and response. Do not contact the appraiser directly. Remember that the appraiser’s client is the Lender; not the agent, the Seller or the Buyer. The appraiser can’t act on your request or revise his report without permission from his client, the Lender. Please note that the Lender can use their discretion and may deny your request without even presenting it to the appraiser.
- Practice the 3 “Ps”. Be Proactive – initiate the request promptly. Be Professional – don’t get bogged down in personally attacking the appraiser or his skills, present your case in a professional, well-supported manner. Be Polite – appraisers are people, too. Really, we are. You will get further with your request if you simple practice good manners and politeness.
- Support your request with good sales information and insights. Simply saying that “the value is not high enough” will not cut it. Be prepared to provide additional comparables and explain why they are more appropriate that those used in the report. If you have comments about the comparables used in the report, be specific and detail exactly why the comparable used in the report was not the best one available. If you work frequently in a certain market and have intimate knowledge of sales in the area, use that information to support your point. “Comp 3 was a nasty divorce situation and they needed to sell quickly.” Or “Comp 2 is actually 500sf larger due to a finished attic that is not noted in the public records.” Good, well-supported information will go a long way. And, if you are going to provide additional sales, make sure that they are truly comparable. Don’t just look for sales that will support your price. The appraiser and the Lender will see right through that. If your property is 3 bedroom Rancher, don’t include the 5 bedroom Colonial as a comp, even if it is located across the street. They’re just not comparable.
- Be Specific. If you want to know why the appraiser made or did not make a certain adjustment or did or didn’t use a certain comparable, address it directly and specifically in your request. “Can the appraiser explain why he only made a $5,000 adjustment for the subject’s inground pool?” Or “Why did the appraiser elect not to use the sale at XXX Main Street, one block away?”
- Keep it Short & Sweet. Don’t write a novel. Don’t get emotional. Get to your point, present your case coherently and concisely, provide supportive information and then, move on.
I hope these steps will help you if you ever find yourself in this kind of situation. Should you ever need any assistance with contesting an appraisal or submitting a Reconsideration of Value, please feel free to contact our office. We will gladly do what we can to advise you.
The Coyle Group, LLC is a Residential & Commercial Real Estate Appraisal firm serving the Greater Philadelphia Region and New Jersey. 215.836.5500