I’ve written about this in the past but thought I would mention it again because I have received a couple of calls within the past month from loan officers not happy with the appraisals they have received. In both situations, out of town appraisers were used.
The first call involved an appraiser from Georgia coming over for an assignment. Yes, you read that right, Georgia. It seems that because business has been slow in Georgia some appraisers have chosen to venture over into Alabama. While it is legally permissible to do this with a valid temporary permit, it would not be wise practice if you are not very familiar with the local market. Besides lacking the necessary knowledge of different neighborhoods and the various value influences, you should also have access to local data sources such as the Birmingham Multiple Listing Service as well as be a member of the local appraiser coop known as AGDA. I have written about AGDA and its importance in a previous post.
The second situation occurred when an appraiser from south Alabama was used for an appraisal on a lakefront home in south Shelby county. I had a conversation with the listing agent and she informed me that the appraiser had asked her to take pictures of the property as well as measure it. This type of appraisal practice is ethically not acceptable. Many appraisal mangement companies these days order appraisals with their main criteria being price. In order for some appraisers to take on these jobs and make money they must cut corners, and this is one way they do it.
It is best to hire a local appraiser who is familiar with the area as well as having access to all required data services and sources. A competent appraiser will be aware of what needs to be done in order to complete and accurate appraisal. You may pay a little more but the value of their service is immeasurable.
Banks are not allowed to pick appraisers for individual assignments however they can add appraisers to their rosters that exhibit high ethical standards. If you require an appraisal for pre-listing, tax appeal, divorce, or estate settlement you can hire whom ever you want. Just remember to ask them if they are familiar with the local market, have access to local data services, and if they have experience in the area the home is located.
Have you ever been involved in a situation like I have described? Did it have an impact on the results of the appraisal? If you are a real estate agent do you see this type of thing happening much?
If you have any real estate appraisal related questions you can call me at 205.243.9304, email me, or connect with me on Facebook., Twitter, or Youtube.
Thank you for producing helpful information that gives the general public more understanding on what an appraiser does!! I’ve been in the mortgage industry for 25 years and am thrilled to be able to share this information. THANK YOU
Thanks for reading and the kind words. If you ever have a question please let me know as I am always looking for topics to write about.
You may have already written on this, but I’d love to see a post explaining to a homeowner that a true appraised value and their home owner’s insurance company’s estimation of “appraised value” are not the same and why 🙂
Thanks, that’s a great idea! I’m going to look into it.
Tom, I couldn’t agree with you more! I just think sometimes people confuse “geographical competence,” with the appraiser’s physical location to the property, and they’re not necessarily one of the same. I did find it humorous during this little refi-boom how many AMC’s called me looking to find an appraiser in my area-their appraisers didn’t want to travel this far. My response, “sure, but this is my fee.” Guess what, no call back. And “they” tell us choosing appraisers has nothing to do with fee. Yah Right!
You are right Michael, geographic competence and distance are not always the same. I think you have to look at it on a case by case basis. I think, as you alluded to in your example, that the fee is more important to the AMC. Most AMC’s motto should be “if your fee is low, lets go!”
That’s a great line! I’m sure I’ll be using it.
Hey Tom, I’ve never really experienced anything like what you’ve shared. I’ve heard stories, but it’s always been anecdotal. I think sometimes though that the distance an appraiser has to travel tends to be a catch-all excuse if the home doesn’t appraise for what “they” thought. I know I moved to an outer ring suburb a few years ago, but most of my work is 25-50 miles away minimum. Take care!
Hey Michael, thanks for your perspective. These were two extreme situations that I was actually made aware of from people involved in the deal. Other things I have heard have been through third parties. I am sure that some people do use the distance an appraiser travels as an excuse for the home not appraising, and sometimes it is a valid point. I do realize that some appraisers cover areas more distance from their home base but it is acceptable because they have years of experience and expertise in the market. My focus in this post are the appraisers that are out of their area of knowledge and that are not doing a good job because of that. Sometimes appraisers come into a market and do not even have access to acceptable data sources and they really miss the boat. I have done field reviews on these types of appraisers and have seen it first hand. It’s all about geographic competence as we all know.