Appraisal complaints are pretty common these days since it can make or break your mortgage approval or purchase. I outlined some of the biggest complaints I heard from our former clients and readers over the years and tried to shed a little light on each of them.

However, if you suspect there was laws broken or fraud committed on your appraisal, I included links for each state to file a complaint against the appraiser located at the bottom of this post.

Note: Read Our Top Five Mortgage Complaints!

First, the definition of a mortgage property appraisal. A licensed appraiser researches other properties to find homes that have sold in the last 6 months that are similar to yours. That is how they come up with an appraised value. They do come inside or drive by your home to make sure it is the same information represented at the county and to note any improvements or problems.

So, let’s start with the complaints.

Improvements will increase value dollar for dollar.

This is a big complaint especially when you just spent a ton updating your home.

If you made improvements costing $10,000, that does not mean your appraised value is increased by $10,000 exactly. You may get a boost but not the exact amount.

It depends on how much other houses used in the appraisal were improved. If all the other homes have updated kitchens and yours does not, your appraisal amount will come in lower than those other properties. So, you spend the cash to update your kitchen and yes it will increase the appraised value but only up to other home's values with updated kitchens.

What if you over-improved your home? This is always disheartening for people who have spent tons of money and time improving their property only to find out it doesn't really matter to the appraiser or the underwriter. If your kitchen is something right out of Architectural Digest (or whatever magazine says you have the fanciest kitchen) and other homes used in the appraisal are not, you won't get a massive boost in appraised value.

Your home is now over improved compared to others and underwriters and lenders do not like that. Even if you get an appraiser who gives you credit for these improvements, the underwriter will probably take issue with it and may hack the value of your appraisal. Underwriters and lenders like normal and conservative especially in a down market. They like houses that are easy to see how much they are worth because they are the same.

Think twice before you go crazy with your property especially if you plan to sell or refinance. Underwriters will always take issue with huge over improvements even in a good market. If you are going to stay there forever and don't care what happens after you're gone, then by all means, do it up right! But if you think all the money sunk into a project turns into dollar for dollar appraised value, you will probably be disappointed.

Try to stay in the middle. Keep up with your neighborhood updates so you're not the only one without them and don't go overboard on improvements so again, you are the only one who has them. But that won't help you now if you did over improve. You will just have to work with the new lower appraisal.

Your home did not appraise for what you thought

Another huge complaint. Your appraised value comes mainly from what other homes similar to yours have sold for in the last six months. Those are called comparables. And by “similar”, I mean pretty much the same. They have to be the same style. You can’t compare a two level home to a ranch. A ranch has to be compared to another ranch.

They also need the same number of bedrooms and bathrooms and preferably be in the same neighborhood. The appraiser is trying to find out what your house is worth and to do that, they have to find out what others paid for a house just like yours.

It's the opposite of how most people think. It's really less about your house and more about what other people paid for a house like yours.

If your mortgage is being denied for low appraised value, that means the houses similar to yours sold for less than you thought. However, we hear quite often of appraisals coming in arbitrarily low. Underwriters are going over appraisals with a fine tooth comb these days.

To you, it may be a lower value with no merit but to the underwriter, there could be issues like the improvements we just talked about. They may not want to take a risk on a higher appraised value for expensive landscaping for example. They just take the bump for the landscaping out of the appraised value.

Now, I'm not saying there are not mortgage companies out there actually arbitrarily lowering appraisals for whatever reason but chances are it's that underwriters and lenders are being extremely cautious with appraisals right now.

When the real estate market is strong, you won't see appraisals being cut and everyone is happy. But as the market weakened, they are on the chopping block.

When you get a copy of your appraisal, take a look at the comparables or comps and do a little research of your own. Make sure there are no other comps they are leaving out that actually sold for more than the comps their appraiser picked. You can check out comps on Zillow under their recent sales info. Sites like Zillow are just a resource. They are not an actual appraisal obviously and should just be used for informational purposes.

I know the appraisal looks completely intimidating but read through it. It lists all the information on your home then all that same information on the homes used for comps. Then, you can compare your home to the other comps and see how the appraiser came up with his or her number. Maybe other homes were slightly bigger, on a quieter street, more updated, etc.

Appraisal Fee and Deposit

The appraisal fee can be anywhere from $250 to $750 or maybe more depending on what type of appraisal. A drive by is when the appraiser does not actually go into your home and that is cheaper obviously. The automated underwriting determines if an interior/exterior or just exterior (drive by) appraisal is needed. And a jumbo mortgage appraisal is more expensive than a non jumbo.

An originator asks for a deposit in case you cancel or the loan is not approved for any reason. If the loan doesn't close, the originator uses your deposit to pay the appraiser.

Or, now a days the originator has to pay the lender or the appraisal management company at the time they order your appraisal because of new HVCC rules. So, your originator is out the money right off the bat whereas before the appraiser could wait until the loan closes to get paid.

This is pretty standard operating procedure when getting a mortgage for a refinance or purchase. Many people think they are being taken advantage of when they are asked for a deposit. It is not a scam or fraud to use an appraisal deposit to pay the appraiser for work they performed even if your mortgage did not close. So, asking for a refund after the appraisal was completed won't work.

However, some mortgage companies make money just by taking appraisal deposits and of course that is a scam. They advertise ridiculous rates to get you to call. They take your credit card info and many times the appraisal is not even ordered. They either drag their feet until you leave and find another mortgage company or they send out an application with a rate way higher than you were told on the phone so you move on.

Can you use your appraisal at another mortgage company?

Who owns the appraisal? This becomes a big complaint if you decide to move to another mortgage company.

Giving money to the originator for an appraisal deposit does not mean you are the owner of the appraisal. We get this question often. If you paid for an appraisal, it should be yours no matter what right? Unfortunately, no. Technically, the loan file owns it.

And at the time, the mortgage company is in control of the loan file. The best you can do as the borrower is get a copy of your appraisal. A copy of the appraisal will not work if you move to another mortgage company. To use that appraisal with a new mortgage company, the new appraiser has to contact the old appraiser or old mortgage company.

The old mortgage company must give their permission to release the appraisal to the new company and appraiser. In the case of a Fannie Mae appraisal or Freddie Mac because of the new rule, the appraisal management company must release it to a new management company. Some lenders do not allow transfers under this new rule from certain states but that depends on the lender.

Links on how to file a complaint against an appraiser.

Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, District of Columbia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, North Carolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Texas, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, Wyoming

Good Luck!

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