Why your loan may be denied
I recently corresponded with a consumer who had suffered a late-stage rejection based on an appraisal that placed heavy weight on the recent sale of an almost-identical house across the street at a very low price.
That transaction, however, was within a family and involved a "gift of equity" where the buyer sold for a price well below true value with the difference comprising a gift. The consumer knew this, but the appraiser did not.
On my suggestion, she provided evidence of the gift of equity to the lender who had rejected her application. The lender ordered a new appraisal, on the basis of which the loan went through.
Another possible basis for an appeal is where the appraiser is not located within the area and may not know the local market. The appraisal report, which you have a right to receive, will show the company and the appraiser's address.
Don't waste time trying to educate the appraiser; he is already thinking about his next assignment. Your recourse is to the lender. Lenders don't like to reject loans because it means forgoing a profit they otherwise would make, so they are receptive to facts that undermine the credibility of the appraisal that forced them to reject the loan. But tears won't do it, just facts.
The writer is professor of finance emeritus at the Wharton School of the University of Pennsylvania. Comments and questions can be left at www.mtgprofessor.com.
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