Appraisal Secrets Revealed
“Overpriced,” thought Ryan Lundquist, a certified residential appraiser in Sacramento, California. He’d just received an appraisal order and, thankfully, his last impression didn’t match his first. In the end the home received top dollar.
But, he was puzzled. Finding that the property was worth slightly more than the selling price, he wondered why the listing agent offered no information about the property until he asked for it. Didn’t he want to ensure top dollar was received for this home?
Unfortunately, many agents have been intimidated by, and sadly misinformed about the 2010 Dodd‐Frank Wall Street Reform and Consumer Protection Act, assuming that they can’t communicate with an appraiser under any circumstance.
Let’s bust that myth
It’s not against the law to contact and converse with the appraiser, unless the goal is to bribe or intimidate him or her.
In fact, Dodd-Frank specifically states that you or “anyone with an interest in a real estate transaction” can ask an appraiser to:
- Consider additional, appropriate property information, including the consideration of additional comparable properties to make or support an appraisal.
- Provide further detail, substantiation, or explanation for the appraiser’s value conclusion.
- Correct errors in the appraisal report.”
The law does not, however, provide for a “full-blown conversation or discussion with the appraiser,” cautions Vic Knight, certified general appraiser and former president of the North Carolina Association of REALTORS®.
“The implication is that the flow of information is essentially one-way,” he continues, “from the broker to the appraiser.”
How your MLS description can help the appraiser
Knight offered an often overlooked point brokers can utilize to help the appraisal process. Writing a listing description is considered part of the marketing of a home for sale. What most agents don’t think about when penning the description is the appraiser, who will also be part of the audience reading it.
Knight recommends that you keep in mind the following tips as you enter the listing into the MLS:
- Don’t skimp on the photos and include photos of the home’s unique features.
- Be overly descriptive – this helps with marketing as well.
Point out the “quality of finish in ‘below-grade’ living areas, attics, bonus rooms, decks, porches, etc.”
Create an appraiser’s package
Knight suggests that agents compile a package of documents and either leave it at the property for the appraiser to view, or deliver it in person, by meeting the appraiser at the home. Include the following documents in the package:
- A fully-executed copy of the purchase contract and addenda
- Floor Plan
- HOA Docs
- Inspection reports
- List of upgrades, including the dates they were performed, with photos
- Neighborhood information, especially anything that makes homes here more valuable than homes in nearby areas
- Plat and survey
- Proof of multiple offers
The latter is important information for the appraiser, according to appraiser Tom Horn of Birmingham Appraisal Blog. “Providing proof of multiple offers does show them that more than one person is willing to pay a certain price for the home,” he suggests.
It’s also important that you are very specific in your description of the home’s upgrades. Rather than stating that the bathroom was “completely remodeled,” list what was replaced, what it was replaced with, the date the work was performed and the cost.
For example, Lundquist suggests, on his Sacramento Appraisal Blog, “Bathroom remodel: new tub; travertine tile work; cherrywood cabinetry; Kohler sink, faucet, etc. …/Installed 2009/$15,000 cost.”
Or, offer the appraiser a cheat sheet
Lundquist offers some tips on how to interact with the appraiser within Dodd-Frank guidelines.
These useful tips help agents avoid the appearance that they are pressuring the appraiser, a violation of federal law. Any statement that can be perceived as an attempt to steer the appraiser to the value you want for the home can get you into hot water.
Examples of these are frightening because they are so commonly (and innocently) used. Banish them from your interactions with appraisers:
- “I’ll be happy as long as it appraises for at least the sales price.”
- “The market has been ‘on fire’. You shouldn’t have any trouble with the appraisal.”
- “Is it going to come in at ‘value’?
- “If this doesn’t ‘appraise’, the seller is going to go into foreclosure.”
- “I would be shocked if it didn’t ‘appraise.”
- “I really hope this works out. No pressure or anything though.”
To avoid trouble, keep your opinions, feelings and thoughts to yourself. Communicate only the facts about the home and neighborhood.
A listing agent’s job entails far more than marketing the home and negotiating with the buyer’s agent. Underlying all of the duties, however, is the duty of “care.” This includes ensuring your client gets the most money possible for the home.
This article is not intended to serve as legal advice and should not be used as a substitute for consultation with an attorney.
Related: Pricing Makes Perfect
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