When selling your home, a few things can derail your plans faster than a low residential appraisal. After weeks of preparing your property and finally getting a buyer under contract, receiving an appraisal that falls short of the sale price can be frustrating. But don’t worry — you’re not powerless. This guide outlines what sellers can do when a residential appraisal dispute arises and how to protect their sale.
What Is a Residential Appraisal and Why Does It Matter?
A residential appraisal is an independent, professional evaluation of your property’s market value. It’s what the buyer’s lender requires to ensure the property is worth the amount being financed.
If the appraisal is lower than the agreed sale price, the lender may only approve a mortgage based on the appraised value — not the full purchase amount. This can lead to a gap in financing, putting the transaction at risk.
Common Reasons for Appraisal Disputes
Before you take action, it’s essential to understand why the residential appraisal came in lower than expected. Common causes include:
- Incorrect property data (e.g., square footage or bedroom count)
- Outdated or irrelevant comparable sales (comps)
- Appraiser unfamiliar with the local market
- Lack of recent upgrades noted
- External factors, such as declining market conditions
What Sellers Can Do to Challenge a Low Appraisal?
1. Request a Copy of the Appraisal Report
You don’t automatically receive the appraisal report as the seller, but the buyer can share it with you or your real estate agent. Reviewing the report is the first step in understanding the appraiser’s rationale. Look for factual errors, such as incorrect square footage, wrong lot size, or missing upgrades.
2. Review the Comparable Sales Used
Appraisers base valuations heavily on comparable sales in the area. If the comps used are outdated, too far from your property, or dissimilar in size and features, the residential appraisal may not reflect your home’s genuine market value. You or your agent can compile more accurate or recent comps to present as part of a rebuttal.
3. Submit a Reconsideration of Value (ROV)
If you find discrepancies or have stronger comps, your agent can help submit a Reconsideration of Value (ROV) to the buyer’s lender. This is a formal request for the appraiser to review and revise the appraisal based on new data. There’s no guarantee of success. However, ROVs are a standard and valid tool for resolving appraisal disputes.
4. Order a Second Appraisal
Sometimes, the buyer’s lender may allow for a second residential appraisal, primarily if the first was conducted with errors or by someone unfamiliar with the local market. Although not always an option, this route can sometimes result in a more favorable value if justified.
5. Negotiate With the Buyer
If the lender won’t budge, you still have options. You can try to:
- Lower your asking price to match the appraised value
- Ask the buyer to cover the difference in cash
- Split the difference with the buyer to keep the sale alive
Negotiation depends on the buyer’s willingness and your urgency to sell.
6. Make Preemptive Moves Before the Appraisal
If your home hasn’t yet been appraised, there are proactive steps you can take:
- Provide a list of recent upgrades and their costs
- Clean and present the home professionally (appraisers are human, too!)
- Offer your agent’s comparative market analysis (CMA) to the appraiser
- Ensure easy access to all areas of the property
These can influence a more accurate appraisal from the outset.
Final Thoughts
Residential appraisal disputes are not uncommon, and they don’t have to spell disaster for your sale. With meticulous review, solid data, and clear communication, sellers can often challenge or work around a low appraisal. Whether you’re preparing to list your home or are already in a sales contract, understanding the residential appraisal process — and how to respond when disputes arise — can give you the upper hand. Contact Randy M. Sonns for accurate residential appraisal in Los Angeles.