Record-low interest rates are a boon for home buyers and for homeowners seeking to refinance.  But low appraisals are making it difficult or even impossible for some borrowers to take advantage.Making sense of the story

• Lenders report that “overly pessimistic appraisals caused by appraisers using distressed sales as ‘comparables’ are a key reason why deals are falling through.

• Part of the problem is that home prices have plummeted further than many people would like to believe.

• Another key factor is the appraisal changes enacted in the wake of the financial crisis that were designed to eliminate improper pressure on appraisers that often led to inflated valuations during the housing boom.  However, critics say those changes resulted in unnecessarily conservative valuations and the greater use of appraisers with little knowledge of local market conditions.

• Additionally, accurate valuations can be difficult to come by when sales are thin and prices are just beginning to edge upward after prolonged declines.  Many borrowers are “in a holding pattern for extended periods” because it’s difficult to find comparable sales to support the appraisal value.

• Despite these issues, there are ways consumers can improve their odds of getting a deal done.  For example, borrowers can look at comparable sales from the last three to six months before seeking a mortgage to know the range of home values in the area.

• Secondly, although borrowers cannot choose their appraiser, they can accompany the appraiser during the inspection, pointing out improvements that add to the home’s value.  They also can provide the appraiser with comparable sales that can be used to support the valuation.

• Borrowers also can request that the lender review the appraiser’s findings, though the chances of success are slim.  If the borrow thinks the value is unreasonably low, they should first look for factual errors, such as an erroneous number of bedrooms or miscalculated square footage.

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