It seems there is still some confusion about what real estate agents and real estate appraisers can talk about. Many believe that there can be no discussion between the two and others still have no idea that it is unethical to suggest to an appraiser that a home should appraise for a certain amount. The idea behind the rules regarding communication revolved around the desire for appraisers to be able to perform independent and impartial appraisals on real estate being held for mortgage lending purposes. I hope this discussion will put your mind to rest about exactly what is allowed and what is not. Lets take a look at some of the top concerns among agents and appraisers.
Real estate agents CAN provide appraisers with comparable sales information- I’ve written about agents providing appraisers with comps before and feel like this is just as confusing for appraisers as it is for agents. Some appraisers do not want to accept comparable sales from the agent because they believe the agent might be directing them in a certain direction of value. This is a valid concern because I myself have been provided sales that were just that, sales, and they would not be considered comparable. So my advice to agents is to provide the best comparables to the appraiser using comp selection techniques that appraisers use. Appraisers should be open to accepting sales comparables provided by the agent if that agent has put in the necessary effort to find true comps. No appraiser is perfect and it is sometimes easy to overlook sales, but the likelihood of this occurring can be reduced by considering sales provided by the agent.
Real estate agents CAN provide data about home improvements, neighborhood amenities, and any other positive factors- If updates or renovations have been made to a home this information should be passed along to the appraiser. I always encourage homeowners and real estate agents to give me a copy of any improvements made to the home over the past 15 years so that this can be factored into the appraisal. Appraisers are required to report any improvements to bathrooms or kitchens done within the past 15 years. Major renovations can reduce the effective age of the home and help the properties value. Sometimes a feature of a home may not be readily visible and the appraiser can miss it. Features such as computer networks, hidden bonus rooms, and top of the line building materials can affect value but not always, just remember that cost does not equal value. With that being said the features still need to be noted and accounted for.
In addition to work done on the house it is also important to know if there are any amenities unique to the neighborhood that may contribute to value. This is important to consider when using sales outside of the subdivision because adjustments may need to be made to these outside sales to reflect the value of the amenity on the sold price. Some neighborhoods in the Birmingham, Alabama area are in locations that bring a premium because they are located within walking distance to a school. If the agent knows that such a feature brings a higher value, because they have seen it in other closed sales, this information should be shared with the appraiser.
Real estate agents CANNOT suggest that a home appraise for a certain amount- Real estate agents cannot make comments such as “There are plenty of sales to support the contract price so the appraisal shouldn’t be a problem”, or “let me know if the home doesn’t appraise so I can give you comps to support the contract”. Agents should never suggest to the appraiser that the sales they provide are the “best” comps because that is for the appraiser to determine and this comment could lead the appraiser to believe that the agent is leading the appraiser to appraise the home at the amount of the sales contract provided.
Real estate agents CANNOT talk with an appraiser after the appraisal has come in low- If a home happens to appraise lower than the contract amount the agent should not call the appraiser to discuss it. The proper protocol would be to contact the lender and discuss it with them. If you feel the appraiser did not do a good job then provide your reasons in writing and if you have additional information to support your point then include it. By putting your concerns in writing you are better able to communicate your thoughts and you can provide additional sales if available that you want the appraiser to consider. If for some reason you were not able to provide the appraiser with sales that you may have used in the market analysis when pricing the home then now would be a good time to do that, especially if the sales you have were not used in the appraisal. Just remember that the appraiser is a person too and they do not set out to kill deals, no one is perfect. This is why it is a good idea to provide this information up front, if you have sales you used to price the home by all means give the information to them before the appraisal is completed.
I hope this has cleared the air for you. The main concern is to not influence the appraiser, so if you have a question about anything else to do with this please leave a message or email me.