6 Appraisal tips for agents in the new year

Appraisal tips for agents

Agent Appraisal tips Wow! It’s a new year and time to make things happen. If you’re an agent and want the low-down on how to make the appraisal process smoother on all of your sales then this post is for you. Today I’m going to give you some appraisal tips that will hopefully make your job easier. Grab a cup of coffee and let’s get started.

1) Make sure your square footage is accurate- I know I probably sound like a broken record (what the heck is a record, right?) but one of my biggest pet peeves is inaccurate square footage shown in an MLS listing. You may wonder what the big deal is if the MLS listing does not have accurate square footage.

It’s important for the listing to have accurate square footage for several reasons. The first is to provide reliable and accurate information to the buyer who needs to know if the house will be big enough to accommodate their family and belongings.

It would be unprofessional to tell a buyer that a home has 2,500 square feet if in reality it only has 2,000 square feet. Inaccurate information could result in the buyer not being able to utilize the home as efficiently as they had hoped in addition to them paying more for the home than it is worth because it’s not as big as they thought.

A second reason for making sure that the square footage is correct would be so that sales statistics are accurate. One of the most frequent questions I get is “what are homes in so and so neighborhood selling for per square foot?”

For the most part price per square foot is not the best way to gauge the value of a home, however, in some instances, it can be depending on the house. Having accurate square footage and price per square foot statistics can help the agent to communicate a pricing strategy to potential sellers.

If they want to sell their home at a price that translates into a price per square foot of $150 but all the homes in the area are selling for between $100-$125 then this would be a good visual to show them to let them know they are pricing their home out of the market. The price per square foot statistic does not mean as much when the information it is based on, which is accurate square footage, is incorrect.

2) If the list price can’t be supported by the market, don’t blame the appraiser- Appraisers have been blamed a lot for “killing” deals when in reality the deal was never alive. It’s important to remember that appraisers provide their opinion of market value by comparing the property to what others have recently sold for and are currently listed at.

In the same way, agents should price their listings based on the same type of information. If agents use the same methods to price homes as appraisers do in their appraisals the likelihood of deals falling through is diminished.

It’s also important to make sure you choose the most similar sales available to compare with your listing. You don’t want to use only the highest priced homes in the neighborhood because that will not provide the most accurate estimate of value. The best way to choose comps is by using the most recent sales that are the most similar physically to yours, taking into consideration age and condition. You should never price a  home by using an arbitrary value to choose your comps.

3) Don’t wait until there’s a problem to have conversations with the appraiser- If I were to pick the most important appraisal tip listed here I would say this is the most important one. As in most things, communication is key during an appraisal assignment. Rather than going incognito when the appraiser is setting up the appointment, and during the inspection phase, it would be ideal to communicate with them to iron out any confusion or to provide them with valuable information that could help them in the assignment.

Don’t avoid the appraiser, meet them at the inspection if at all possible. Some of the best information I get is when the agent meets me at the house to point out items of interest. Since most appraisal inspections can get lengthy on larger homes it is not necessary to stay for the entire time. You could meet with them, provide them any sellers packet you may have, and show them features of the house that may not be readily apparent. You can leave after this and let them carry on with their job.

If there is anything about the house that you factored into the pricing this is a good time to let them know. Recent renovations can have a significant impact on pricing however, you should keep in mind that remodeling costs do not always contribute on a dollar for dollar basis, contrary to what most home renovation TV shows suggest.

Providing sales information that you used to price the home is a good way to explain to the appraiser how you came up with the price you did. Some appraisers may be more willing to accept this information than others and if you present them the information in a nonbiased way it will help.

It is not always necessary to meet in person, and these items that you put together for the appraiser can be emailed. The important thing is to have the initial conversation and any follow-up questions that they may have.

4) Don’t be cheap by not ordering an appraisal when you don’t know the value- There are some people that believe that an appraisal is a waste of time. Agents will rationalize this by thinking that since they do this for a living that they are very capable of pricing a home without the help of an appraiser.

While there may be instances where this is the truth, there are also situations where it would be a better use of time and money to order a pre-listing appraisal to determine a home’s true market value. When you have this you can list the home and sell it more quickly, which saves money by reducing marketing time and costs as well as mortgage payments by the seller, and the cost will be returned manyfold.

5) Invite an appraiser to speak at your office to help you understand the appraisal process- I speak at real estate offices on a regular basis because I want to inform and educate agents about why and how appraisers do their job. If agents have this information they can provide a better service to their clients.

Knowing how to think like an appraiser will help in pricing homes. If you need a speaker at your office meetings to discuss these appraisal tips and common questions asked of appraisers I can help you. I’ve spoken on the following topics:

  • Appraisal Basics (What and why appraisers do what they do)
  • How do appraisers make adjustments
  • FHA Appraisal Guidelines (including most common repair items)
  • How to prepare for the appraisal
  • Tips for working with an appraiser (what agents should and shouldn’t say)
  • Challenging a low appraisal
  • How to find out the qualifications of an appraiser
  • Local market trends

6) Avoid Zillow like the plague- This goes without saying, right? While Zillow may be a decent source of actual sales data, it is horrendous at providing the market value of a home because they utilize inaccurate information.

There are many reasons why Zillow Zestimate aren’t accurate and you can read about them in a past article I wrote but the bottom line is that their accuracy leaves a lot to be desired. Agents should not let sellers rely on the Zestimate but instead should rely on the expertise of the agent or a local real estate appraiser that is more familiar with the market and can do the research and analysis necessary to arrive at a reliable opinion of value.

Question

Do you think these appraisal tips might help you sell more houses in the new year? If you have a question about anything mentioned here or would like to discuss something else about appraising, leave a comment below and we’ll keep the conversation going. Wishing you a productive and prosperous new year.

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Comments

  1. Great information Tom! Your information, when utilized proactively, will reduce a REALTORS® pain significantly.
    Educating REALTORS® about how appraisers work, and what lenders expect should be required curriculum. Most agents have no idea about the requirements and guidelines placed on an appraiser completing appraisals for a mortgage lender. I speak in real estate offices often and this information is found to be very valuable to REALTORS®

    • Thanks, Mark. I agree, speaking at agent offices helps them understand more about what an appraiser has to do and it helps appraisers stay in front of them so they remember us when giving a referral.

  2. Agents Are Not Deducting Concessions From These Cloud CMAs…and that’s a problem!

    Tom, when I shared your excellent tips with my Agent audience I added this below because of Fannie Mae’s desire for cash equivalency and because seller paid concessions are absolutely getting out of hand in 2016-2017. I know, there are many Appraisers who deduct 100% of the concession, others who say it’s a normal function of the market and deduct them after say $3,000 and others who don’t deduct them at all. And, when you deduct some or all, you’re labeled by the industry as that darn “conservative Appraiser”.

    One problem I have with concessions now is they used to be say just $3,000, which wasn’t that unrealistic. However, now $6,000, $7,000, $8,000, $10,000 and I even saw $13,077 on a $168,000 purchase. The other problem I have is explained below where Agents nationwide are using a tool to price listings that doesn’t deduct any concessions….and that does cause some deals NOT to appraise.

    “TIP #7: DEDUCT CONCESSIONS BEFORE PRICING THAT LISTING because Appraisers are going to deduct them when using them as comps. IF you’re pulling a simple Cloud CMA and NOT deducting seller paid concessions, you’re just asking for your deals not to appraise. On 1 deal that did not appraise in 2017, 2 of the 3 sales offered to me had concessions of $8,000 and $10,000 of which the Agent had not deducted.

    When a seller sells for $350,000 and pays $10,000 in buyer help to obtain the loan, they walk away from closing with $340,000, not $350,000. Fannie Mae wants cash equivalency reflected, which is why the $10K is deducted. This is already tripping up deals in 2017.”

    • This is a great point Bill and one I don’t see a lot of people talking about when discussing contracts that fall through. Our area is probably most similar to the 2nd option you described. This is something I will bring up when speaking at agents offices.

  3. Thank you for the tips Tom. Appraisers are a great resource for agents. Each real estate agent should have a relationship with a sharp appraiser to help avoid issues.

  4. Great job Tom. I find many of your tips are focused on communicating well with the appraiser and building a better relationship with a local appraiser. These are both absolutely critical for real estate agents. Often times we only pay attention to appraisers when there is a fire. I say being proactive is a better way to go. 🙂

    • You’re right Ryan. I think communication is key between the agent and appraiser. While we cannot talk value there is still a lot we can talk about that can help make the process smoother.

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