Non-Local Appraisers Killing Deals

Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

I hate the new appraisal system and non-local appraisers. (see video below)

Let me explain. The government came up with a brilliant idea to curb another housing meltdown!

Assuming (you know what they say: It makes an "Ass out of you and Ming") most lenders and appraisers were fraudulent, they decided to put a great wall of china in between the lender and appraiser. So instead of having a "reliable" and experienced local appraiser, they instead farmed out the process (and sometimes to a company they own) to a company that would then find an "independent" appraiser. 1 problem is, the appraiser has no accountability.

Also problem #2 is now another middle man has to make a cut, but the cost to consumer is the same. The result? The cost to the appraiser goes down. The result? NON-LOCAL APPRAISERS.

You know you are in trouble in Northern Virginia if your appraiser gets out of the car with a cowboy hat & boots. So if you (Mr. Appraiser) don't know the area, what are you going to do? Pick the wrong houses and appraiser more conservatively (they can only get in trouble if they appraise a place too high, so why not just make it come in lower. It also takes more work to come in higher). An appraiser's job is not to be conservative or aggressive, but to be as correct as possible. Recently we had a listing where a bank promised that they used local appraisers.

The appraiser came from Purceville! Over 50 miles away! The appraisal made comments about Ballston and Rosslyn being where the jobs were. As if Clarendon was 2nd fiddle and not desirable. (If you aren't from the area, like the appraiser, you wouldn't know that Clarendon is the most expensive and nicest place in Arlington, see Arlington Rap )

Even before the appraisal system was mixed up, I would always warn my buyers "hey if it comes in higher than what you paid, don't really celebrate. Sometimes appraisers like to come in higher, just to make you feel good, and oftentimes they aren't really "real" in my book." Why would I burst their happy dance? Because I warn them that the flip side (a low appraisal) is also possible. Just because an "appraiser" says something has a value of X, that doesn't mean it is the "true" value. While some might argue there is no "true value" or "it is worth what somebody is willing to pay for it", I'm referring to the other problems with appraisals.


1) BANK SALES IN COMPS Appraisers usually include bank sales on the MLS. These are homes that are oftentimes underpriced, they get 7-20 offers and the all cash offer wins. NOT THE HIGHEST OFFER. So a $400,000 bank listing might get bid up to $415,000 with an "all cash" buyer, and 3 other buyers had offers in for $435,000. What is it "worth?" Well the appraiser says $415,000, but the market says $435,000. And this isn't even going into whether a regular, properly marketed identical listing would sell for $450,000. So what is the "value?" of this $415,000 closed home? For some people this means NEVER being able to buy a home. They live in areas that are full of investors buying with all cash (like WOodbridge). Those sales then drive down the price of a regular listing but not enough. The appraisal will still be low, and the 3% down FHA buyer doesn't have the money to make the difference (yes, I got emails on this).

2) SHORT SALES Similar to the above, but the seller has NO interest in trying to get full market price. Actually the banks expects to sell them for 5-15% off market price. The seller just wants a patient buyer, oftentimes an investor. And as I have written in all my other Short Sale posts, these deals will go 3-6 months and oftentimes never pan out. So yes they have to sell for less, to compensate the buyer for the hassle and high chance of never closing. Many buyers will not even look at short sales. So are these good comparable for an appraisal? I think not.

3) MARKET UPSWING? Oh my! Could it be? Could it be possible that homes and condos in Arlington are actually selling for more than the low in June 2009? Yes. In reality they are (this is the first time I have said anything about the market going up), yet the appraiser is more likely to call the market "steady." All you need is a small 1-3% increase for a $500,000 place to now be selling for $515,000, yet the appraiser won't adjust for that.

4) LOW INVENTORY Rarely will an appraiser adjust for low inventory. IE, Ain't nothing else out there to buy in this price bracket. Good appraisers will see this and understand supply and demand.


So this is what I see happening. When a low appraisal comes in, the buyer oftentimes freaks out. It is the buyer agent's job to warn them about this (see post above) and then discuss what they want to do. About 1/3rd of the time the buyer will walk (until it happens to the next property!), 1/3rd of the time the seller will just drop their price and the last 1/3rd get new appraisers or work it out.

1) DEMAND A LOCAL APPRAISER Put it in the contract (as the lister) that you will only entertain a local appraiser. Maybe give it a 15 mile range. If the lender can't do this, make the buyer get a new lender and new appraisal if somebody non-local does the appraisal.

2) GET A NEW APPRAISAL. CHALLENGE IT. Either the buyer or seller can get a new appraisal. Yes, my buyers have hired new reliable and local appraisals. Why? Because the buyers have been to each home in the area for the last 3 months and they know the value. While a bank won't flat out accept the new appraiser, it can be used to challenge the first appraisal.

3) PAY THE DIFFERENCE While it might be painful, it might be the only way. Especially if you have gone through it a few times, if you start all over, it will likely happen again (unless you are willing to wait 3 months for a short sale to MAYBE close).

Appraisals falling short is occurring in about 50% of transaction. IT EVEN HAPPENED TO ME! The home I bought did NOT appraise. Yes, I paid well over the "appraisal" price. (yep soon that will be a good post, make sure to subscribe to the blog).

Thanks for hearing me out. Now I can warn my clients with a link to this post instead of giving a limited explanation to the appraisal problem. The goal is not to pressure a buyer to increase their price. I really hope this didn't come off that way. Instead the goal is to explain the process and for buyers to not ignore their own perceived "value" and ignore their Realtor, when some $20 an hour newbie appraiser from West Virginia says otherwise.

Written by Frank Borges LL0SA- Broker Owner and

UPDATE: Paul Todd, has a brilliant comment. You are brilliant! Paul says, when the appraiser calls, ask exactly where they are from. If they aren't local, then refuse access and make the lender pick another appraiser. Wow, great idea.

Map image from Scott Wall of China photo from jaaron Cowboy shot by imdan Freak out by agnes


Re-Blogged 6 times:

Re-Blogged By Re-Blogged At
  1. Nicole Borsey 01/30/2010 03:27 PM
  2. Alix Pinzon 01/30/2010 03:55 PM
  3. Ruthmarie Hicks 01/31/2010 02:54 AM
  4. Lane Midgett 01/31/2010 11:45 AM
  5. D B 01/31/2010 12:40 PM
  6. Dana Devine 02/01/2010 05:10 AM
  7. Harry F. D'Elia 02/01/2010 07:46 AM
  8. Tony Grego, 317-663-4173 #1 Trade Association for Alternative Inv 02/03/2010 10:09 PM
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Shanna Hall
Real Estate Solutions - Kirkwood, MO
I love selling houses!!!St. Louis, MO 314-703-1311
I have heard that there are talks about repealing this "law" about no talks between appraisers and lenders... Let's hope it happens quickly!
Feb 01, 2010 10:26 AM #94
Melonie Rich
Keller Williams Realty - Mount Juliet, TN
Frank, I just had a listing in my own neighborhood for $400,000. I've lived in this neighborhood for 10 years. Appraiser came from a county 40 miles away and appraised the home for $320,000! We were floored!
Feb 01, 2010 12:40 PM #95
Mark Cohen
Eyemark Realty, Inc. - Gainesville, FL

I recently had an appraiser come from 250 miles away.

Mark Cohen, Broker, Eyemark Realty, Gainesville, Florida USA

Feb 01, 2010 01:26 PM #96
Christine Donovan
Donovan Blatt Realty - Costa Mesa, CA
Broker/Attorney 714-319-9751 DRE01267479 - Costa M

I miss having my knowledgeable, local broker and having to use unknown appraisers.  I also like Paul Todd's idea.

Feb 01, 2010 03:47 PM #97
FRANK LL0SA Esq.- Northern Virginia Broker .:.
Northern Virginia Homes - FRANKLY REAL ESTATE Inc - Arlington, VA
Thank you for all the comments! To those that have posted that the problem doesn't stop with non-local appraisers, yes I realize that the entire system is a mess. But did you see the length of this post? I had to focus on one immediate problem that I had. And yes, the problem isn't so much non-local appraisers as it is "Sucky" appraisers. I focus on the non-local problem since I have found a high correlation of problems with far far away appraisers coming in low and making a ton of mistakes. Also it is easier to tell the lender "this guy is from 50 miles away" then it is to say "this local appraiser stinks." At first glance, the first issue is more likely to be listened to. Thanks! Frank
Feb 01, 2010 04:11 PM #98
Nikolay Pavlov
TreeHouse Appraisals - Belmar, NJ

Several appraisers explained things pretty well, however it seems like no Realtor took note (2 exceptions). It's like those comments do not exist. It's really like a room full of parrots...

Feb 01, 2010 04:51 PM #99
Nikolay Pavlov
TreeHouse Appraisals - Belmar, NJ

"Thank you for all the comments! To those that have posted that the problem doesn't stop with non-local appraisers, yes I realize that the entire system is a mess. But did you see the length of this post? I had to focus on one immediate problem that I had. And yes, the problem isn't so much non-local appraisers as it is "Sucky" appraisers. I focus on the non-local problem since I have found a high correlation of problems with far far away appraisers coming in low and making a ton of mistakes. Also it is easier to tell the lender "this guy is from 50 miles away" then it is to say "this local appraiser stinks." At first glance, the first issue is more likely to be listened to. Thanks! Frank"

Finally, some acknowledgement!! But, it looks like you are cutting corners too then, telling the lender about the "non-local" appraiser instead of the "sucky" appraiser. You are blaming the "non-local" appraiser unfairly to make your life easier. Not cool. And a bunch of followers are breaking their beaks repeating your sermon. Even more not cool.

Feb 01, 2010 05:02 PM #101
Aaron Silverman, Bluewater Property Management, LLC and Lowcountry Turnkey Properties, LLC - Charleston, SC
Improving Real Estate Experience through Education

The new appraisal system leave a lot to be desired.  The first problem you list is hands down the biggest one.  An appraiser has no incentive to do a good job, timely job, accurate job or even professional job.  Very sad, and it will hurt in the long run.


Feb 01, 2010 10:56 PM #102
Richard Glesser
North Country Appraisal Services - Gaylord, MI

To provide some insight to the appraisers' dilemma, I offer the following example which is not uncommon.  I received an order from an AMC for a REO appraisal on a vacant canal frontage lot located off a lake in an area where few canals exist off the local lakes.  Upon completing the report, for the first time in 25+ years of appraising, there were no comparable sales within 1 year and a reasonable distance (defined in this case as a 6 county area).  I did develop the report using listings with list prices adjusted based upon typical local list to sale price ratios.  At this point, the AMC (not the endline client) rejected the report since no closed comparable sales were used.  I argued that, without comparable closed sales, the only proper approach beyond that which I utilized would be a narrative format report using developed canal front properties, calculating and removing the value of the improvements, and leaving the established land value - not done on a standard form.  After reaching impasse with the AMC personnel who shuffle the paperwork, I was finally contacted by their "chief appraiser", who obviously had far less appraisal experience with no local knowledge, but did listen to my arguments.  After upwards of several hours with the paper shufflers and the chief appraiser, he agreed that the only proper method to value the property was as I described in the narrative format which would require additional fee.  (Remember, the original assignment came from an AMC at an already below market appraisal fee based on a typical report of this type without all the extra work.)  He was to go back to the client for increased fee approval.  My next contact was an e-mail from the paper shuffler that the order was cancelled and since it was not completed to their standards, there would be no fee paid.  I am now proceeding to sue them for the fee and expenses but that is additional time.  The point is that, while I tried to exercise due diligence and properly complete the report, the AMC's have reduced local appraisers to cattle being driven to market at the least expense.  The core of the problem is the HVCC which has driven lenders to AMC's.  Relating the situation to Realtors (since any Realtor in the business any length of time has done substantial work for no pay), if all buyers and sellers had to go to some giant organization which then assigned them to local Realtors based solely on who would work for the lowest commissions, how would that change the real estate sales market?

Feb 01, 2010 11:27 PM #103


All appraisers should be completely insulted by your post (and actually some other posts here). Why wouldn't an appraiser have incentive to provide a good report? We are professionals just like any others. Our profession shouldn't be judged by a few incompetent appraisers just like I wouldn't judge agents from a few incompentent ones. Like another appraiser mentioned here, good appraisers will provide a quality report even if they take less money for it. Would you provide your clients less quality of service if the BAC is only 1% versus 4%? I would hope not since that is against your ethics rule as well as ours. Appraisers have every reason to provide good reports. Good appraisers get referrerals for private assignemnts (perhaps prelisting assignments), get the abiltity of being on the rosters of quality lenders, can be considered experts in their respective fields (thus being able to charge more or do expert withness testimonials), not to mention the ability to keep our licenses and not gettting sued. In today's real estate environment, if your not a competent appraiser, its going to catch up with you. Appraisers put a lot of effort in the ability to get their licenses and maintain it and there is a lot of liability that comes along with this profession.

Feb 01, 2010 11:34 PM #104
Lyn Sims
RE/MAX Suburban - Schaumburg, IL
Schaumburg IL Real Estate

Where have you been guy? This is nothing new, there have been so many great posts on what to do for re-appraisals, etc.  Now the new law is supposed to be changing this but I'm not sure when it will go into effect.

Feb 02, 2010 02:22 AM #105
Jay & Jewell Kaiser
Jay Kaiser (Exit Mountain Realty) - Brevard, NC

Last year our company had several deals go south as they brought in appraisers that knew nothing of our market. As example they took a customhome built by one of our best builders and designed by Al Platt that did the HGTV home 2 years ago and coped it to a track builders home that was not the best quality by any standards. So in short it killed the deal.

In hind sight we should have turned in the appraiser as the agents tried to help with comps but the appraiser stuck his nose up at us. We even paid for an independent appraiser to prove the point but the bank wouldn't use it. Wake up America, Wake up banks, Wake up appraisers and stay in the market you know!

Feb 02, 2010 07:29 AM #106
George Wilson
Lincolnton, NC - Lincolnton, NC

Frank, Great post. Another thing to consider is that with the AMC's taking the lion's share of appraisals, locally owned & operated appraisers are losing business & therefore are getting out of appraising property in order to provide for their own households (just look at your local board's associate members numbers, up or down?). This maybe just the first wave and it may become common for appraisers coming from outside the local area to appraise property. Time will tell if this is just a blip or the new reality of real estate appraisals as local appraisers leave creating a void for AMCs to fill.

Feb 03, 2010 07:46 AM #107
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

Appraisals are certainly problematic now. Good appraisers don't like this system any better than we do.

Feb 04, 2010 03:12 PM #108
Matt Robinson
Professional Investors Guild - Pensacola, FL

Appraisers who are not from the area have no business performing appraisals, in the same way I wouldn't list a house in a city 80 miles away.  Real estate is local, and that includes the appraisal business.

Feb 07, 2010 12:03 PM #109
Matthew Bartlett
Century 21 Masters/Lic. #01353034 - Glendora, CA

Great post Frank. This is a prime example that government is not the solution. Give them a chance to step in fix the problem, they only make it worse. But I agree the process we have now is a mess and an even bigger problem has now become a reality with these new rules wiping out many businesses for many appraisers accross the country.

Feb 08, 2010 03:03 PM #110
Jon Zolsky, Daytona Beach, FL
Daytona Condo Realty, 386-405-4408 - Daytona Beach, FL
Buy Daytona condos for heavenly good prices


I enjoyed watching your video and listening to common sense. The problem of the appraisal system is that they are trying to create an absolute system for the industry that can't be homogenous. If real estate is local, and the values in one place mean nothing to values of similar size-age-quality constructed real estate in another place, how can you automate the appraisal process?

Just no common sense

Feb 13, 2010 08:02 AM #111
I have to say I take some exception to your commentary. "most lenders and appraisers were fraudulent" is a very, very unfair statement. I have met my fair share of LOs whome have made illegal and improper requests in a an appraisal assignment. "Value must met $xxx,xxx or stop work and call the lender immediately." This is clearly on the shoulders of the brokers and loan officers whom initated the assignment. It was up to the appraiser to tell them to go pound salt. Those types of appraisals are barred per USPAP, FNMA FHA guidelines and regulations. When LOs were told it was a violation, they simply replied, "well I have other appraisers who do it all the time"! Look, I understand your frustration with sales being killed because the appraisal does not support the purchase price. I get it. What you all must understand is that our fiduciary responsibility is to the client, the funding lender. Not the broker, not the buyer, not the seller and not the real estate agent. It is to the guy writing the check and taking the monetary risk. All of this brew-ha-ha about "out of area appraisers" is nothing more than a mechinism. A way for the lender/broker to cry foul if the appraisal does not meet their expectations. It is also the ONLY way to get a sceond appraisal. The bottom line is that the data does not change. I do not care if the appraiser lives on the subject street or comes from 50 miles away the data does not change. As appraisers we pull comps in a radius around the house. We are to match apples to apples. 20% within the GLA, similar room utility, view , locational influence, amenities, age, style, site - you get the picture. An experienced appraiser will be able to recognize a variance in sales range from a base builder to an upscale builder. If model match or similar sales all sell for $250k and are similar in size quality etc- how preytell does one expand the radius to support a purchase price of $295k? How do you legitimately do that and keep your license? Answer: You don't. I have had more than one Real Estate broker submit sales that are dated, superior , distant or all three in an effort to support an agressive purchase price. An investor ranch flip with a $3500 Home Depot, white melamine kitchen, vinyl floors and very basic baths and they hand me comps that are 3/4 of a mile away, 6 months old and completely remodeled with granite counters, custom kitchen cabs and stainless steal GE profile high end appliances. They totally neglect to print out the model match comps that are flips on the subject street that sold 8 weeks ago for $80k less. After I submit the appraisal they are incensed that their sales were not used. They even go as far as to sumbit the sales to the lender - they don't make it bast the review appraiser who now sits between the appraiser and the LO at the AMC. Before the requirement of a firewall, LOs, Realtors and the like could beat the hell out of the appraiser who didn't meet the desired value. As far as using REOs for arms length transactions, EVERY market is different FNMA requires a complete analysis of the subject neighborhood and the types of sales that are being transacted. That is, determine what is driving the market; find out if there is a two tier or multi-tier market. If it is multi-tier and there are sufficient sales of arms length transactions to support the analysis of a two/multi tier market, then the REOs can be left out and the proper commentary regarding the analysis must be included in the report along with the supporting data. Conversely, if you go into a tract neighborhood and there are 19 sales and 15 are REOs, Then you have a neighborhood driven by REOs and they are tough to legitimately discount them. Arms length sellers will typically have to compete with these homes. I am speaking of tract homes with similar appointments, mind you. An appraiser simply cannot and must not expand the radius by which comparables are yielded simply to find perhaps a farther or dated sale that supports the price that they are after. It is simply a violation of of our Standards. I can guarantee if it is done, it will be caught on a review and certainly during due diligence by the UW. Most certainly an addendum will be sent by the UW requesting commentary as to why sales A, B and C were not used on the subject street that support a LOWER value. If the report is not credibile the appraiser has risked their license, legal action or worse. Lenders have access to all the data they need. They can pull all the sales in an area and certainly see at a minimum, a range of sales for the area. A purchase price that sits above that range with the only supporting sales sitting a mile or more away is a HUGE red flag. While I am positive that there are either untrained, inexperienced or unscrupulous appraisers more than willing to hit the mark, experienced appraisers whom value their license will not and should not play this game. In my humble opinion, I personally believe that it would benefit every Realtor to learn how to properly develop a CMA and or BPO and perhaps apply some minimal appraisal techniques in terms of comparable selection. Rather than focus on giving the seller the number that they want, give them a number that is well supported with data and will withstand the appraisal analysis. This would or could lessen the chance of a property being overvalued in the first place. As I said before, - the data doesn't change. A good valuation relies squarely on the shoulders of a good analyst albeit an appraiser or a Realtor; someone who can recognize trends, variances and market reactions and apply that data to develop a supported value. A supported value that is compiled by relevant and verified data is unshakable.
Mar 09, 2010 02:21 PM #112
Ellie Shorb
Compass Real Estate - Chevy Chase, MD
Realtor DC, MD & VA Luxury Home Expert

Wow, you struck a nerve and for good reason! No kidding!!!

Apr 27, 2010 04:56 AM #113
DeeDee Riley
Lyon Real Estate - El Dorado Hills CA - El Dorado Hills, CA
Realtor - El Dorado Hills & the Surrounding Areas

Hi Frank,

I think it is easier for the listing agent to present comps for the appraiser in advance verses trying to get them to adjust their appraisal after the fact.  Of course, in our area, listing agents on bank owned properties don't even communicate with the selling agents much less take time to meet the appraisers. 

Thanks for your excellent post!

Jun 12, 2010 05:06 PM #114
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