Los Altos Real Estate Blog

You could be a home buyer or seller, it doesn't make a difference.  In the process of selling a home, both are impacted by an appraisal that's wrong.  What's the first reaction of the agents, the buyer, the seller, and the banks?  Frustration, panic, anger, I could go on and on.  Once you get past the myriad emotions, you need a rational response.  I just got an appraisal back that I don't agree with and here's what I looked at to make sure the appraisal is done right.

Market Conditions

In most appraisals they'll be ranked as "Inclining", "Stable", or "Declining".  This is the first thing you check because if the appraiser is looking at the market as too large an area, such as a county, then the home might be undervalued.  Make sure the market the appraiser is considering is the local market (town, subdivision, or neighborhood) and not a general one.

Home Size

The appraiser should take measurements of all the rooms to get the interior dimensions.  The home size used in the appraisal should be all living space but if the comps include both living space and garage space (which often happens), then make sure the appraiser includes the garage space.  Appraisers will balk at this, claiming it's not appropriate, but if a comp shows up as 20% larger because the listing agent included the garage space, make the appropriate adjustment.

Comps

The appraiser should have at least 3 comps they used as the basis for their opinion. Check each one and make sure it's really in similar condition, close by, similar street location, and similar age.  A home on a corner lot on a busy street isn't a suitable comp for a home on a cul-du-sac.  Check these detail because appraisers do make mistakes.  The two most contentious I've seen are age and condition.

Now what do you do?  Take what you find back to the appraiser and ask them to reconsider the factors in their appraisal.  The purpose of this response is to present facts in a logical manner.  If the appraiser is doing their job, they'll consider what you have to say and fix whatever mistakes they've made - if they made them.

Just be very clear in reading what the appraiser wrote in their report.  If you don't like the results but they're based on sound facts, which is most often the case, then you'll just have to live with it.  But if they do get it wrong, be prepared to do what's needed to get it fixed.