Do you cross your fingers in hopes that the appraisal doesn’t come in low?
If you’re a listing agent, and the title of this blog describes the way you prepare for real estate appraisals on your listings, then you’ve come to the right place. Many agents believe that they have no control in the appraisal process but I disagree. While there is no way to influence the appraiser to get a value that you want, there are ways to make sure that the appraisal on the property you are selling comes in at a value that supports the contract price. If you’re
interested in finding out more, then read on.
Preparation to make sure that an appraisal does not come up short, and cause a potential sale to fall through, begins way before the appraisal is even ordered. Today I’m going to share with you an approach that will increases the chances that your appraisal won’t fall short.
Do your homework upfront
By being able to “think like an appraiser” a listing agent can develop an asking price for their listings based on the criteria appraisers use when doing the mortgage appraisal. The list price for a home should be based on market data rather than the request of the owner or some other unsupported information.
Real estate appraisers follow industry specific requirements as well as underwriter guidelines when developing an opinion of value. These guidelines insure that the appraisal takes into consideration relevant sales information that reflects what is happening in the market and that measures the actions and motivations of buyers and sellers.
I speak at real estate offices frequently on this very subject. If you can do a similar analysis of the property as the appraiser does, then the likelihood of the appraisal coming in low is reduced. You don’t need to know specific adjustment amounts to do a good job of pricing a home. I explain in a past post about how you can do this using another method called qualitative analysis.
It is important to use the most recent sales that are the most similar to your property. If you used a sale that was 6-9 months old, and it took 30-60 days to sell, then those sales are now going to be 7-10 months old and out of range for the person doing the mortgage appraisal.
Bracketing can help you to choose the best comparables. By choosing comps that bracket key items such as square footage, quality, and amenities you’ll do a better job of coming up with a list price.
Listing agent: Don’t slouch after the home goes under contract
Just because you think the house is sold is no reason to relax. You must power through to the very end and this means being a helpful resource for the appraiser. Forget about the rumours that the real estate agent can’t talk to the appraiser because that’s hogwash.
Keep in mind that you don’t want to discuss value with the appraiser, but if you do what I suggest then you won’t have to. If you did your homework on the front end by pricing the home to the market using market data, then there should be minimal concern.
You can help the appraiser by having an information packet ready for them whenever they call you to schedule the appraisal inspection. If you’re not able to meet the appraiser at the house then make sure you get this information to them through email or another way. You’ll want to include all of the property specific information you have on the home. This includes a list of improvements that have been made to the home over the last 10 years, especially updates or renovations to all kitchens and bathrooms. If you need a helpful form to do this read this post I recently wrote.
You will also want to include items that you know will have an impact on value. This may be something specific to the house itself or a feature within the neighborhood such as golf course or lake privileges, or maybe its location to a nearby school.
The last thing to include are the sales AND listings you used to price the home. This is where it may get a little tricky because you don’t want to come across like you’re trying to steer the appraiser in a certain direction regarding value. Saying something as simple as “I’m including the sales AND listings I used to price the home” is all you need to do. The appraiser will have to sift through these sales and determine if they are true comps or just sales.
Do you remember what I said about doing your homework up front? If you did, then the sales AND listings you used will most likely be the ones used by the appraiser as well. The only different sales they may come up with are those that occurred in the time period between when it was listed and when it went under contract.
The last thing I will say is to let the appraiser know that if they have any questions they can call you. By being available to answer questions you may be able to address issues before the appraisal is finished as opposed to after the job is completed. It’s easier to do it this way rather than ask for a reconsideration of value later.
Need help?
If you’re a listing agent and need help learning how to “think like an appraiser” I am available to speak with you and your office. We can discuss what you need to do to price homes like an appraiser so that the chances of a low appraisal are diminished. Call me today to set up a time that I can speak at your office.
Question
Are there any other questions you have about what you can do as a listing agent before and during the appraisal to increase the likelihood of a good result? If so please leave a comment below and I’ll do my best to answer them for you. If you have anything else to add lets continue the conversation and leave a comment below. Thanks again for reading.
If you liked this post subscribe by email (or RSS feed). Thanks for visiting.
As an appraiser I want to hear the agent’s perspective on the property, and I appreciate it when an agent is intentional and proactive to be prepared to answer appraisers’ questions. In fact, it reeks of professionalism when agents answer questions in advance and come prepared with typical questions already answered. Thus the agent can say, “I prepared a document for you with some answers to questions appraisers tend to ask me. Here is this sheet if you’d like it.” I find many in the real estate community really don’t know how to talk with appraisers though. They either provide the wrong type of information, are stuck in a rut of subtly pressuring for a certain value, or they have a hands-off approach where there is no exchange of information at all. There is definitely room for growth here, and I’m hopeful to see more growth in the future.
I definitely agree with you Ryan. I think this is where educating agents come in. If we as appraisers make ourselves known to the agents and educate them on what is needed I have found they don’t mind helping out. We have got to continue doing this especially with the newer agents coming up. It is a great way to educate as well as market our services.
You nailed it, Tom! I actually encourage agents to share information with our appraisers. Often times, we as appraisers may not get to know the nuances of certain markets as well as the agents who work in them every day. Sometimes, an agent can share a small insight that makes a huge difference in terms of the appraisal and value. Thanks, Tom…
Good to hear Michael. I honestly think it takes appraisers and agents working together to produce a good appraisal.
One of the local MLS that I use no longer reports seller’s concessions. It’s a constant battle emailing and calling realtors for this data. I find that many realtors don’t want to be bothered. Also, when I appraise a vacant home I’m lucky if the realtor will even bother to show. When I ask them particular questions, the most famous answer is “I don’t know”.
Sorry to hear about your situation Janet. I know from my own experience that many agents don’t really understand what we do as appraisers. I have found, through speaking at local offices, that if we educate them on the process that we go through and the importance of the information they are more willing to help out. If you don’t already I would suggest you contact some realtor offices and volunteer to speak to them about what appraisers do. This is a good way to market your business and educate at the same time. Good luck!
Tom, good angle to come at this topic of agents communicating with the appraiser. Agents typically know more about the subject property and the reactions of buyers to that property than the appraiser. If the appraiser does not ask (and not all will), then that information could be lost. Information lost might be information that could have made a difference in the value conclusion.
I agree Gary. It probably wouldn’t hurt appraisers to take a detective course to learn how to ask relevant questions to help uncover the necessary information to produce a reliable appraisal.
Tom:
I always enjoy your blogs. As there are no two appraisers alike, there are no CMAs that will arrive at the same price. Have you written on the best ways to do a cma with examples. I have asked other Agents and nobody can give a definitive anwer
Thanks Chris for your comments. You may want to check out some of the links I included in this post. Two that I feel might answer your question is the one on qualitative analysis and bracketing. I think these will help you price your listings more to the market and more similar to what the appraiser will come up with.
Great information Tom. Agents-do not be afraid to share information with the appraiser. Be proactive, share the information when you meet the appraiser at the home for the appraisal. If you “cross your fingers” and wait for the results, the re-consideration process may become more difficult and time consuming. Appraisers-be receptive to the agents information, they are not trying to influence you-only trying to help make things easier. The adversarial agent-appraiser relationship needs to end. We CAN all get along!
Right on Mark! I think we all can benefit from asking and answering questions the others have about how and why we do our job. This clears up confusion and prepares us for what to expect. Thanks for adding your valuable opijion on the matter.