Post-housing crisis reforms meant to protect consumers have swamped them with more complexity and hard work. Michelle L. Campbell, a real estate paralegal who works for a title company, was better qualified for the challenge than most, yet she and her husband missed their chance to refinance at a lower interest rate. And home buyers trying to grab low rates as home prices rise may also fail when closings drag on. But financial advisors familiar with the labyrinth of mortgage financing today can help clients while building lasting relationships.

The Campbells waited out the housing crisis until they thought prices had bottomed before buying their ranch house in Eatontown, N.J., in 2008. Nearly five years later they decided to grab a lower interest rate and reduce their monthly payment.

Before seeking a lender, Campbell calculated her home’s market value by compiling her own list of sold comparable properties—two from July and two from November 2012 in the $330,000 area. She needed her property to be appraised at between $326,000 and $328,000. A realtor colleague also checked the MLS (Multiple Listing Service) every month for new comps in her area. Yet when the Campbells applied for refinancing last December, hoping to swap their rate of 4.75% for 3.25%, the appraisal came in $70,000 under their existing mortgage. They were effectively “under water.”

“I don’t understand how we could essentially lose $70,000 in value in less than five years,” says Campbell, who considered challenging the appraisal. There was a lack of comparable sales that winter due to the devastation of Superstorm Sandy in the fall. Campbell found upon reviewing the appraisal that the examples the appraiser had used were mostly distressed properties. As the Campbells tried to find sales closer to their perceived value for their well-maintained home, interest rates started rising, in inverse proportion to their hopes of lowering their payments.

“I submitted my refi application in January 2013,” she says. “My appraisal was done mid-February and I finally gave up on my refinance by early May.” The $70,000 gap, she adds, seemed too large to argue down as time was rushing by. “I think appraisal reports are typically good up to 120 days, but it depends on your lender.” This underscores an important distinction: Unlike most services we pay for, appraisers aren’t beholden to the borrower.
Their client is the lender. But the borrower needn’t be passive.

Borrowers should find out as much as possible about the appraiser before and during the home visit, says Molly Leatherwood, a central Oklahoma-based appraiser and the current president of the National Association of Independent Fee Appraisers (NAIFA). They can question the appraiser’s qualifications, which should include a license or certification, and possibly a designated appraiser title, which ensures more proficiency to go beyond the minimum required, she says.

Competitive pressures on banks to get appraisals “quicker and cheaper,” have been known to erode the quality of the work. “Scope creep” has occurred, according to Ken Chitester, director of communications for the Chicago-based Appraisal Institute. “The work required has expanded,” says Chitester, while payment has stayed the same.

Since the housing crisis, lenders are asking applicants as well for more and more documentation (even duplications of previous requests), in their efforts to ensure that they or private investors have adequate data to assess the risks they’re accepting and will be sufficiently compensated for them. Once a rate is struck, by estimating repayment and rate risks, lenders are eager to complete the transaction. This hurry-up-and-wait pace further exasperates borrowers.

Regulators’ desires to keep lenders from influencing appraisals makes it difficult for families to question finished appraisals. Once owners close the door, appraisers can’t speak directly to them. Neither can the lender’s loan officer. This gets misinterpreted by some to mean neither borrowers nor lenders can question appraisals. But questions, such as why wasn’t the house on Maple Street. included in the comps, can legally be fed through the loan processing department to the appraisal company.

In the hyper-local nature of housing markets, residents can be the best judges of early changes. “I don’t believe the available comps represented the fair market value,” says Campbell. “Home prices were on the rise, in my opinion.” And Campbell was proved correct by the data published just two months after she gave up. Across the country, housing prices rose 12.2%, year to date, over May 2012, an increase not seen since 2006, according to July’s S&P/Case-Shiller report.

In retrospect, perhaps Campbell should’ve pursued her instincts, but it wouldn’t have been without risks. Borrowers can request another appraisal or order their own for another $300 to $400 plus. But there’s no guarantee the bank will accept it. Most lenders are loath to vouch for another lender’s appraisal. Despite national and state standards required of all appraisers and no rules prohibiting lenders from reusing them, appraisals are rarely portable.

In fighting their present lender’s valuation, borrowers like the Campbells may miss the rate that made refinancing feasible, as they did this spring when rates shot from under 3% to 4.5%. If they’ve locked in a rate, which can be a full percent or more of the total loan, it can expire before the closing. Some lenders will extend a lock-in if delays aren’t caused by the borrower. But lenders aren’t mandated to charge at all, according to the Mortgage Bankers Association. So it’s worth asking the lender if it will hold the rate. However, unlike Wall Street pros who hedge their upside and downside risks, borrowers are locked in to that rate for better or worse. They won’t save if mortgage rates slide back, as they did last spring.

Adding intermediaries has increased complexity. To further distance lenders from appraisers, regulators, post-2009, have encouraged—but not required—lenders to use appraisal management companies (AMCs), middlemen through whom lenders hire appraisers. But the quality of AMCs varies. Some are better at screening appraisers than others, says David Berenbaum, chief program officer for the Washington, D.C.-based National Community Reinvestment Coalition (NCRC). To accommodate orders, some AMCs hire from an expanding radius. Berenbaum advises, “When selling a home, people should make sure the appraiser is from the area and familiar with the neighborhood.”