Appraisals continue to be a potential issue with every contract. It doesn’t need to be this way.
Of course, there will always be situations where a genuine value challenges exists. But for the most part, better preparation by agents can alleviate the majority of problems.
A key component of that preparation is an understanding of what an appraiser does and how they operate. This can quash issues before they arise.
Appraisers have no interest in “killing a deal.” They get paid to complete reports. Appeals or contested reports waste everyone’s time, and no appraiser goes out looking to waste time.
Agents would do well to understand that the appraiser is not their enemy, but simply one of the many people involved in the sale. Appraisers report the market — they don’t create it.
The agent-appraiser relationship can be contentious, mainly due to a lack of understanding. Appraisers have little idea of how much time can be invested with a client, and agents have little understanding of the requirements appraisers work under.
Agents can be a huge asset by providing comps an appraiser can use. Learn what is required. Don’t just toss data that’s largely useless at an appraiser and say, “Here you go!” Opinions are good, appropriate data that supports them is great.
It’s important to note that appraisals are a “look back.” While consideration is given to active and pending comps, closed sales are given most support.
Areas where the market is very fluid and on the rise presents a challenge for all. Remember that underwriters hold the reins with appraisals.
Most appraisals are written for underwriters. Requirements are clearly stated, and appraisals that don’t comply are sent back for edification. Despite the fluid housing market over the last few years, underwriting is still rather stiff with regard to adjustment percentages, closing date, distance and other parameters.
The real estate crash was especially hard on the appraisal industry. Management companies drove many experienced appraisers out, and those who remain must increase volume to earn what they did before the crash.
There are less-than-perfect appraisers out there just as there are less-than-perfect agents. The wise agent makes it easy for the appraiser to see what they see. Here are key points to consider:
- Understand the appraiser’s role, requirements and what underwriters expect. If nothing else, understand what they are required to look for when considering comparable data for the report.
- Meet the agent at the listing if possible. Agents can talk with an appraiser, but they cannot exert undue influence. Give the agent an info packet on the area, home and the contract, and include appropriate comps that might be considered. Leave a packet of info if you don’t meet them.
- No discussion should last more than five to 10 minutes. Everything you touch on should be in the packet you give them. Do not sell the appraiser — just point out things that might not be obvious. Be certain to leave your contact info and respond as/if needed.
- Don’t try to exert any type of authority or expertise. The appraiser could care less if you are a “top agent.” They are there to complete the appraisal. Be a peer and be helpful, then leave. The data speaks louder and more effectively than anything said.
There is no agent-appraiser nirvana. Real estate by its very nature operates in an environment of distinctiveness and unpredictability.
But agents and appraisers should recognize they have a common objective: to complete a transaction that satisfies the client and the lender. An antagonistic approach based upon preconceived notions benefits no one.
Not every deal will end up working. The data obviously has to be there, but it’s far better to try with a unified front than to grasp at straws. Something about flies and honey comes to mind.
Hank Miller is an associate broker and certified appraiser in Atlanta, Ga. The lead agent for HMT Atlanta, he’s known for his candid opinions and real estate expertise.
