Appraisal Tips for Realtors

Using your logic, there would never be an appreciating market.  There are not supporting sales when a home hits the high water mark in a neighborhood.  HOWEVER, it doesn't mean the property is not worth it. 

60 homes per month is not that many.  My buyer's agent go through 60 per week.  And when they write a contract, they have been in many (sometimes 20 or more) that are in the same general area, same general price range, etc.  Once they have found what they consider to be a good value, and home the purchaser wants to live in, they negotiate the best price possible for that home.  

To address the comment it's a No-No to discuss value with the agent, The only time an appraiser should not be discussing value with me is if he appraises the property at the contract price or greater.  Anything under, a good appraiser should talk with the agents and be wondering what they missed!  The presumption an appraiser knows more about the property and the competition is ludicrous, (see my comment above on houses seen per month) 

I acknowledge that appraisers have a valuable role in the process, but when values come in at 2 or 3 percent below purchase price, it's just not a good appraisal.  An appraisers job, in my estimation, is NOT to determine value, that is the job of a willing buyer and willing seller.  The appraiser's job is to validate for a lender, if the value determined by the parties is reasonable for a lender to make a loan on, and as such should make every effort to meet the sales price.

Great Post....... I only wish that the Appraisers did not have the contract before they look at the house..... They should just go ahead and apppraise the house for what is it worth., not the sales price. I have seen several cases where appraisers will do the appreaisal to match the sales price although there are supporting comps for the exact same house(s)  in near proximity has actually closed at a higher price.

Your take ?

Bob,

When a buyer is willing and able to pay for a house with cash, they can pay what they want. Appraisers work for the client(lender), they don't want to lend more than home is worth. I wonder how many of those willing buyers(2004 thru 2006) are loosing or already lost their over valued homes!!! Tim's posting was great, but one more thing I would like to add is Realtors, when an appraiser calls to confirm a sale, please answer them back in a timely manor. I know it's take time out of your busy day, but it might also save somebodies deal. Good Appraiser are more apt to use a confirmed sale verses an unconfirmed sale.

good post! 

Bob - the fact that appraisers can not discuss "value" with anyone other than the client is what we have to follow as appraisers. However, to to the research and discuss with an agent or property owner as to the property characteristics that can impact value either lower or higher than contract price (ie what they missed) is what we can and SHOULD discuss with you as an agent/owner so we can make appropriate market analysis, but to discuss VALUE is a no-no.....  And just because you have a "willing buyer and seller" at $XXX, and the appraisal at 2-3% below $XXX doesn't mean the property is worth $XXX. 2-3% seems trivial and it's a fine line, but its these tiny expectations that lend to "pressure" and "fraud."

It comes down to communication and mutual respect.  One side having expectations of the other without communicating leaves each side frustrated.  

Just my $0.02! 

Unfortunately,there are some shifty folks in our business.  I certainly didn't intend to imply the appraiser is not an integral piece to the puzzle.  I do believe that too many appraisers are covering their butt's right now.

Michael, most people aren't losing their home currently because they paid too much for them, a few years back.  They are losing them because they put no money down, have used them as ATM's, and got into the wrong loan. 

Jeremy & Timothy; I guess we're talking semantics here.  When and appraiser talks to me about why the contract price is a couple grand more than comparable A, I guess I assumed we were in fact talking about value.

My primary point is appraisers have to use reasonable judgement, and not think they are smarter than an informed consumer and professional agent.

You know the sad part about some of the appraisals being pick apart, is that they are good reports!  A lot of the underwriters (not all) don't understand or care about market time, or homes that were poorly marketed. It also seems that underwriting differs greatly from lender to lender, some UW's know their job, and others try to tell you that a townhome is a good comparable for a SFR.

Bob, you are also right about people using their homes as ATMs, I asked a broker,  few years ago, if every house in Coral Springs (middle class), if they now comes with a Hummer H2 in the driveway.

Charlie  -  The so called "good" ones or "team players" that hit the value all the time are the ones that ignore regulations and cave in to the pressure put on them or are coersed in some way to do so.  They are the ones that falsely inflate values, provide misleading reports, are committing appraisal fraud, and in some cases associated with mortgage and consumer fraud. 

Roland  -  Appraisers are required to analyze and include in the report information from the contract, therefore the need to have a copy of it.  There are some (the so called good ones) who will use the sale price as a predetermined value for the deal to work.

Bob  -  I have yet to meet an informed consumer and have met very few realtors/agents that have been issued a license by the state they reside in to perform appraisals.  I also cannot seem to locate in any prior edition or current edition of USPAP where it states    -    quote "The appraiser's job is to validate for a lender, if the value determined by the parties is reasonable for a lender to make a loan on, and as such should make every effort to meet the sales price" end quote.        Since appraisers are not as smart as a "Professional Agent" when it comes to determining the value of real estate, perhaps you could provide for all the appraiser members of ActiveRain, a copy of the page where that is written, from the "Special Edition of USPAP" you got when you recieved you appraisal license certificate.

Tim, good first post.   Welcome to Active Rain!  I am sure as an appraiser there is much I do not know about being an agent or realtor so it will be great to read more of your posts.

Keep at it. don't leat them get to you.

Regards,

Aldo.

Appraisals..

1.What does an appraiser do?

An appraisers job is to determine the value of a property.  An appraiser is usually hired by the lender for a financial transaction to make sure that their assets are covered.

2. Can you reuse the same report for a new potential buyer?

No.  The client on the report cannot change.  A new report would need to be ordered by a new client if it is necessary to change client names (usually mandatory by lenders)

3. Do appraisal reports expire?

Yes.  When markets were stable or increasing an appraisal might be good for up to 12 months.  In todays market it is not uncommon for a lender to require a new appraisal or an appraisal update if the loan has not closed in 90 days.

Home Inspections..

1. What does an inspector do?

An inspector thoroughly inspects the bones of a house or structure, points out flaws and suggests fixes. 

2. Can you reuse the same report for a new potential buyer?

I'm not sure.

3. Do home inspection reports expire?

I would suspect that the inspection might also expire (as changes and deterioration come with time), but again I'm unsure.

Sara, not to sound too picky but your information is slightly inaccurate.

1. What does an appraiser do?

An appraiser does not determine the value. The market determines the value and the appraisers job is to interpret data from the market and provide an opinion of value. While it is most common for lenders to hire appraisers for verification of adequate collateral, there are a wide array of appraisal services including, but not limited to, litigation support, pre-listing, tax appeals, etc.

2. Can you reuse the same report for a new potential buyer?

While in most cases, it is true that once a an appraisal is completed the client, intended use/users, and the scope of work cannot be changed. The only exception I can think of is FHA, in which the case number and the appraisal report is specific to the property and not the borrower. but that is a whole other can of worms.

3. Do appraisal reports expire?

Yes, The appraisal is only good for 1 DAY. The appraisal is only good for the effective date of the appraisal. If the very next day the house burns down, then the value has obviously changed. Lenders may elect to use an appraisal for several months but that will vary among different lenders.

So is it a bad sign if the appraiser calls the buyer and asks what number they want?  Just kidding, think that kind of appraising is long gone!  Great first post...