How to Dispute a Low Home Appraisal in Chicago

There is no doubt that a home appraisal is one of the most important things in a real estate transaction. People get home appraisals in Chicago for various reasons every day. 

Ideally, in most scenarios, you would want your appraisal to be as high as possible. But, in some cases, appraisal may come in lower than expected. This is important because differences in an appraisal value can make or break a deal.

If you get an appraisal for buying a home or refinancing it, and it comes in low, the lender may refuse to issue you a loan. If you are stuck in such a situation and this blog might prove helpful to you. We will guide you through the process of disputing a home appraisal and possibly get a higher one. So, please read along!

Understand Why the Appraisal Came in Low

There are several reasons why an appraisal might come in low. Understanding that the specific reason is important. We will cover the most common reasons below:

• Market Fluctuations: Given the volatility of Chicago’s market, it is common for home values to change considerably within a span of a couple of months. So, it is very possible that this is the reason for your low appraisal. Usually, during the wintertime, the real estate market is slow, and the market value of your home drops. This drop will also reflect in your appraised value.  If market fluctuation is the sole reason for your low appraisal, then there is not much you can do except wait for a better time for the appraisal.
• Appraiser’s lack of knowledge: There is also a possibility that the appraiser is not familiar with your specific location. Sometimes, appraisers cover large regions and may not be very familiar with your specific neighborhood. In Chicago, each neighborhood has distinct characteristics, and the appraiser needs to be familiar with the specific neighborhood to appraise a home properly.
• Errors in property details: While gathering the data about your property, the appraiser may have made an error, causing the appraisal to come low. The error might be such as incorrect square footage, outdated room count, overlooked renovations, etc. These things can significantly impact the value of your appraisal.
• Unfavorable comparable sales: Appraisers heavily rely on recent sales of similar homes to determine the value of your home. These are called comps for short. If they choose comps that don’t truly match your property, it can lead to an inaccurate valuation. They may have chosen smaller homes, or homes too far away from yours, causing your appraisal to be significantly lower.

By pinpointing the exact reason for the low appraisal, you will be better equipped for disputing it.

Review the Appraisal Report for Errors

The next step is to carefully review the appraisal report for any errors. The appraisal report is usually several pages long, so you will need to spend some time on it. We recommend taking notes as you go to make sure you don’t miss anything. 

One of the main things you should look for is any factual mistakes. This could be incorrect bed/bath count, wrong square footage, missing features, wrong dates for any recent upgrades, any major upgrades missing, etc.

Next, verify the comps used in the report. Check if they are really comparable to your home. Make sure they are not much smaller than your home or not too far away from your location. 

Moreover, look for any outdated or irrelevant data that may be affecting your appraisal value.

Gather Supporting Evidence

Now that you have made a list of all the errors and issues with the data from the report, you will need to provide the correct data and supporting evidence.

If you found an issue with the comps, provide better-suited comps to support your case. Find any recent sales of homes similar to your size and closer to your location. The sales should ideally be within the last 3-6 months. 

If you found any factual errors, provide the correct data. Make sure to highlight any recent home improvements or upgrades that the appraiser may have missed. 

If you found any neighborhood-specific data that the appraiser may have gotten wrong, provide the correct data as supporting evidence. Also include data showing rising home values in your neighborhood.

Submit a Formal Reconstruction of Value (ROV)

A Reconsideration of Value (ROV) is a formal request that you can submit to the lender to review and adjust the appraisal value. Your ROV should be detailed, professional, and evidence-based.

Write this letter in polite but firm language. Outline the specific issues in the original and include everything you found out in the previous steps. Also, attach all the evidence that you found.

Provide this letter to your lender, and they will forward it to the original appraiser for review. Although this doesn’t guarantee an adjustment, a well-documented dispute with strong evidence and factual corrections can lead to an adjustment. Some lenders may also have a formal ROV form, so check with your loan officer before submitting.

We recommend acting quickly for your ROV to be considered. Moreover, work with your real estate agent or mortgage officer to help identify the strongest comps and navigate the lender requirements.

Conclusion

In the above blog, we covered the reasons why an appraisal might come in low and how you can properly dispute it if you have valid reasons. We hope you found value in this blog and that we were able to explain everything clearly.

AnDel Appraisals is a home appraisal company based in Chicago, and we have been appraising homes for over a decade. If you have any questions regarding anything appraisal-related, feel free to reach out to us, and our staff will be happy to help you out.