How to Challenge a Low Appraisal—And Win a High Valuation

How to Challenge a Low Appraisal—And Win a High Valuation

8 min read
Mindy Jensen

Mindy Jensen has been buying and selling homes for more than 20 years. Her preferred method of investing is the “live-in flip”—she buys a house, moves in, makes it beautiful, sells it after two years to take advantage of the Section 121 Capital Gains Exemption, and starts the process all over again. She is currently working on her ninth live-in flip.

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Mindy is a licensed real estate agent in Colorado, author of How to Sell Your Home, and the Community Manager for BiggerPockets, where she helps new and experienced investors learn the proper ways to invest in real estate to grow their wealth. She’s also the co-host of the BiggerPockets Money Podcast.

Mindy is passionate about financial independence and wants to help as many people reach this milestone as possible, so they can live their best lives.

As both an agent and an investor, Mindy LOVES real estate. She has taken part in syndications, private lending, and deals involving seller financing. She owns a single family rental, a short-term rental, a mobile home park, a co-working space, and her most recent purchase—a caboose!

Mindy is an alumnus of the School of Hard Knocks and will happily share her experiences with anyone who asks. When you can get her to stop talking about real estate, you can find her on her bike or adventuring in the beautiful mountains of Colorado.

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Mindy has been featured on 1500Days.com, CNBC’s Make It, 60 Second Docs, as well as podcasts like Money Nerds, The FI Show, Stacking Benjamins, and How to Be Awesome at Your Job.

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Mindy is a licensed real estate agent in Colorado.

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There are many reasons to get an appraisal. A seller may want to know their home’s value to refinance an existing mortgage or sell their home.

A home appraisal is a professional opinion, in the form of a report, that assigns a market value to a home. The appraised value is determined by the home’s location, condition, and features.

Unfortunately, it is less of a science and more of an art—and low appraisals do occur.

Why is the appraisal important?

A traditional mortgage will not go through without a home appraisal—and if the home doesn’t appraise, that’s the end of the line for that transaction. This is called an appraisal contingency. Unless the property owner can prove an error in the appraisal process, the appraiser’s mind is unlikely to be swayed. That home sale won’t be happening… at least not under the initial terms determined during negotiations.

The appraiser doesn’t use the sales price to determine their valuation. They use a complex combination of data sources to come up with a price they believe is fair.

A sellers market may lead to more low appraisals. Bidding wars drive up the price more than recent sales can support—but buyers might be willing to waive the appraisal contingency. In that case, they’re responsible for covering the “appraisal gap,” or the gap between the appraised price and the asking price.

In a hot housing market, sellers may be less likely to negotiate after a low valuation. Chances are, someone else will come along willing to pay the cash difference. In a buyers market, there may be more wiggle room to come to a happy medium.

Property owners can prevent a low appraisal from happening by preparing documents ahead of time that portray the property in the best light. A list of improvements, favorable comps, and a home improvement cheat sheet go a long way.


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Reasons for a low appraisal

Appraisals come together through research, thoughtful analysis, and the appraiser’s in-person home inspection.

Once the appraiser has inspected the home and compared it to recently sold properties, they will write up a report, giving their estimate of the value of the home. The report will include which specific addresses for recent sales used to value the home, along with a description of the actual subject property, a map marking the location of the home, a picture of the property, and a general condition of the current real estate market.

One of the reasons for a low appraisal is if the home does not look well-maintained. That’s why it’s so important to ensure that both the outside and the inside of the property look good (i.e. clean and well-maintained).

Market conditions can influence the appraisal. This can be affected by the current season—in summer, more people are looking for homes and placing offers. The opposite can happen during the winter. Perhaps it is a “hot market” with more buyers than sellers. It also could be a lack of comparable sales, or “comps” in the area that made it hard for the appraiser to judge the worth of the property. Comps have to be similar in location, size, and style—and they must have sold recently.

(Want to dig into the nitty-gritty? The National Association of Realtors publishes a thorough guide to understanding residential appraisals.)

Prepping to fight a low appraisal

Appraisers are human and make mistakes just like everyone else. If a property appraises significantly lower than expected, the results can be challenged.

Double-check figures

The first thing to do is check to make sure the property stats are accurate. Did the appraiser include all the bedrooms and bathrooms? Is the square footage correct? Did they forget the basement or misjudge the size of the lot? If there is an error, provide the evidence to the appraiser and ask that they reevaluate the property based on the additional information provided.

If the home appraisal is slightly lower than what you hoped for, your chances of successful appeal aren’t great. However, you can certainly ask the appraiser to reevaluate the property. Having comparable properties to share can help your cause as well.

Know the neighborhood

Even if the appraiser is local, they may not be intimately familiar with the neighborhood and the property. Keep in mind that school districts can change valuation significantly. If the property is located in a better school district, make sure the appraiser knows that—and includes that into the valuation.

Examine comparable properties

MLS listings on recently sold properties don’t always tell the whole story. If the appraiser doesn’t know the comps’ backstory and it drags down the appraised value, the property owner needs to make sure the appraiser understands the reason the home sold for such a low price. Remember that home that sold for $45,000 less? Tell the appraiser.

Also, comparable properties should actually be comparable: same neighborhood and sold recently. It is easy to mistype a ZIP code and get an entirely different location. Being off by even just a mile could drastically change the valuation.

What to say in your appraisal challenge

Write out your thoughts in a logical manner that the lender and appraiser can easily understand. Here’s what else to keep in mind:

  • Skip the novel: Don’t write one.
  • Filter thyself: Put name-calling and finger-pointing aside.
  • Provide specific support: Be specific about why the value opinion is different from what was appraised. Focus on critiquing the meat of the appraisal—their comp selection and price adjustments.
  • Find new comps: Supply one or two other sales for the appraiser to consider. The comps should be truly competitive—not twice the size or located in a superior area. Would a buyer consider purchasing the comps as a replacement for the subject property if the comps were still on the market? That’s what competitive means.
  • Be humble: You might be right, but you could also be wrong.
  • Use bullet points: Organize your thoughts into five to 10 specific bullet points that the appraiser and lender can easily digest. Avoid lengthy paragraphs and emotional points void of logic and specific data.
  • Ask questions: After presenting a point, ask the appraiser to explain why certain adjustments were made or not made. As an example, “Comp 2 is located next to a gas station, but no adjustment was given. This may have been a clerical error on the part of the appraiser. Why did the appraiser not make an adjustment for an adverse location?”
  • No pressure: Remember not to pressure for a higher value—or even suggest a minimum value. Stick with the facts and try to help the market speak for itself. Let the appraiser reconsider the value.

Here’s our recommended opening paragraph:

After reviewing the appraisal for [address] by [appraiser], we would like to request further clarification and investigation by the appraiser. We would like to ask for a reconsideration of value based on the following points:

And the recommended closing paragraph:

We would humbly ask the appraiser to take a second look at the information above as it relates to data and adjustments in the appraisal report. We appreciate your time and consideration, and please let us know if you have any further questions.

Tips to get a higher appraisal

Did the lender agree to send a new appraiser? Make the most of their visit by being proactive before the appraisal. Here are six ways to score a better appraisal for the second appraisal.

1. Ask if they are local

When the appraiser calls to make the appointment, ask if they are local. Real estate is local, and an appraiser from out of town may not be as familiar with the local real estate market.

Your house should be appraised relative to its location, not in relation to the local market of the appraiser from 60 miles away.

Unfortunately, requesting specific appraisers is no longer allowed, thanks to all those shenanigans around 2005-2007.

Today, lenders select appraisers by sending an email to all appraisers on their list. The appraiser who gets the appraisal is the one who hits the “accept” button the fastest and who agrees to the fee the lender wants to pay.

The current paradigm is: Who is the fastest and the cheapest?

“If you get an out-of-the-area appraiser, you can try to ask for another appraiser from closer to your area, but from what I have been told on the expert panel to which I belong, that almost never works,” recommends John Carlson, a California Certified General Real Estate Appraiser with JCCREA.

The lender would have to send out another email blast in hopes that a local appraiser hits the accept button first. Continued Carlson, “If a borrower does get an out-of-the-area appraiser it makes it even more important to know your market better than the appraiser who is coming out.”

2. Tidy up

The appraiser will spend a short amount of time conducting the appraisal—maybe an hour at most. The home needs to be prepared as if it were for a showing with clutter hidden and spotless floors. It helps if the whole house smells nice.

This is technically not supposed to help the home appraisal—however, the appraiser will notice if the house is a disaster. They shouldn’t walk into the property and have their first impression be, “What a dump!”

If the property is rented, tell the tenants to make everything as clean as possible.

For a property that is not tenant-occupied, the only thing you should do differently than you would for a showing is to stay put. The homeowner needs to be at the home when the home appraisal happens in case the appraiser has questions.

3. Look outside, too!

The last thing any property owner wants is for the appraiser to think their house is gross before they even walk in the door.

The home’s exterior should be clean and neat. If the appraisal happens during the grass-growing season, mow the lawn and clear dead leaves or plants. During winter, shovel the driveway and walk. Pick up anything else littered around, such as toys, trash, and debris.

4. Have a list of improvements

List any significant improvements done on the property. What was done? How much was spent? When was the improvement made? Understand what amenities make your property better than the comps.

This list can help the appraiser understand the scope of work and encourage them to appraise higher than the recent purchase price.

5. Make a cheat sheet

Measure the rooms ahead of the home appraisal and have a sheet ready to give to the appraiser. They will most likely still take their own measurements, but having a page with the information can help them make sure they don’t miss a room.

The property owner needs to give an overview of the entire home—highlighting the positives, of course. No feature is too small to mention, and some upgrades may not be readily apparent. Who can tell if the plumbing or electrical has been upgraded by looking at the walls? Tell the appraiser everything important.

6. Explain the comps

The appraiser needs to know about comparable properties (a.k.a comps) that have recently sold and those that are currently on the market. This helps them get a feel of what is selling and for how much—both before and after rehab.

Create a list of comps from their neighborhood that they can share or they can enlist the help of their real estate agent.

The appraiser isn’t going to be able to go into the sold houses on the list to see what they look like. They won’t know if the home had really cheap carpeting or stunk of cats.

Be prepared to explain how your home compares to each property that recently sold—especially those that sold for a lower price. Sometimes homes have issues that aren’t disclosed on the MLS. A home may sell for $45,000 below list because of undisclosed sewer issues. In those cases, buyers uncovered the issues before closing, but the sewer problems weren’t advertised on the MLS. The appraiser won’t know anything not listed on the MLS unless you tell them.

Sharing comps with the appraiser can help them make an informed decision and hopefully help get the property appraised at the right value.

A low appraisal may prevent your lender from funding your mortgage—but it doesn’t have to be the end of the road. Follow these smart tips for a higher valuation.

Your ability to qualify for a mortgage hinges on your home appraisal—so how can you maximize your home's value? Here, learn how to challenge a low appraisal and get the highest valuation possible.