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Do I have recourse when a lowball appraisal with serious errors/omissions affects refinancing?

The appraiser either didn't know the area (he's from out of town) or was angling for a certain value. He used three comparable sales: the #1 was a home adjacent to a seedy trailer park, while my home is in one of the most desirable, stable neighborhoods in the region. The other two homes were significantly smaller with serious condition issues, and neither had a two car attached garage as my home does. (One home was 600 square feet smaller and built 30 years earlier. The real estate agent who sold it wrote a letter saying it wasn't a comparable home. The other home was also much smaller and had only a carport and difficult access to the rundown home in an inferior neighborhood.) There were closer comps within the same area that the appraiser ignored. None of these problems was mentioned or adjusted for in the appraisal. The appraiser did not inspect the properties. I found out about the trailer park by Googling the address. I have sent the credit union a satellite photo showing the trailer park next to the house, and a statement that the agent who sold the home is willing to speak to the appraiser since most interested buyers walked away when they saw the trailer park. I have sent them comparable sales suggested by two experienced local real estate agents representing the two major firms in the area. I sent them a list of all sales in my neighborhood for the past three years - there is absolutely no data from the neighborhood to support the appraisal amount. These comparables are all so inferior to my home and neighborhood, we wouldn't even have looked at them when we were househunting, and believe me, we looked at a range of stuff for years. Do I have a right to demand another appraisal with a local company? It's very suspicious that the loan amount now being offered would require us to give the credit union virtually all of our savings in the credit union to make up for the lower refinance limit. We're not looking for favoritism, just a fair appraisal from a knowledgeable firm. I should probably also have mentioned that we locked in such a low rate, going to another bank is out of the question. Also, the comps we provided from the realtors were from the last 90 days. I should have mentioned that there are no sales and no homes on the market in my neighborhood in the last 90 days, homes rarely go on the market in my neighborhood. Any reasonable person can see the realtors' comps are more comparable to my home, and they are in a totally different price tier from the appraisal (and more in line with sales data from the last three years in my neighborhood, which is why I brought that up). I guess I really want to know if I can demand a second appraisal (versus just asking for one), and if as a last resort I have any causes of action against the appraiser if I lose my financing because of their errors and omissions. One more detail: I don't have an upside-down mortgage. If the real estate agents are right, I have almost 40% equity in my home even in this market. Even if the appraisers had made a "reasonable" low-ball estimate, I would still have more than 30% equity. I need to refinance because I have an interest-only loan and am getting a lower-rate 30-year-fixed for almost the same payments.

Public Comments

1. It really comes down to the bank. Most banks will only accept appraisals from the their own affiliated agencies. You're just going to have to try again and pay for the appraisal again. You really shouldn't have to give anyone money now to refinance with the new law going through May14th. "credit worthy" people are supposed to be able to refinance their up-side-down mortgages.
2. When I first read the title of your post, I figured that you were one of these people that didn't know how appraisals worked, which is frequently the case on Y!A...however, you are correct in your rationale. Out-of-town appraisers present a major problem, because they don't know the area, they pull comps that are not true comparables...things like trailer parks, railroad tracks, homes without garages, or that is more than 10% smaller or larger than the subject, should be avoided...ALWAYS if there are other comps available. A home that is 30 years older than the subject should NEVER be used as a comp. Frankly, I would be shocked that the underwriter would accept such an appraisal. I never would have. An appraiser doesn't have to inspect the interior of the comps..in fact, he can't. However, he is required under ethics to physically go out to the comps and take a NEW picture..not pull it off of MLS or property tax records. I used to see pictures with snow in the front yard when it was June. That is part of what you are paying for. Have your Realtor pull comps and SEND them in...NOT to the appraiser (b/c he doesn't work for you, he works for the bank), send them in and demand your loan officer send them to the underwriter. Tell your loan officer that the appraisal was bogus and that you want the bank to send out someone that is local...that is a reasonable request and the source of your problem. If the second appraisal comes back higher, then you'll know the first one did a bad job. Yes, you do have the right to demand another appraisal, but at your expense, however, I would make it clear you are going to go with another bank if they don't.
3. Try another paying for another appraisal, but in this current market the lender approved appraisers are being very conservative in assessing home values, esp. if you are in an area with many foreclosures etc But as toward going to another bank to refinance, you would have to pay for another appraisal to wit it would be very unlikely the third appraisal would be sufficiently higher then the average of the last two Side note: In this current market, sales data from three years ago or even two years ago is not relevant to the lenders
4. Your only option is to go to a different bank.
5. You can always ASK for another appraisal (at your own expense, of course), but there IS one factor you did not mention and may have overlooked with your critique of the current appraisal. The lender's underwriter may well have demanded that provided sold comparables be no more that ninety, or even sixty, days in age. That would negate your efforts in sending all those comparables for the last three years. The real estate market these days changes rapidly, which is the reason for insisting on very recent sold comparables. Those used comparables may be the only issues which met that date requirement. Of course, the appraiser should have also adjusted upwards (as well as downwards) for features and conditions which are not equal to your property. You might inquire of the appraiser involved to determine why he selected the comparables which he did.
6. Talk to your lender and contest the appraisal. They might have another company do the appraisal. I had a similar experience in 2005. A out of town appraiser compared my home to mobile homes! I called my credit union contested the appraisal since my house was compared to trailers.Then the credit union had a local appraiser redo. Big differrence in results to my benefit. Call your lender.