An appraisal report is an integral part of the mortgage loan process. Occasionally a lender will issue a PIW (property inspection waiver) allowing a borrower to skip this requirement however these are random and few and far between. It is important that appraisals are ordered early on in the process because a difference in contract price and appraised value can be a complete deal breaker.
Appraisals provide both the lender and borrower with an independent opinion of value by a licensed professional. When the property’s contract price is different from the appraised value the borrower ultimately has three options. The first option is to bridge the gap between the difference with cash out of pocket, the second option is to renegotiate, and the third option is to submit a reconsideration of value request.
While it never hurts to submit a reconsideration of value, the success rates are low. Most appraisal management companies have a quality control department that checks the appraiser’s work to ensure that there are no errors with the report. Also, appraisers who complete reports with errors are reprimanded, which can reduce the amount of orders they receive.
The best chance of a reconsideration of value having success and increasing the overall appraised value of the property is if the appraiser missed comparable properties that should have been included in the appraisal report. Keep in mind that these properties must be more salient to the subject property than the other comparables already provided in the report. For example, a similar house 10 miles away is not as salient as a slightly different house 0.5 miles away.
The next best chance for a reconsideration of value is if you can prove the reason one of the comparables should not be included in the report. For example, if you are able to evidence that one of the properties with a low selling price dragging down the price was sold under duress that property would need to be thrown out.
Oftentimes agents will point out intangible data such as beautiful views, the serineness of the neighborhood, the proximity to the freeway, etc. While these intangibles undoubtedly have an impact on the value of the property they are harder to quantify which makes them less useful for reconsiderations of value. Keep in mind that appraisers are experienced and licensed in real estate, so their opinions of value include all of these concepts in the appraisal reports that they produce.
If you have any questions, feel free to give us a call and discuss with one of our Mortgage Loan Originators at (760) 930-0569.