Low Appraisal Values Can Hurt Chances For Refinance

26 Jul
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Line art (Photo credit: that one guy with the camera)

Home values are creeping upwards.  Slowly, and not consistently.  It is estimated that up to 25% of homes with mortgages are currently underwater because of the drop in home values over the past five years.

Anyone who has looked for a refinance in the recent past can tell you that a low appraisal can kill a deal.  The appraisal process changed a couple of years ago when control was placed in the hands of the AMCs (appraisal management companies).  Brokers no longer have a direct line of communication with appraisers, though they may submit an appeal through the AMC.

Homeowners can, however, take steps to get the most accurate appraisal value.  Careful examination of an appraisal may show homes used for comparable sales  were distressed sales, or houses which were not the same size, style or age as the subject property.  The appraiser may have failed to include a recent sale, especially if it was done privately.

A homeowner may respectfully request the appraiser consider additional information.  He can ask around the neighborhood to see if any houses have sold privately and may not have appeared on MLS.  He may be able to alert the appraiser that certain sales were foreclosures and do not reflect the value of the area.

The homeowner may also accompany the appraiser when he does his inspection and point out improvements that may not be included in the latest survey, such as a finished basement or half-bath.  A list of improvements that are not easily spotted, such as energy-efficient windows or a new central air conditioning system, can be handed to the appraiser.

But be warned: most people are surprised, if not shocked, at how their home’s value may have fallen in the last 5 or 6 years.  And cost does not equal value when it comes to most home improvements – $20,000 worth of new cabinets does not increase the home’s value by $20,000.

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