Top 5 Misperceptions About Real Estate Appraisers

Top 5 Misperceptions About Real Estate Appraisers

misperceptions about real estate appraisersDuring my day to day interactions with home owners, real estate agents, and mortgage professionals I have found that many people have misperceptions about real estate appraisers that I would like to clear up. One of my goals when starting this blog was to increase the knowledge among everyone regarding what appraisers do and why they do it. Many of the questions I get (as well as my appraiser colleagues) could be avoided if we did a better job of explaining our profession to laymen, so let’s take a look at some of these misperceptions and try to clear them up.

There’s no magic “formula”

I get questions from people asking  me what homes are appraising for “per square foot”. While the price per square foot is an important metric that appraisers look at, and one of the reasons we measure a home during the appraisal inspection, it is not the be all and end all of estimating value. I’ve written in the past about why price per square foot is not a good indicator of market value so I will not go into detail here except to say that the price per square foot will vary because of a lot of different factors so it is not possible to quote a number and be able to get an accurate estimate of value. In addition there is no “formula” that appraisers use when comparing market value with assessed value. Some people incorrectly assume that market value is a certain percentage of what the county assessor has your home valued at but this is not the case. Every property is different and must be analyzed based on its unique characteristics within the market area that it is located in.

Appraisers like to “kill deals”

Really? If you knew how much pain it is to respond to lender and buyer/owner requests to take a second look at an appraisal or review some additional comps to see if we can increase the value you would think twice before making this type of statement. To start with I would like to say that appraisers don’t “make value”, rather we measure value by looking at what the market is paying for other similar properties and then comparing it to what we are appraising while taking into account variations between the two. We are in a position to assist the lender or client to make sure that the collateral they are taking for the loan is worth the money that they are loaning to the buyer. They want to know that if they had to foreclose on the home that they could sell it and pay off the balance of the loan without losing money. If a home does not appraise for the contract amount it is not because we intentionally set out to do this, it is because the contract price is too high when compared to other recently closed homes and active listings which is typically the best measure of the market value of a property.

Appraisers “own” the appraisal report

I got a call this week from a home owner who wanted a copy of their appraisal report that I had done on their home for a refinance. I had to explain to them that they would need to get a copy from the bank that hired me because the bank owned the report and I could not provide it to them. The appraiser does not own the appraisal report but the person or company that hired the appraiser does. This really doesn’t matter too much when an individual hires me, and I can provide them with a copy of course, but when the bank hires me the owner must go through them to get a copy. This is a common question that comes up quite often so I thought it would be helpful to include it within this post. If you would like to read more about this check out my previous blog post.

Appraisers only do appraisals for purchases or refinances

It is true that a large part of work that appraisers do is for lenders during a home purchase or refinance,  however this is not the only type of appraisal that we do. There are many occasions that call for the market value of real estate and which an appraiser can assist in. Some of the most common reasons for getting an appraisal include estate planning, divorce settlement, PMI removal (although in recent years this has not occurred due to the drop in real estate values), court litigation, and pre-listing appraisals for determining the market value of your home before selling. You can read more about these types of appraisals in an earlier blog post I wrote about non-traditional assignments. Is is a good idea to ask the appraiser if they have experience in doing the the type of appraisal that you need.

Appraisers are perfect and will not take calls or listen to you

I’m being a little sarcastic here but I also want to get the point across that we are human and we can make mistakes but just because we don’t appraise your home for what you think it is worth does not mean we don’t know how to do our job. The appraiser is typically the only unbiased party in a real estate transaction which is good because it allows us to provide a more accurate estimate of value because we have no emotional ties.

With that being said it is  possible that we did not have all the information available to us about your home or possibly looked over a sale that recently occurred, which could have an impact on the value. I always encourage home owners and real estate agents to provide a complete list of any repairs, remodeling, or updates that a home has had because these things are taken into consideration during the appraisal and it is better to have the information up front than provide it afterwards when the value was not what you wanted it to be. Also, if you are aware of any recent sales that would compare well with your home let us know about it. We cannot promise that we will be able to use it but at least it will be considered. I am always open to communication and it is better to have great communication up front rather than at the end. I am always willing to answer questions on the phone when agents or owners have them because I’m all about education. I may not be able to change the appraisal but I can help you understand it better.

Question

Are there any other misperceptions you can think of that I did not cover? Feel free to leave a message below and let me hear your thoughts.

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Comments

  1. Well said, Tom. I like your point on perfection. Many people think appraisers are expert data wizards in that they make perfect adjustments and arrive at the perfect value all the time. They think this of course until they get a deeper understanding of the appraisal process and more experience in real estate. Eventually they realize there is no such thing as a perfect appraisal, but there is such a thing as a reasonable and supported value. They also realize there is a quality spectrum among appraisers (just as is true in any industry). With that being said, appraisers have a very complicated job to interpret the market, and in the midst of that, mistakes do happen.

    • Right on Ryan. We are not perfect and if we do make a factual mistake (measurement, forget to mention a feature, etc) we can correct the report. There is no need to report appraisers to the state for honest mistakes.

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