Fannie Mae, Freddie Mac, and HUD unveiled updated policies for appraisal reconsiderations of value (ROV) on May 1, 2024. Due to these changes, now is a good time to share a refresher on responding to ROVs. To help you out, we’ve put together some practical information to strengthen your responses to a mortgage lender’s appraisal appeal, called a reconsideration of value (ROV).
Notes on the reconsideration of value process
While the ROV process is an appeal process, it is not to be used to change the value or alter other assignment results simply because someone is dissatisfied with the outcome. Like performing an appraisal assignment, your role as an appraiser is to respond impartially, objectively, and without bias to an ROV request.
As per the guidance outlined by the GSEs and HUD, the reconsideration of value process must not conflict with Appraiser Independence Requirements. This means that any requests for appraisal reconsideration must be evaluated based on valid and objective criteria, rather than influenced by external factors such as the desire to achieve a certain valuation outcome. It also implies that you, as the appraiser, must have the autonomy and freedom to defend your original valuation conclusion if you believe it to be credible, without facing repercussions.
When you receive a reconsideration of value request, there are proven ways to handle these requests, adhere to USPAP and applicable regulatory requirements, and preserve a rock-solid relationship with your client. Best practice is to respond in a professional manner, remain positive, respond accurately and timely, and always operate ethically.
12 tips to respond to a reconsideration of value request
1. Confidentiality
When you receive an reconsideration of value, the first thing you should do is to make sure that the request was forwarded by your client or parties designated by the client, such as an AMC or an agent of the client. USPAP prohibits an appraiser from discussing the results of an appraisal with anyone other than the client or parties designated by the client. Never respond to a complaint or an ROV that is forwarded to you directly by a real estate agent, the borrower, the seller, or any other party that is not the client or the client’s designated agent.
2. Pause before responding
As with any complaint or negative feedback, it is best to pause and not respond with your first reaction, which is likely to be a defensive and unprofessional response. Value reconsideration requests seem to surface at the most inconvenient times, typically when you are busy and stressed with other deadlines and commitments, so pausing before responding is highly recommended.
That said, it is good customer service to immediately acknowledge receipt and inform your client of an estimated time of when you’ll be able to respond to the ROV. For example, you might respond, “I’ve received your reconsideration of value request and will take a look at the concern cited and get back to you within one day.”
3. Meet deadlines, if attainable
Often, an ROV has a deadline for responding to it. If the ROV has a deadline that is unattainable, you should inform the client immediately. Perhaps you respond by saying, “I’ve received your reconsideration of value request, and unfortunately due to the amount of time involved to research and thoroughly complete this request, I’ll need two business days to respond.”
If possible, try to meet the client’s requested deadline, as the client may be up against a hard deadline for loan approval. This is especially critical if you missed a deadline when you completed the original appraisal assignment. However, you must be honest with yourself with an attainable timeframe and not add unnecessary pressure to respond to the ROV, thereby completing it hastily and recklessly.
4. Take the ROV seriously
Some appraisers respond rudely, sarcastically, or jokingly to an ROV. Responding to a request to consider alternative sales with a curt reply (e.g., “Clearly, I used the best comparable sales available if these are the only sales you could locate to dispute my appraisal…” or “If these sales were better, I would have used them…”) is not helpful and tells the complainant that they are uninformed and that you don’t value their opinion.
5. Start with a positive
As inconvenient as it is to respond reconsideration of value request, you should start positively by recognizing and acknowledging the time and effort it took to file the complaint or by acknowledging the specific complaint cited. You may state something along the lines of:
- “I appreciate your having taken the time to voice your concerns about the appraisal completed for the property located at 123 Anywhere Street, Any State.”
- “I understand how disappointing it can be when the borrower’s expectations are not met, and below is my response to the value reconsideration request.”
- “I am responding to your concern that…”
As difficult as it may be, especially when you feel the complaint wasn’t justified, you should always respond in a sincere and respectful manner.
6. Assess the problem and research facts
Assess the problem and research facts related to the subject matter of the complaint, such as a review of the MLS listings of any sales forwarded for consideration. If the complaint is that your living area calculation is inaccurate, you should review your sketch and possibly compare it to other sources such as a public property record or a blueprint, if available. The scope of research required will vary depending on the particulars of the value reconsideration.
7. Respond to all points and sales forwarded for consideration
An appraisal appeal may bring up multiple concerns. Be sure to respond to each and every one. If the ROV forwards five sales to consider as comparable sales, provide a specific reason(s) for why each one is not considered comparable to the subject. To simply state that the sales forwarded are “dissimilar” or are “superior” to the subject property is an inadequate response.
For example, if the ROV includes a sale that is dissimilar in age and type, you may state, “The property located at 444 Mulberry was not considered comparable because it is 20 years younger than the subject and is a detached single-family home while the subject property is an attached townhouse.”
8. Rectify an error
Avoid taking an explicit position that everything was accurately done, and the best sales were used in the appraisal. It is always possible that a real estate agent did not correctly enter an MLS listing such as the geocode or the name of the subdivision and subsequently the sale did not populate during your search for comparable properties. If a sale has been forwarded that is comparable, it should be added to the grid to determine if it results in a different outcome.
Likewise, if you made a negative instead of a positive adjustment, made a mathematical error, or were not aware of the specifics about a comparable that you used, you should acknowledge it and remedy the error or omission whether it impacts the valuation outcome or not.
If the error does impact your opinion of value, acknowledge and revise your appraisal accordingly, as you want your appraisal to be credible. Remember to update your report date and note any changes and the reasons for it in your appraisal report.
9. Use understandable language
There are appraisal terms and concepts that even individuals in the lending industry sometimes have a difficult time understanding. For example, some lending professionals do not understand why a property must be appraised to its “highest and best use” when appraising a property’s market value for lending purposes. If possible, your response should be detailed, but use simple language. In instances where it’s impossible to avoid appraisal jargon, try to put layman’s terms in parentheses to enhance clarity.
10. Do not strike back
The complaints cited in the reconsideration of value may be full of anger and unprofessional comments about your appraisal abilities. Don’t take it personally, and whatever you do, do not strike back. While it may be difficult, remain calm and respond systematically and logically to the complaint. Be respectful and constructive in your response.
11. Ask questions
If the complaint is too difficult to follow, reach out to the client/AMC and ask questions for clarity. It is best to ask open-ended questions in a neutral and non-accusatory manner. Make it clear that you are simply seeking to gain clarification, so you better understand the complaint before responding to it. You might say, “I think I need more information because I don’t fully understand the part about …”
12. Include it in your appraisal
Upon the implementation of the new policies in August 2024, you will be required to include your response to the ROV in your appraisal report, even if there are no modifications made to the original appraisal. It is advisable to start this practice immediately. Should revisions become necessary, such as incorporating additional information acquired through the ROV process or rectifying any errors, it is crucial to summarize these changes within the appraisal report and provide a rationale for the alterations.
Moreover, even if the content of the appraisal report remains unaltered, you should incorporate a summary of the complaint and your response, alongside the decision reached and the underlying reasoning, all of which should be appended to the appraisal report and accompanied by an updated appraisal report date. The ROV complaint forwarded to you, along with your research and notes pertaining to it, should be retained in your workfile. Regardless of whether revisions are made or not, updating the appraisal report date is mandatory under USPAP.
Ultimately, if the information provided through the ROV justifies a revision of value, adjustments to the appraisal report should be made accordingly. However, it is imperative to avoid altering your report solely due to external pressures from entities such as the AMC, the lender, borrower, or other parties.
Take the next step with CE courses
If you’d like to learn more, check out Responding to a Reconsideration of Value, an appraisal CE course designed to provide added insight in understanding the necessity for and best practices for responding to these requests.
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