Magazine article Mortgage Banking

Appraisal Disputes: Finding the Best Resolution

Magazine article Mortgage Banking

Appraisal Disputes: Finding the Best Resolution

Article excerpt

AS A RESULT OF THE HOUSING CRISIS, one of the regulators' many areas of focus was the appraisal process--primarily, legislation aimed to create lines of separation between lenders and appraisers to avoid the vulnerabilities previously plaguing the industry. While this step was a vital one, lenders are now working through the best way to uphold compliance and at the same time, if they feel an appraisal is inaccurate or misleading, dispute it.

The option to initiate an appraisal dispute at times places lenders in a quandary, asking themselves: Do we argue a value we think is inaccurate and risk creating roadblocks for the entire transaction?

If lenders fully understand the dispute process and have prescribed, internal guidelines for managing these situations, they will be better equipped to confidently make this decision when the question arises. Lenders should create reliable workflows for disputes and rebuttals and identify the resources available to ensure that they can achieve successful, fast resolutions.

Why dispute?

In recent years lenders have primarily attributed cancelled transactions to low value appraisals. However, to prevent a home sale from falling apart at the seams, more lenders are giving thought to how they can execute appraisal disputes effectively and successfully.

Lenders that disagree with the comparable used, feel the appraiser's adjustments are inaccurate or measured a different square footage are now more commonly asking for a second look.

Additionally, lenders that identify additional market information or details about the property's physical condition that were not accounted for in the initial report are more commonly asking for a reconsideration.

Know your options and the laws

From an operations standpoint, lenders' goal is to achieve a desired result from a dispute without hindering the loan or creating significant delays. Doing so requires them to account for two primary factors: the regulations per the Dodd-Frank Wall Street Reform and Consumer Protection Act and appraisal independent requirements (AIR), and their own internal procedures. To remain compliant with AIR, submitted value disputes should be void of any terms or statements that could be misconstrued as applying pressure to the appraiser or leading the appraiser in any way.

It is important for lenders to present the facts and be mindful that the appraiser, by profession, is an impartial party. Even when initiating a dispute, lenders should have the perspective that an appraiser's aim is to complete the best appraisal possible and have it accepted--he or she is not intentionally obstructing the loan.

When it comes to disputes, the origination process in general can be highly charged and emotional; lenders are working to protect their businesses and more importantly, the borrower is making one of life's most important financial decisions.

As lenders increasingly consider appraisal disputes and work to institute an ideal process for their organizations, it is helpful to keep in mind a few do's and don'ts:


* Present the facts. Share details that explain why you believe a value is inaccurate, and provide sales that you feel would have been stronger in the initial appraisal report. If sales used were in a different neighborhood or had unusual sales terms, identify and disclose this information.

* Provide applicable sales and request that that appraiser consider this data. …

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