Top 5 appraisal problems and solutions for homeowners

Top 5 appraisal problems and solutions for homeowners

When speaking with homeowners I hear various complaints regarding appraisal problems. These typically have to do with issues that result in the home not appraising for what the owner thinks it should. I’m going to take a look at some of these complaints today and offer solutions to help solve the problem so lets get started.

  1. Appraiser did not include my updates- During the appraisal inspection process appraisers should be noting the quality  of List of home improvementsconstruction, features, and updates that your home has been through over the past 15 years. Sometimes these updates are easy to pick up on, however other times they are not. It is for this reason that I conduct an interview with the owner after I have completely been through the home, that way I can ask any question that have come up during the inspection. The Uniform Residential Appraisal Report has an area where the appraiser is suppose to report whether the home has had any updates or remodeling over the past 15 years so the appraiser should be asking if this has occurred. The solution to preventing this problem is to have a list of these updates or renovations available for the appraiser to take with him/her. The list should include the date of the work along with a short description of what was done, and if you have the information readily available you can include the cost of what was done. Please keep in mind that cost does not always equal value but knowing what the cost was can give an indication of the level and quality of work.
  2. Appraiser did not know my area- This has been a problem that has cropped up over Tom Horn's geographic competency mapthe last several years. With Appraisal Management Companies (AMC’s) taking over the job of choosing an appraiser the quality of appraiser has gone down. This is because some AMC’s will send an appraisal request to anyone on their list and the appraiser that will do it for the cheapest fee will get the job. Many times this appraiser is from an area outside of where the property to be appraised is located. The appraiser may or may not know the area depending on how much work they do and if they have the necessary data sources to provide an accurate and reliable appraisal. A solution to this problem is to ask the bank or mortgage company you are using if the appraiser has done much work for them in your area and where the appraiser’s office is located. There are situations where an appraiser’s office may not be close by, however if they do a lot of work in the area that may not be an issue. If their office is far away (even out of state!) and they do not do much work in the area then that is definitely a red flag and you should request an appraiser who has a lot of experience in your area. You can also ask the appraiser these questions when they call you to set up the appraisal inspection appointment. If you find that the appraiser is from out of the area and may not know your neighborhood you should contact the lender and ask for another appraiser. By looking at my geographic competency map included in this post you can see how much experience I have in the Birmingham, AL area.
  3. The recent FSBO sale down the street was not included in my appraisal- Appraisers should have access to all the sources of fha_appraisalinformation on home sales in the area that they do business, however sometimes a sale may slip through the cracks. A FSBO (For Sale By Owner) home is one type of sale that may be hard for the appraiser to locate because it is a private sale and they may not be listed in real estate multiple listing services or any other online listing service. The appraiser can research this sale if they have some basic information such as the buyer or sellers name, address, and the general time period of the sale. The solution to this problem is to have this information available to the appraiser for consideration in the assignment. Sometimes nearby neighbors are the only ones that are aware of this type of sale and if that is the case then providing this information to the appraiser can help them to complete a more accurate appraisal. Please keep in mind that the appraiser will have to make the final determination about including it in the appraisal depending on whether the home is truly comparable to your home and if it meets underwriter and appraisal guidelines.
  4. Appraiser did not come into my house- Have you had an appraisal performed on your home recently where the appraiser DID NOT come into your home? Lenders will sometimes order a drive-by appraisal to qualifyingproperty information packet customers because they do not need a full appraisal and because it is usually less expensive than a full appraisal. Some shortcomings of this type of appraisal is that the appraiser does not know what the inside of the house looks like, they will not be aware of any updates or renovations, and may not have reliable data about the gross living area (square footage) of the home. Whenever I take on this type of assignment I always make sure that I have a reliable data source for the square footage of the home. This can be from a previous appraisal that I or someone else has done on the house or from some other local reliable data source. I will also call the homeowner to discuss any recent updates or renovations the home has had. The solution to this problem is to be proactive on your part because you cannot be sure that the appraiser will take the necessary steps to call you and get the information on his own. You can put together an information packet that can include an old appraisal that was done on the home because it will give accurate information on square footage and room count if no additions have been made since the appraisal was completed. In addition, you can include a list of recent updates and renovations similar to the one I mention in #1 above. The combination of the old appraisal and list of updates will allow the appraiser to provide you with an accurate but less expensive appraisal.
  5. The appraiser only spent 10 minutes in my home and they didn’t even measure it- I performed a drive-by appraisal recently and during my call to verify information the owner said that another appraiser who recently appraised the home was in and out in 10 birmingham house measuringminutes and he said the appraiser only stretched their measuring tape one time. To me that does not appear to be enough time spent at a property to get the right information to provide an accurate and reliable appraisal. The owner said that the appraiser was off on the square footage by about 500 square feet. I don’t know any more details but that seems like it could be accurate given that the appraiser skimped on measuring. A solution to this problem is to observe the appraiser while they are working and see if what they are doing makes sense for the information they are trying to collect. I am not encouraging homeowners to question everything the appraiser does, or act like they know more, but if the appraiser is supposed to collect measurements to calculate square footage, but they do not measure the house, then I believe this is cause for concern. Do you see them sketching out the home? Are they asking you information about the home regarding updates, renovations, repairs, etc. My goal is to make the owner aware of the appraisal process so you can be a better informed consumer.

Can you think of another problem to add to this list or have you been through a situation you would like for me to address? Leave me a comment below and I will do my best to help you out. Thanks for visiting my blog and if you think others would benefit from this information please pass it along. Happy Thanksgiving!

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  1. Lawrence Fenimore says

    All homeowners need to be highly aware that if their home is “totally renovate” more so than other homes in their market neighborhood they should demand that the appraiser use similar “totally renovate”comparables and not just comparables that may have only a few of the updates as the homeowner’s property. If no such “totally renovated” homes exist in an older neighborhood the appraiser is required by USPAP to not perform a non-credible appraisal report due to a lack of good data. My question is though if an appraiser can not complete a report due to lack of good supportive market sales data such in this example than where does that leave the homeowner and lender?

    • It may be possible to go to another competitive market area where some renovated homes are present. If this is not possible you may be able to compare it to newer homes depending on the degree of updating and renovations.

  2. Nice job on the article Tom. I like numbers one and three the best. It is important for homeowners to provide appraisers with information that only they can provide and not all appraisers will ask all the right questions to draw the information out.

    • I’m all about education Gary. In the past homeowners were kept in the dark about appraisers and appraising so I think the more they know about what we do the better.

  3. David Niksich says

    I 2nd what Ryan stated – I am pleased to admit that I truly look forward to these posts for a multitude of reasons but foremost, their accurate & informative nature! Just a couple points I’d like to make Tom: 1st – diggin’ the competency map & 2nd – I believe you’ve touched on a major point on the current landscape of our industry when you mentioned the AMC’s & their role in selecting appraisers. I won’t get in to this overly too much but we all unequivocally know by now that they are business entities trying to maximize profits like the rest of us. Unfortunately, their profits typically come at our expense but I personally believe that they (AMC’s) offer up a valuable service to us as appraiser’s. I’d like to think we have a choice in which vendors we work with & with that, I try to associate myself with the ones that I feel pay fairly/timely and make me a better appraiser. The latter is tantamount to a solid & mutually beneficial professional relationship. Their review process combined with their engagement letter stips should have you pondering all of Tom’s aforementioned points to ensure an accurate appraisal. AMC’s should be ranking/grading us for all of their stated performance based criteria therefore rewarding our industries strongest. How I see it, if our industries top 10%-20% received & was able to handle the lions share of appraisal orders – I can’t envision ever seeing any 1004UAD fee’s beginning with a ‘2’ any more. Our ‘best’ understands what it takes to put together a quality appraisal & we charge accordingly. Hope all is well Tom, take care & Happy Thanksgiving!

    • Thanks for your comments David. I don’t have a problem with AMC’s as long as they don’t make their fortune off the backs of the appraisers in the trenches and as long as they pay customary and reasonable fees, or even build their business on the cost plus model. I will not do work for AMC’s that pay the appraiser poorly. One other point is that grading appraisers is fine but let them be graded by peers or other appraisers that have equal or greater experience and knowledge as opposed to someone with little or no experience as I have heard about some who work for AMC’s. Happy Thanksgiving to you as well David.

  4. Great list, Tom. Nice job.

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