SOME CARD INFO MAY BE OUTDATED
This page includes information about these cards, currently unavailable on NerdWallet. The information has been collected by NerdWallet and has not been provided or reviewed by the card issuer.
A lot rides on a home appraisal, whether you're trying to sell a house, refinance your mortgage or tap into your home equity.
A low appraisal could prevent a buyer from getting approved for a mortgage, which may delay or even cancel your home sale. It can also limit your ability to refinance or access cash through a cash-out-refinance, home equity loan or home equity line of credit.
An appraisal may come in lower than you expected because property values dropped or you've overestimated your home's market value. But the appraisal process isn't foolproof, and there are options if you think the appraiser got it wrong, or you suspect that you've been subject to appraisal discrimination.
Here's what to do if your home appraises for less than you think it should.
What is an appraisal?
A home appraisal is a licensed appraiser's opinion of home value, based on research, analysis and professional judgment.
Lenders require an appraisal for most kinds of home loans because the property serves as collateral for the loan — they don’t want to lend more than the property is worth. Lenders plug the appraised value into a formula called the loan-to-value ratio (LTV) — the loan balance divided by the home value. A combined LTV includes the balance of the mortgage plus the amount of a home equity loan or line of credit. The ratio affects the amount you can extract in home equity and whether you can refinance.
How an appraisal affects home equity
Say a lender's maximum combined LTV is 85%. You owe $200,000 on your mortgage and want to borrow $100,000, for a total of $300,000:
- If your home appraised for $375,000, your LTV is 80% ($300,000 / $375,000). You might qualify.
- If your home appraised for $325,000, your LTV is 92% ($300,000 / $325,000). That's too high to qualify.
Check the appraisal report for accuracy
The lender is required to send a free copy of the appraisal report to the loan applicant at least three days before the loan closes, whether you're refinancing or applying for a home equity loan. However, in a home sale, the buyer will receive it as part of the mortgage process. If you’re the seller, work with your real estate agent to get a copy of the report from the buyer.
The appraisal report documents a slew of property details that the appraiser considered in the valuation. Even the best appraisers can make mistakes, so scour the report to make sure all the particulars are correct, such as:
- Number of bedrooms and bathrooms
- Square footage
- Amenities, including fireplaces, patios and pools
- Garage type and condition
- Condition of roof, furnace or other major systems listed on the report
- Additional features, such as energy-efficient systems
Also make sure the appraiser didn't miss anything, such as major home improvements that could increase value.
Evaluate the 'comps'
To help determine home value, appraisers consider prices of comparable homes that were recently sold in the area, known as real estate comps.
Check which homes were used. Were they truly comparable? How nearby are the homes, and how recently were they sold?
You may want to ask a friendly real estate agent familiar with your neighborhood — or your agent, if you’re working with one — for a list of recent comparable sales.
🤓 Nerdy Tip
Understand that appraisals are different from online home value estimates. The appraisal isn't wrong just because it's lower than the ballpark figure you saw online. Home appraisals take more details into account than home-search algorithms can, so use online estimates as guidelines only. Submit a 'Reconsideration of Value'
Promptly document any mistakes or missing information from the appraisal report and gather any additional comparable sales that support a higher value.
If you're the loan applicant:
Submit the written information as part of a "reconsideration of value" to your lender.
If you're the seller:
Ask your real estate agent to communicate those issues to the buyer and ask the buyer to submit the information to their lender.
Although the loan applicant pays for the appraisal, the appraiser works for the lender. So direct any feedback to the lender, not the appraiser. The lender will pass along the information to the appraiser, which could lead to a revised value if it’s relevant and significant.
A loan applicant could also ask for a second appraisal or switch lenders, but that means paying again and there's no guarantee the next appraisal will come in higher.
File a complaint if you suspect discrimination
Under the U.S. Fair Housing Act of 1968, home appraisers aren't allowed to discriminate based on someone's race, color, religion, sex, disability, family status or national origin.
You can file a complaint with the Consumer Financial Protection Bureau if you suspect a lender discriminated against you, including by relying on an unfair appraisal.
Another option is to file a fair housing complaint. You can do that directly with the Department of Housing and Urban Development's Office of Fair Housing and Equal Opportunity or get help through your local fair housing center. Funded through HUD's Fair Housing Initiatives Program, fair housing centers do preliminary investigations and help people navigate the complaint process. You can find a fair housing organization near you on the HUD website.
Refinance programs that don't require appraisals
If you have a mortgage backed by the Federal Housing Administration or the Department of Veterans Affairs, you may be able to refinance without getting an appraisal. These programs, however, don't let you cash out any of your home equity:
- The FHA streamline refinance replaces one mortgage backed by the Federal Housing Administration with another.
- Often called a "VA streamline refinance," the VA Interest Rate Reduction Refinance Loan — or VA IRRRL — is used to refinance a mortgage backed by the Department of Veterans Affairs.
Explore more on
