As a real estate investor, it is commonplace to have to deal with appraisals. If you sell a property to a buyer who is financing the purchase, their bank will require an appraisal to make sure the asset backing their loan is of sufficient value. If the property being purchased appraises below the purchase price, the bank will base their loan on the appraised value, not the purchase price. Appraisals can be used to your advantage as well. They can be used to dispute the tax base or, in a good market, to refinance your property to better terms or to take cash out of your equity in the property.

If you are selling or refinancing a property and the appraisal comes back below what it should, all is not lost. Appraisers can make mistakes that can ruin a sale or not allow you to take out as much cash as you should be able to. If you know your market and can construct a valid appeal, the bank and appraiser can review and change their initial valuation.

To illustrate, I’ll take you through a personal experience I had with an appraisal on my 3-family property that came back low during a refinance.

As a realtor and investor, I keep a close eye on my local markets. A 3-family that I purchased in Fairfield County in 2017 initially appraised $20,000 over the purchase price, but I noticed that similar properties were selling for quite a bit more into 2019. I decided to explore my refinancing options but needed to get an appraisal done for my bank as proof prices had gone up.

When I got the appraisal back, it came in at a value of $40,000 over my initial purchase price. That sounds great considering I owned the property for less than two years, but I disagreed with the valuation based on what I was seeing in the market. I decided to appeal the appraisal.

An appraiser values a property of four units or less using a weighted average of three different methods. The first method is the Income Approach. Using this method, they value a property based on the current rental income it generates. The value is determined based on the sale price of similar properties that generate similar income.

The second method and most heavily weighted for properties with four units or less is the Sales Approach. This method compares the subject property to other properties that have recently sold that are similar in size, location, and condition.

The third approach used is the Cost Approach. This method values a property based on the cost of building a similar structure. It is typically the least reliable and thus least weighted approach for older properties.

My appeal was to the variables used in the income and sales approach in determining the value of my property. The exact appeal that I submitted to the appraiser is below:

Income Approach

  1. Market rent for 1-bedroom, 1-bath in Shelton in the current condition is between $900 and $1,100. However, for the Appraised Property, $800 was used.
  2. Currently, garages rent for $100 each ($300/month in total). This was not factored in the income approach.

Sales Approach

Property Conditions

  1. Appraised Property had very similar improvements to those made to Comp 1 in 2015 including a new roof, 3 new hot water heaters, 3 new gas burners, 3 updated kitchens, and 4 updated bathrooms. Comp 1 also has aging siding, so nothing about exterior condition should be deducted from the appraised value.
  2. Unfortunately, the other two comps used in the sales approach had very few pictures in the listings. As a licensed real estate agent, I went and looked at both Comp 2 and Comp 3 when they were on the market. They had many issues, including aging burners and hot water heaters, aging flooring throughout, aging appliances, and aging cabinetry in kitchens and bathrooms. A substantial renovation would be needed to bring to Appraised Property’s current condition.
  3. The condition of Appraised Property is far closer to that of the condition of Comp 1. The $40,000 deduction should be reduced, and there should be an adjustment made to factor the dilapidated conditions of Comp 2 and Comp 3 when comparing to the Appraised Property.

Square Feet

I am hesitant to believe that Comp 2 is 3,546 square feet, only 100 less than the four-family Comp 3. The listing agent may have combined both living area and basement area in that assumption (as she did on Comp 3 – she was the same agent). This might be worth taking a second look at.


A $5,000 adjustment for a 3-car garage and off-street parking where no comps have a garage or off-street parking seems low. I would imagine due to the low supply of off-street parking for multi-families in the area, having a 3-car garage and driveway with additional space should add more value.

After the appeal, the appraisal came back with an additional $20,000 in value ($60,000 above purchase price). Although I still thought a higher valuation could be justified, I was satisfied with the result. This goes to show, if an appraisal comes in low, all is not lost. It can be successfully appealed when valid justifications are provided.

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