Got a Low Home Appraisal? Here's What to Do About It

A home appraisal is a licensed professional's opinion of your home's value. It's based on research, market data analysis, on-site inspections, and, yes -- subjective judgment. So much depends on a home appraisal (from keeping a deal intact to securing enough financing for a home equity loan) that if it comes back lower than you were expecting you have plenty of reasons to feel concerned -- and downright disappointed.

For their part, home appraisers are experts at evaluating homes. But they're not immune to making errors. And if your appraisal came back lower than you were expecting, here's what you should do.

Inspect the appraiser's report for errors

While appraisers are known for being meticulous, putting an extra set of eyes on their reports can help prevent tiny errors -- like miscalculating square footage or omitting new renovations -- from bringing down their estimates.

Appraisers typically send reports to lenders and loan applicants, whether that's a homeowner getting a refinancing loan or a buyer trying to secure a mortgage. If you're selling a home, however, you may have to request a copy or get one through your buyer. It's a good idea to inspect this report with your real estate agent, as they may have an eye for details you wouldn't otherwise catch.

Look closely at the comps

If the appraisal report is free from errors, you might still have a chance at disputing it by asking your agent to evaluate its comps.

Comps (or "comparables") are recently sold properties that share features with the home being evaluated. They're located in the same area, sometimes in the same neighborhood. For example, four houses of roughly 1,500 square feet, two bedrooms, and two bathrooms might be considered comps for a fifth house being sold on the same street. If your agent finds these comps to be inadequate, you might have a chance at disputing the low appraisal.

Consider racial bias

The U.S. Fair Housing Act of 1968 protects homeowners from discriminating appraisals. That means, if you believe your appraiser's opinion was influenced by preconceptions of race, color, sex, disability, religion, national origin, or family state, you can file a complaint with the Consumer Financial Protection Bureau (CFPB) and dispute it.

The sad truth is that it's not rare for homes within communities of color to receive lower appraisals than comparable houses in white neighborhoods. According to research by Dr. Junia Howell, sociologist at the University of Illinois, homes in white neighborhoods are often judged to be double the value of comparable homes in communities of color.

If you believe your appraiser was influenced by racial bias, contact the Property Appraisal Valuation Equity (PAVE) taskforce and connect with a fair housing specialist.

Submit a reconsideration of value

If you have compelling evidence to suggest the appraiser's original report was mistaken, missing information, or influenced by racial bias, then you should submit a "reconsideration of value" (or ROV) to your lender. Most top-rated mortgage lenders will then review the ROV promptly and convey it to the appraiser for their consideration.

If you're selling a home and not the applicant on a home loan, you may have to work with a buyer or their agent to put together a ROV. Depending on the errors in question, some lenders may request an appraisal from a second appraiser, especially if the first was influenced by a bias.

It's not unusual to discover bias or mistakes at the root of a low appraisal. But if your appraisal comes back clean, the problem could be within yourself -- high expectations or overvaluations could have led you to believe your home is more valuable than the market says. You could request a second appraisal, which will cost you, but at the end of the day if your home is valued lower than what you thought, it might be best to accept it and find a way to adjust.