5 Things Agents MUST Provide The Appraiser In Today’s Hot Market

Still Having Problems With Your Appraisals?

I keep hearing that agents are still having some issues with homes not appraising for the contract amount. Is this you?

Things Agents MUST Provide The Appraiser In Today’s Hot Market

If so, are you doing everything you can to provide the data you used in pricing and contract negotiations to the appraiser? I know it may sometimes seem that your work is never-ending but if you have collected all of this information why not share it?

In an increasing market, like we are currently in, appraising can be a big challenge. Because the appraisal process is a historical look at past sales there is always the chance that sales data will lag behind the rapid rise in prices.

Appraisers have options to help add to the historical data and provide a better picture of what is currently happening with home prices. Appraisers are able to consider several things that I would like to discuss here and that agents MUST be willing to share to increase the chances that the gap between the appraisal value and the contract price will be minimized.

5 Things Agents MUST Provide The Appraiser

1. Comps you used to price your listing – If you have done a CMA, and I highly recommend that you do, it is a good idea to share this with the appraiser. In today’s market, it is more important than ever to base the list price on solid market data.

I always ask the agent for the sales they used to price their listing so I know where they are coming from and what they based the list price on. If a CMA has not been done it’s just a shot in the dark that you may or may not hit.

The comps should be similar in age, size, bedroom and bath count, quality, and condition. To get the most accurate value they should also be the most recent sales because they will reflect the current hot market.

If you cannot find recent sales in the immediate subdivision then it is alright to look in another competitive market area. I believe that the date the home sold is one of the most important criteria in a market like we have now and I try to use sales that have closed within the past 90 days if possible.

2. Back-up contracts – Back-up contracts are another very important detail that should be shared. If an appraiser knows that 5 other people have written a contract on the property then it helps the appraiser see that the current contract may not be an outlier and that others are willing to pay a similar price.

Back-up contracts cannot be the only indicator to support a higher price, however, combined with all of the other items I have included here it can provide solid support for possibly reconciling a higher value opinion of value.

Sometimes it’s not a good idea to choose the highest offer because it may not be realistic or supportable. If you have advised your client not to accept the highest offer but rather a more reasonable one, it is still a good idea to show this to the appraiser for the reasons I have stated.

On a side note, this week (as of the date of this writing) there was a home in California that received 122 offers in one weekend! This is not normal, and speaks to the very real limited inventory of homes, but don’t you think that would also be important information to provide to the appraiser?

3. List of updates – As I mentioned previously, it’s very important to provide all relevant information. This includes any and all significant updates or renovations that the home has had.

Buyers like new and the next thing to new is updated. While most homes are selling in a fraction of the time as they were in the past those that are renovated and like new are selling faster and for top dollar.

Because of this, it is very important to include all of the major renovations and updates the home has had so that this can be included in the appraisal. An appraisal is like a court case that needs evidence for support. All of the items have included here are the evidence that appraisers use to support their opinion of value.

4. Anything that supports the contract – Is there something about the neighborhood that buyers can’t live without? Does the neighborhood have something that other neighborhoods don’t?

Some neighborhoods have important characteristics or are located in close proximity to schools or other prime features. Agents get a better idea of what moves the needle for buyers because they deal with them daily whereas appraisers have very little contact with buyers. This information should also be passed along as it gives the appraiser insight into what motivates buyers to pay what they do.

Some neighborhoods are popular in the Birmingham metro area because they are located in close proximity to schools where kids are within walking distance. If this motivates a group of buyers to pay more then it could be a key factor in their offer and should be shared.

5. Don’t let buyers make unreasonable offers- Okay, so this is not something that you can provide to the appraiser but it is super important. Today’s real estate market is on steroids but you can’t let your client get out of hand.

A lot of buyers have lost out on homes that they were outbid on. They feel like the only way they can get into a house is to make an over-the-top offer, one that may not be reasonable.

I’ve written in the past about why sellers should not always take the highest offer but today we’re talking about buyers. A buyer’s unbridled enthusiasm should also be tempered with the calmness of the agent and solid sales data.

The closed sales data is in the form of the CMA you did before listing the property. In addition to closed sales, pending sales that have occurred since the home was originally listed should also be considered and used to support your contract.

These are not pending sales that occurred yesterday and have not been tested so to speak but rather pending sales where the financing and the appraisal have been done and they are just waiting to close. These types of comps give the most recent indication of value and should be passed along to the appraiser just in case they do not know about them.

Conclusion

Like I said before, in today’s hot real estate market you may have to put in a little more effort to share the information you have with the appraiser but it will end up paying off if the data is solid and supports the contract amount. No amount of data will help with an over-the-top offer so keep that in mind when advising buyers.

Do you have any other questions or something to add about what agents can provide to the appraiser to help support the contracts they write? Leave a comment below and as always thanks for reading.

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Comments

  1. Great tips Tom! In Boston and the suburbs bidding wars are common. I liked your statement “No amount of data will help with an over-the-top offer so keep that in mind when advising buyers.” I tell RE agents to discuss ponying up cash to cover the the difference between their client’s offer and the appraised market value. The correct mindset there is
    “I am willing to pay the future price for this home, today.”

    • Yes, I think that sometimes agents think that appraisers can make the deal work or that we kill the deal but the most straightforward way to solve the problem is to go into the transaction expecting to come out of pocket if they know that it is way overpriced. Thanks for sharing.

  2. I co-sign on these thoughts. It’s so important for agents to tell the story of the marketing of the property (without pressure to “hit the number” of course). It’s a lopsided market out there these days.

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