Appraisal coming in low, how to dispute?

17 Replies

I have a house that's under contract. I'm buying it at $150,850 (motivated seller) and 4 years ago it sold for $187,500. It is in the same shape as before.

The appraisal came in at $155,000 and will cause me more than $5000 extra in downpayment that I was not prepared to pay. How can I dispute this?

Why do you assume that Its wrong?  why assume it’s worth what it was four years ago ? Sometimes real estate doesn’t appreciate sometimes it’s the opposite despite what people on here always say . you could find your own comps and try to make a case that it should be higher . Doesn’t look like you have much meat on the bone in this deal to even be a little risky 

How is an appraisal $5k More than purchase causing issues? Your loan is based on your purchase price no matter how much higher your appraisal may be.
Typically appraisers will appraise at or just above contract price when it is worth more.

You would have to still do 20-25% of the loan anyways not the appraisal unless this is a REFI. In which case a BRRRR type strategy would be in place to pay cash and refi it back out after 6-12 months at 70-80% of the value of the home.

@Roshan K. I'm with @Wayne Brooks on this one. I think you are mis-understanding the appraisal process. This should not cause you anything extra at all out of pocket. You already have a contract at 150k. Done deal. You don't have to pay the higher appraised value out of pocket.

Originally posted by @Dennis M. :

Why do you assume that Its wrong?  why assume it’s worth what it was four years ago ? Sometimes real estate doesn’t appreciate sometimes it’s the opposite despite what people on here always say . you could find your own comps and try to make a case that it should be higher . Doesn’t look like you have much meat on the bone in this deal to even be a little risky 

 The house has not changed over the last 4 years and the area has appreciated, not depreciated. This appraiser is saying the property depreciated 36K since the last sale. 

Also, the house next door, which is in same condition, has less sq footage, smaller backyard sold 2 years ago for 183K. The interior is average as well, similar to mine. 

Originally posted by @Roshan K. :
Originally posted by @Dennis M.:

Why do you assume that Its wrong?  why assume it’s worth what it was four years ago ? Sometimes real estate doesn’t appreciate sometimes it’s the opposite despite what people on here always say . you could find your own comps and try to make a case that it should be higher . Doesn’t look like you have much meat on the bone in this deal to even be a little risky 

 The house has not changed over the last 4 years and the area has appreciated, not depreciated. This appraiser is saying the property depreciated 36K since the last sale. 

Also, the house next door, which is in same condition, has less sq footage, smaller backyard sold 2 years ago for 183K. The interior is average as well, similar to mine. 

I understand your point and I’m certainly not saying your wrong ,I’m just pointing out that there is always a possibility of depreciation instead of the value going up 

Originally posted by @Wayne Brooks :

How is an appraisal $5k More than purchase causing issues? Your loan is based on your purchase price no matter how much higher your appraisal may be.
Typically appraisers will appraise at or just above contract price when it is worth more.

 The lender stated that they would do a 10% down loan. They said they could lend the lower of 90% by the purchase price or 85% of appraisal value. 85% of appraisal value is approx 4K less than 90% of purchase price, so now I have to make up the difference. 

That on top of the escrowed payment of 1 year of property taxes and insurance upfront (which was not disclosed to me, until I got a loan estimate) has also increased the down payment by $7,500. I was specifically told when I had the property under contract that all I would have to bring was 10% of purchase price and to estimate 3 to 4 k for closing costs.

I was prepared to put down 18 - 19K, but now closing costs are estimated at a little over 30K so I'm trying to reduce the downpayment by disputing the appraisal

Originally posted by @Jesse Moran :

You would have to still do 20-25% of the loan anyways not the appraisal unless this is a REFI. In which case a BRRRR type strategy would be in place to pay cash and refi it back out after 6-12 months at 70-80% of the value of the home.

 See above comment

Originally posted by @Aaron Cullen :

@Roshan K. I'm with @Wayne Brooks on this one. I think you are mis-understanding the appraisal process. This should not cause you anything extra at all out of pocket. You already have a contract at 150k. Done deal. You don't have to pay the higher appraised value out of pocket.

 See above for my response

Originally posted by @Dennis M. :
Originally posted by @Roshan K.:
Originally posted by @Dennis M.:

Why do you assume that Its wrong?  why assume it’s worth what it was four years ago ? Sometimes real estate doesn’t appreciate sometimes it’s the opposite despite what people on here always say . you could find your own comps and try to make a case that it should be higher . Doesn’t look like you have much meat on the bone in this deal to even be a little risky 

 The house has not changed over the last 4 years and the area has appreciated, not depreciated. This appraiser is saying the property depreciated 36K since the last sale. 

Also, the house next door, which is in same condition, has less sq footage, smaller backyard sold 2 years ago for 183K. The interior is average as well, similar to mine. 

I understand your point and I’m certainly not saying your wrong ,I’m just pointing out that there is always a possibility of depreciation instead of the value going up 

I hear you. Definitely prices can go down and depreciate. But this is simply not the case here. And no properties depreciate the 20% stated unless there's some serious damage to the houses. 

Updated 3 months ago

I meant to say no properties in that area depreciate 20%. They didn't even fall that much during 2008-2009 crisis!

@Roshan K. ok, I'm with you now. So you are looking at spending 26k to close IF you dispute, spend extra time, and money on new appraisal AND get that new higher appraisal. OR you spend 30k and close right now. 

If it was me I would suck it up as an unlucky appraisal and close. But only you can answer what your time/effort is worth and the risk of spending the extra money only to get the same appraisal.

It sounds like the bigger additional cost are the extras that THIS bank is requiring you to pay upfront. Keep in mind it's money you would have to pay anyways if you are holding the property. The bank is just making you pay it upfront, which sucks I get it. This happened to me once when I didn't properly screen the bank requirements upfront. I learned my lesson and ask these questions now upfront when shopping for loans. I just chalk it up to a learning experience, something to tweak in my process.  

Originally posted by @Russell Brazil :

I once had an appraisal with 22 factual errors in it and still couldnt get appraisal tossed.

 I don't how appraisals are viewed as this contract from God that can never be changed. I can only imagine how frustrating that is

Originally posted by @Aaron Cullen :

@Roshan K. ok, I'm with you now. So you are looking at spending 26k to close IF you dispute, spend extra time, and money on new appraisal AND get that new higher appraisal. OR you spend 30k and close right now. 

If it was me I would suck it up as an unlucky appraisal and close. But only you can answer what your time/effort is worth and the risk of spending the extra money only to get the same appraisal.

It sounds like the bigger additional cost are the extras that THIS bank is requiring you to pay upfront. Keep in mind it's money you would have to pay anyways if you are holding the property. The bank is just making you pay it upfront, which sucks I get it. This happened to me once when I didn't properly screen the bank requirements upfront. I learned my lesson and ask these questions now upfront when shopping for loans. I just chalk it up to a learning experience, something to tweak in my process.  

The issue is that I'm in aggressive growing mode so I've been deploying most of my capital. I had 23K saved up for this purchase (5K more than my lender told me to estimate for), and now I have a week to get 7K more. It'll happen but I just got to figure it out. It would just be a lot easier if I didn't have to pay as much

I would try to locate your own comps, to justify any type of appeal.  From my experience, 2 years ago seems quite long ago for a Single Family Home Comp., even if it is the House next door.  A Real Estate agent, if one is involved, may be able to help with the Comps.  

What's the exit strategy?  If you expected an appraisal of $187K, and it appraised at $155K, that's a pretty big swing.  Does it still achieve whatever you were trying to do, or are you going to live there?  Maybe you could re-neogiate the purchase price.  

Originally posted by @Christopher B. :

I would try to locate your own comps, to justify any type of appeal.  From my experience, 2 years ago seems quite long ago for a Single Family Home Comp., even if it is the House next door.  A Real Estate agent, if one is involved, may be able to help with the Comps.  

What's the exit strategy?  If you expected an appraisal of $187K, and it appraised at $155K, that's a pretty big swing.  Does it still achieve whatever you were trying to do, or are you going to live there?  Maybe you could re-neogiate the purchase price.  

 It's a duplex and I'm house hacking. It still works. P and I would be under $700 and other side is a 1700 sq ft 3 bed 2 bath with a quarter acre fenced yard that should rent for $1100-1200

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