When the bank says no, draft a rebuttal
The National Association of Realtors reported in May that a low appraisal
resulted in a contract cancellation for 9 percent of agents and a delay for 10
percent. For 13 percent of Realtors, an appraisal below contract price opened
the door to a sale price negotiation re-do.
Generally, borrowers faced
with a low appraisal need to make a bigger down payment or walk away from the
transaction. However, they also have another option they could try: Submit a
rebuttal or reconsideration letter to the lender with input from their agent or
an appraiser. Chances are slim that the lender will change its mind; however,
lenders are sometimes willing to assign a new appraisal if there see evidence of
incomplete or inaccurate work.
To succeed in a rebuttal, borrowers who
challenge an appraisal should focus on factual errors, flawed methodology and/or
new or missed comparable sales â€“ and leave their emotions out of the equation.
It could be worthwhile to pull additional comps to determine whether the
appraiser missed something â€“ especially now that home sales are on the rise â€“
and hire a review appraiser or local real estate agent with access to the MLS
data used by appraisers.
When it comes to luxury homes, Chicago-based
appraiser Chip Wagner says, â€œThe appraiser must have a grasp on the newest
technologies, the highest quality materials and upper-end appliances and how
they contribute value.â€
Rebuttal letters these days often cite the
quality of the initial appraiser, as the 2009 Home Valuation Code of Conduct
rules forced many independent professionals out of the business and left behind
appraisers with little experience or market familiarity.
Experts add that
a professionally bound rebuttal â€“ with copies sent to the loan officer,
underwriter, bank president, buyerâ€™s and sellerâ€™s attorneys and agents, the
appraisal management company and the appraiser â€“ will have a bigger