Here's Why I Don't Trust Home Appraisals -- But Have to Get One Anyway

Home appraisals are supposed to tell you the fair market value of your home. A professional appraiser comes to your property to take a look at its features and condition. The appraiser then looks at comparable properties that sold recently, makes adjustments to the cost based on how your home differs from theirs, and then gives you a valuation. 

Although this process can seem very technical, I do not trust home appraisals at all. But, despite the fact I think the valuation process has serious flaws, I still have to get a home appraisal. Here's why. 

This is the big reason why I don't trust the accuracy of appraisals

There's a very simple reason why I do not think home appraisals are accurate. At various times, I have had to get multiple appraisals within a very short time period. Each time, the appraisals came back with wildly different valuations.

The first time this happened was when I was closing a loan on my new home build. I had a construction loan and needed to get a permanent loan to pay it off. I applied for a loan with a lender my builder had recommended, got an appraisal, and the appraisal was for substantially less than the amount we needed to pay off the construction loan.

I reached out to a different lender, reapplied for a loan just four days later, and they sent out an appraiser who valued the exact same house for over $100,000 more than the first appraiser. They chose different comparable properties in the area -- each of which were equally as valid to compare my house to as the ones the first appraiser chose.

A similar thing happened when I was refinancing my mortgage -- the first appraisal came in for lower than we needed, so we appealed and the valuation increased by more than $100,000. This time, I provided some suggestions on comps for the appeal and the entire appraisal changed overnight even though it was done by the same person.

Ultimately, the process is pretty subjective in terms of what comps to choose and how much to add and subtract for various home features -- and that's why I don't trust it at all. 

Here's why I'm going to be paying for an appraisal despite my distrust 

With my most recent home purchase, I paid for the property out of my savings account and I did not get an appraisal. When I buy my next home, though, I will be getting a mortgage. And, since there is a lender involved, I'm unfortunately going to need to pay for an appraisal this time around.

See, lenders require appraisals because they want to make sure the home is valued highly enough to serve as collateral for the loan. An appraisal is the most objective tool they have to do that, so banks rely on them.

While I may think the valuation process is kind of silly and subjective, it's not up to me -- I have to comply with the bank's requirements in order to get the loan. If you are going through the buying process and working with a mortgage lender, you're likely going to have to do the same. 

Just be prepared for the fact that the appraisal may not really reflect what you think the home is worth -- but you'll still be stuck with the valuation the appraiser provides unless you appeal or switch lenders. It's an annoying part of the home-buying process, but something we all have to live with because the system is just set up that way.