Appraisal Tips For Real Estate Agents
As a real estate appraiser with over 30 years of experience, I have seen many changes and challenges in the appraisal profession and the real estate market. I have also worked with hundreds of real estate agents, some of whom have a good understanding of the appraisal process and some who don’t.
I believe that appraisers and agents have a common goal: to help their clients buy or sell a home. However, sometimes there can be misunderstandings or conflicts between them that can affect the outcome of the transaction. That’s why I want to share some insights and tips from an appraiser’s perspective that can help agents work more effectively with appraisers.
Here are some of the topics that I will cover in this blog post:
- How to interact with appraisers at a property
- How multiple offers factor into the appraisal process
- How to provide relevant information and data to appraisers
- How to handle appraisal issues or discrepancies
- How to educate your clients about the appraisal process
One of the first opportunities for agents to make a good impression on appraisers is when they meet them at the property.
Dos and don’ts for interacting with appraisers at a property
- Do introduce yourself and give your card. This will help establish rapport and trust with the appraiser. It will also make it easier for the
appraiser to contact you if they have any questions or need any clarification later. - Do provide a packet of information about the property. This can include a copy of the listing sheet, a list of recent improvements or upgrades, a plat map or survey, a floor plan, and any other relevant documents. This will help the appraiser understand the features and characteristics of the property and save them time in researching and verifying the information.
- Do provide information about comparable sales. While appraisers are not allowed to discuss specific values with agents, they can accept information about comparable sales that agents think are relevant to the property. You can provide MLS data sheets with brief explanations of why you think these sales are comparable, such as similar location, size, condition, or features. You can also explain why some sales are not comparable, such as different market conditions, motivations, or concessions. This will help the appraiser see your perspective and reasoning behind your pricing strategy.
- Don’t try to influence or pressure the appraiser. One of the worst things you can do as an agent is to tell the appraiser what value you need or expect for the property. This is unethical and unprofessional, and it can backfire on you. Appraisers are independent and impartial professionals who must follow strict standards and guidelines. They cannot base their value opinions on anything other than their own analysis of the market data and their professional judgment. Trying to influence or pressure them will only damage your credibility and relationship with them.
- If you choose not to be at the property during the appraisal inspection let the appraiser know you are available to answer any questions they may have. Even though you may not visit them at the property you can still provide them with a packet of information as noted above.
How multiple offers factor into the appraisal process
In today’s hot real estate market, it is not uncommon for properties to receive multiple offers above the asking price. This can create challenges for both agents and appraisers, especially when it comes to determining the market value of the property.
As an agent, you might think that multiple offers are a clear indication of market value and that the highest offer should be accepted as such. However, as an appraiser, I have to look beyond the offers and consider other factors that affect market value, such as supply and demand, market trends, buyer preferences, financing conditions, etc.
Multiple offers can be useful information for appraisers, but they are not conclusive evidence of market value. They are only one part of the puzzle that appraisers have to put together to form a credible value opinion.
Here are some things that agents should know about how multiple offers factor into the appraisal process:
Multiple offers do not necessarily mean that the property is worth more than the asking price
Sometimes, multiple offers are driven by factors other than market value, such as buyer emotions, competition, scarcity, or urgency. These factors can create a bidding war that inflates the price beyond what the market can support. Appraisers have to analyze the offers and determine if they reflect the true market value or not.
Multiple offers do not guarantee that the property will appraise for the contract price
Even if the seller accepts the highest offer, there is no guarantee that it will be supported by the market. The appraiser has to compare the property with other similar properties that have sold recently in the same market area. If there are no comparable sales that support the contract price, this may result in a lower appraised value.
Multiple offers should be documented and disclosed to the appraiser
If a property receives multiple offers, it is important for agents to document and disclose this information to the appraiser. This can include providing copies of the offers, dates, terms, and conditions. This will help the appraiser understand the market conditions and demand for the property, and evaluate the offers accordingly.
How to provide relevant information and data to appraisers
One of the best ways for agents to work effectively with appraisers is to provide them with relevant information and data about the property and the market. This can help appraisers save time, avoid errors, and produce more accurate and credible appraisal reports.
Here are some types of information and data that agents can provide to appraisers:
Property information- This can include a copy of the listing sheet, a list of recent improvements or upgrades, a plat map or survey, a floor plan, and any other relevant documents. This will help the appraiser understand the features and characteristics of the property and verify the information.
Comparable sales information- This can include MLS data sheets with brief explanations of why you think these sales are comparable or not comparable to the property. This will help the appraiser see your perspective and reasoning behind your pricing strategy.
Market information- This can include any data or trends that affect the market value of the property, such as supply and demand, inventory, absorption rate, days on market, etc. This will help the appraiser analyze the market conditions and adjust for any changes or differences.
Contract information- This can include a copy of the purchase contract, any addenda or amendments, any concessions or incentives, any contingencies or clauses, etc. This will help the appraiser understand the terms and conditions of the transaction and how they affect the contract price.
Tips on how to handle appraisal issues or discrepancies
There is a fine line in communicating with the appraiser regarding any appraisal issues or discrepancies. You should never discuss value, however, you can discuss errors in factual information such as the number of bedrooms or bathrooms, or the number of acres the house is located on.
If the issue is strictly value-based it is best to go directly to the lender to request a reconsideration of value since the appraiser is not allowed to discuss value.
Communicate with the appraiser- The first step is to contact the appraiser and discuss the issue or discrepancy with them. Be respectful and professional, and avoid being confrontational or accusatory. Explain your concerns and provide any evidence or documentation that supports your position. Ask the appraiser to review their work and consider your feedback.
Request a reconsideration of value- If you disagree with the appraised value, you can request a reconsideration of value from the lender. This is a formal process where you submit a written request with supporting data and analysis that shows why you think the appraised value is incorrect. The lender will forward your request to the appraiser, who will review it and respond with their decision. The appraiser may agree to revise their value opinion, or they may stick to their original opinion and explain why.
Appeal or dispute the appraisal- If you are not satisfied with the appraiser’s response to your reconsideration of value request, you can appeal or dispute the appraisal with the lender or the appraisal management company (AMC). This is a higher-level process where you escalate your complaint to a third party who will review the appraisal report and your arguments. The third party may agree with you and order a new appraisal, or they may agree with the appraiser and uphold their value opinion.
Negotiate with the other party- If all else fails, you can try to negotiate with the other party to salvage the deal. Depending on the situation, you may have to adjust the contract price, split the difference, or offer other concessions or incentives. You may also have to explore other financing options, such as changing lenders, switching loan programs, or paying cash.
How to educate your clients about the appraisal process
One of the most important roles of an agent is to educate their clients about the appraisal process and set realistic expectations. Many home
buyers and sellers have misconceptions or confusion about what an appraisal is, why it is needed, and how it affects their transaction. By educating your clients about the appraisal process, you can help them avoid unnecessary stress or frustration and prepare them for any potential issues or challenges.
Here are some topics that you should educate your clients about:
The purpose and scope of an appraisal- An appraisal is an opinion of a property’s market value by a licensed appraiser based on a thorough inspection and analysis of the property and the market. The purpose of an appraisal is to protect the lender and ensure that they are not lending more than the collateral (house) is worth. The scope of an appraisal depends on the type and complexity of the property and the intended use of the appraisal report.
The factors that affect the appraised value- The appraised value of a property is influenced by many factors, such as location, size, condition, features, upgrades, market trends, supply and demand, buyer preferences, etc. The appraiser will compare the property with other similar properties that have sold recently in the same market area and adjust for any differences. The appraiser will also use other methods, such as the cost approach or the income approach, if relevant, to estimate the value.
The role and responsibilities of an appraiser- An appraiser is an independent and impartial professional who must follow strict standards and guidelines. An appraiser cannot be influenced or pressured by anyone involved in the transaction, such as agents, lenders, buyers, or sellers. An appraiser cannot disclose any confidential information or share their opinion of value with anyone other than their client (usually the lender). An appraiser cannot accept any compensation or incentives that are contingent on the outcome of the appraisal. An appraiser cannot perform any appraisal services that are beyond their scope of competence or expertise.
The time and cost of an appraisal- The time and cost of an appraisal can vary depending on the type and complexity of the property, the availability and quality of data, the market conditions, and the appraiser’s workload. Typically, an appraisal can take anywhere from a few days to a few weeks to complete and can cost anywhere from a few hundred to a few thousand dollars. The lender or the buyer usually pays for the appraisal, unless otherwise agreed upon by the parties.
Conclusion
I hope that these insights and tips have been helpful and informative for you as a real estate agent. I believe that by working together and understanding each other’s perspectives, we can make the appraisal process smoother and more successful for everyone involved.
If you have any questions or comments, please feel free to contact me, and as always, thanks for reading.
Great post Tom. I disagree with one point. If an agent disagrees with a value conclusion, o don’t think its a good idea for the agent to contact the appraiser. Emotions are too high so having a meaningful conversation is tough. Instead, I think the agent should start a reconsideration of value and provide the lender with evidence of the error. If the problem doesn’t materially impact value, then maybe a quick note to the appraiser is appropriate.
Good point, Joe. My first thought was that if the error did not specifically have anything to do with the value but was a factual error such as bedroom/bath count or land size, etc. then it would be okay for the agent to contact the appraiser. However, it usually is always about the value so it probably would be wise to initiate contact with the lender from the get go. Thanks for your insight.