Why did the underwriter dispute our appraisal?

We've been trying to refinance our home for the past 2 months. The mortgage co hired an appraiser and all paperwork was completed. Now we find out that the underwriter does not approve the loan based on the appraisal. Why and how often does this happen? Why would the mortgage company hire an appraiser to perform an appraisal, that ultimately the underwriter would not approve?

It is illegal to appraise for an amount just for a loan. They ahve to do a fair appraisal based on what your house is worth. It sounds like it is not worth the amount of money you want them to give you.

The underwriter has the right to decide whether to approve the loan. There may be many reasons. Home values have declined in the past 2-3 months, and some areas are hit harder than others. The underwriter may have decided that the appraisal is too optimistic or that it needs to be adjusted for recent declines in value. Your area may have a significant number of foreclosures. Lenders have tightened the requirements because so many of them have huge losses from lending to marginal borrowers. The result is that everyone suffers, even the strongest borrowers.

These days, it's very common for the mortgage provider itself, not the mortgage brokerage firm, to select the appraiser of its own choice.

If the broker hired the appraiser, chances are that it won't fly. Too many mortgage lenders have been burned by appraisals which inflated the actual value of the property, and many of these situations happened at the behest of the mortgage broker involved.

There are two key figures in every loan approval. The underwriter and the appraiser. The underwriter has the ultimate control over whether or not an appraisal is accepted or not and in tight financing times it is not at all unusual to have an underwriter cut the value. My suggestion is to have another appraisal done and, go to a different lender, especially if the comps were accurate and the appraisal legit.

It could be any number of reasons:
1] The comparable sales ["comps"] were too old. Usually comps should be within 3 - 6 months of the date of the property being appraised.

2] Sometimes underwriters are not satisfied with the way the initial appraisal was conducted.

3] A second appraisal is ordered by the potential lender and that 2nd appraisal is closer to the price of the property and/or the way that 2nd appraisal was arrived at is more familiar and acceptable to the potential lender.

4] Sometimes appraisals are reviewed by an independent 3rd party - paid for by the potential lender - AND that review brings something to the lender's attention.

5] Any one or more of many, many other reasons.

My suggestion: Contact the lender to determine exactly what it was which caused the lender to reject the appraisal.

Thanks for asking your Q! I enjoyed answering it!

VTY,
Ron Berue
Yes, that is my real last name!