Why can’t the appraiser call me when the value is not working out?

communicating with appraiserHave you ever asked yourself “Why can’t the appraiser call me when the value is not working out?”. If you have then you’re probably a real estate agent that was concerned that a home may not appraise for the contract amount. In today’s highly regulated and monitored market the appraiser is very limited in what they can and cannot say to all parties to the appraisal transaction.

Because appraisers interact with real estate agents a large percentage of the time I thought I would focus on what communication is allowed between the two. The main concern is that the appraiser will not be influenced with undo pressure to reach a certain number during the appraisal process. If the appraiser makes contact with the agent after the appraisal is finished then the major reason is to discuss value, or lack of it, and that can be a problem. If there is a problem with the value after the appraisal is completed then the best course of action is for the agent to communicate with the loan officer, who can then pass along any additional sales or relevant information that the appraiser did not have previously.

The best course of action is for the agent to be proactive during the appraisal process and communicate with the property information packetappraiser prior to the appraisal being completed. The best time to do this is during the appraisal inspection, where the agent can personally meet the appraiser and provide him/her with all the relevant information that the agent used when pricing the home. I know that agents are very busy, and that many appraisers use electronic keys to gain access to the house, so if it is not possible to meet the appraiser that is o.k., however I would suggest that real estate agents still make contact by email or other means and provide all the information they can to them, as well as be available to the appraiser while they are completing the assignment in case they have any questions. One way to do this is to have an information packet that can include information such as a list of recent improvements that have been made to the home. It would be a good idea to go back as far as 10 years if you have the records because appraisers are required to make note of any updates or remodeling that has occurred so this will assist them with that information. In addition, these improvements help to reduce the subjects effective age which can help boost the value of the home.

Including information about neighborhood features or amenities that can potentially add value to the property is also a good idea. This may include things such as membership in a club, use of a lake or golf course, or something else that adds value to the home. If an appraiser uses comps from within the subdivision then the value of these amenities will already be reflected in the sales prices, however if they have to go outside of the neighborhood to get comps, and the neighborhood of these sales do not have similar features, then adjustments must be made to the sales to reflect this. This information is especially helpful to the appraiser if the subject property is selling higher that many of the other homes and the list price was set to reflect the positive features. A good point to remember though is that this value must be measurable through other sales comparables in order for the appraiser to account for it in the appraisal.

The last thing that you should include in your information packet is a list of the sales that you used in arriving at your list price. The appraiser may already have access to these sales but it is a good idea that you make him/her aware of them. The appraiser will need to review each sale to make sure that they are truly comparable to the subject and meet underwriting guidelines that are imposed by the lender. Knowing what types of sales an appraiser can use and how they choose their comps can go a long way in helping the real estate agent come up with the sales that they base their list price on. By using sales based on criteria that the appraiser uses there is less likelihood that there will be value issues.

By being proactive during the appraisal phase of the sales transaction the agent can provide all the information they used to arrive at their list price upfront so that the appraiser can utilize it when completing the assignment. What are your thoughts? Leave me a message below if you have any comments or questions.

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Comments

  1. we are selling my mothers house and are getting a 70,000 spread between one agent and another but still not the price we are asking.when we try and do comparables with houses that are selling nearby ,they dont have the items we do and are not updated or have a view of the lake nearby or the basement levels we do,so we never really get an answer just thats the price we got

    • So it sounds like the agents are trying to set a list price? Has an appraisal been done? If not you may want to get a professional appraiser’s take on the situation.

  2. Bill Baughn says:

    The value is working out. It’s just not the value you were wishing for…LOL

  3. Tom, I think you are so right about the importance of agents being proactive about working with appraisers. Too many times there is good information to share, but it’s sort of lost in the haystack of the transaction. The appraisal is one of the most important parts of a mortgage finance transaction, so it’s important to really seize all opportunities to help communication flow (without pressuring to “hit the number” of course). Nice job.

    • Agreed Ryan. I think a lot of agents have been confused lately about the correct protocol for communication, however I am working on educating those in my area and have gotten positive feedback as they believe that having an “info pack” is a good idea.

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