What Causes a House to Appraise Low? Top Reasons to Watch Out For

There are a variety of factors that can cause a house to appraise low. One of the most common reasons is the state of the current real estate market. If market activity slows, home values can decrease, which will then reflect in the appraisal. However, there are several other reasons that a home may appraise low, including:

An inexperienced appraiser who may not have a strong understanding of the local real estate market or who may have overlooked important details about your home.

Incorrect comps, or the lack thereof. The appraiser will compare your home to other recently sold properties. If these homes are not truly comparable to your own, it can lead to a lower appraisal.

An inadequate evaluation of the home. If the appraiser misses key features or upgrades in your home, or does not take into account the overall condition of the property, this can also lead to a lower appraisal value.

It’s important to remember that a low appraisal does not necessarily mean your home is not valuable. It is simply the opinion of one appraiser, and you as the homeowner have the right to challenge or dispute the appraisal. By addressing the reasons behind the low appraisal and providing additional information, such as recent renovations or upgrades, you may be able to increase the final appraisal value.

What Causes a House to Appraise Low?

As a homeowner, you may want to put your property on the market at a fair price. However, you may feel frustrated if the appraisal comes back lower than you expected. An appraisal is an evaluation of your home’s worth. When appraisals come in lower than expected, it can delay or even dissolve a pending sale. An appraisal may be low due to a variety of reasons, which we will explore in this article.

Reasons for Low Appraisal

The most common reason for a low appraisal is the changing market. Real estate markets are an ever-changing landscape, and the values of some homes can fluctuate dramatically. It can happen that the appraisals are lower than expected due to market activity and the value of your house decreasing over time. Appraisers keep up with market changes, but they cannot predict the future. Therefore, sometimes, the evaluation may not accurately reflect the worth of the property. Other reasons for low appraisals may include inexperienced appraisers, incorrect comps, or inadequate evaluation of the home.

Market Changes and Low Appraisals

Real estate market activity can have a significant impact on the appraisal value of your home. If the housing market is in a slump, it may take more time to sell your property, and when an appraisal is performed, the value may be lower than expected. This is because appraisers consider current and past market trends when valuating a home. A slow market can also lead to fewer qualified buyers and, therefore, less competition, resulting in lower offers.

Inexperienced Appraisers and Low Appraisals

Appraisers must complete education and training to become certified and licensed. However, some may still lack experience, resulting in a lower appraisal value. An inexperienced appraiser may overlook essential features of your home, which may impact the overall value. It is therefore advised to work with reputable and experienced appraisers to help ensure a fair appraisal.

Incorrect Comps and Low Appraisals

Comps, or comparables, refer to the recently sold or listed properties in your neighborhood that are similar to your own. An appraiser will use these comparables to help determine the value of your home. Unfortunately, sometimes these comparables can be incorrect due to various reasons. The appraiser may use comps that are not similar to your property, which can lead to a lower valuation. It is essential to ensure that the comps used are a true reflection of your home’s value. Pro Tip: To ensure correct comparables are used, provide all relevant information about your home to the appraiser, including upgrades, features, and improvements.

Inadequate Evaluation of Home and Low Appraisals

An appraisal can come in lower than expected if the appraiser did not evaluate your home thoroughly. It is vital that the appraiser inspects all areas of your property, as they can miss critical features, such as a newly renovated kitchen or bathroom. An inadequate evaluation could lead to a lower value assessment of your property.

Understanding the Impact of Low Appraisal

A low appraisal can have a significant impact on your home’s value and your potential sale. A seller may have to lower their price to meet the appraisal value, causing frustration and lost revenue. On the other hand, buyers may try to negotiate a lower price, causing you to miss out on potential profits.

Tips to Avoid Low Appraisal in Your Home

• Before an appraisal is scheduled, perform necessary repairs, renovations, and improvements in order to showcase the value of your home. • Provide a list of all updates and renovations made on the property over the past years. • Ensure the appraiser has access to all areas of the property, including storage and utility spaces. • Gather and present a list of nearby homes that recently sold at requesting price; these are called “comps” and, if favorable, can be added to an appraisal report • Choose experienced and reputable appraisers who have local expertise and a good track record. In conclusion, a low appraisal can be frustrating for both buyers and sellers. There are various reasons why an appraisal can be low, including market changes, inexperienced appraisers, incorrect comps, or inadequate evaluations of the home. To avoid low appraisal values, take time to improve your home’s value before scheduling an appointment and, importantly, work with an experienced appraiser to ensure a fair evaluation.