How appraisals and the appeals process work

Whether you’re selling your home, refinancing it, or buying a new house, understanding its appraised value is critical.

How Home Appraisal And Appeal Processes Work

If you’re buying or refinancing a home, a professional appraisal tells lenders what the home is worth, which helps banks decide how much they can lend. If you’re selling your home, an appraisal can help you determine a reasonable listing price.

So if your appraised value isn’t everything you’d like it to be, is there a way to improve it?

Sometimes. But first you have to understand how an appraised value is determined.

How appraisals work

During a home appraisal, a licensed or certified professional assesses a house’s market value by looking at three key factors:

  • The age and condition of the house, inside and out
  • The square footage of the living area and the amenities of the house (such as garage, basement, and hardwood floors)
  • The recent sale prices of similar homes (comparables) in the same area

The appraiser then produces an appraisal report with all the data and research. This goes to the lender, who is required to show it to the buyer. (Make sure you get a copy of the report for your own records.)

What if the home’s appraisal value falls short of your expectations?

Your options

If you believe the final appraised value is too low, you have some choices to consider. But first, remember that many factors outside your control influence appraisals, such as nearby foreclosed homes being sold at reduced prices or weak demand for homes in your area.

Sometimes, though, you may be able to find evidence that the appraisal was too low. Such evidence could include:

  • Proof that comparable houses have not been accurately adjusted for less value.
  • Evidence the appraiser missed assets, such as recent renovations, in the appraisal
  • Proof the gross living area — the square footage — of your home was understated
  • Indications the appraiser didn’t properly consider the number of bedrooms and bathrooms in your home
  • Omissions of recent sales of homes comparable to yours

Once you have your evidence in hand, you can write a letter of appeal to the lender or the appraisal management company requesting that your home be reevaluated.