What is the best way to protest a bad appraisal? By following these 10 steps, consumers and real estate agents alike will be able to refute a faulty appraisal. The goal is a “Reconsideration of Value” that accurately reflects the current market.
Step 1: Check the appraiser’s qualifications. What category of license does s/he have? Is s/he qualified to perform the appraisal? Has s/he ever been disciplined or fined? Is s/he local or is s/he they driving over 100 miles to get to the property? Ask the appraiser these questions, then double check the answers online in your state’s professional licensing division.
Step 2: Hire an expert local Realtor to conduct market research. Realtors have the best access to data and can double check the appraiser’s comparable sales for accuracy. They also can provide fresh and pertinent data the appraiser may have overlooked.
Step 3: Get a copy of the appraisal and examine it in detail. Is the data the appraiser reported correct? Data is frequently reported incorrectly because of the appraiser’s haste or lack of attention to detail.
Step 4: Take notes. Starting at the beginning of the report or grid, examine each line item. Point out in detail every error and omission. Add any pertinent data omitted from the report.
Step 5: Gather evidence. Evidence should include photos, floor plans, plat of survey, assessor’s records, MLS copies of most recent comparable sales, pending sales, and sales that didn’t appear in the MLS (such as for-sale-by-owners;) and most importantly, written statements from local real estate experts, brokers, agents and/or attorneys.
Step 6: Armed with supporting new data, exhibits and professional opinions—and the flaws contained in the appraisal—write a rebuttal report or ask your Realtor to do so. Title the report “Complete Field and Desk Review of Appraisal Dated _____________, 2010 for the Property Commonly known as __________________, City of _____________, County of ____________, State of __________________.”
Step 7: Clearly state both at the beginning and at the conclusion of the rebuttal report that if the flaws and discrepancies are not addressed and immediately corrected, all involved parties will have no recourse but to report the appraiser to the licensing board for further investigation. Attach all evidence gathered (in Step 5) as separate exhibits in the report. If the report is prepared by the Realtor, have them attach their professional qualifications—and a copy of their state issued license as the final exhibit.
Step 8: Have the rebuttal report professionally bound.
Step 9: Make a list of all involved parties in the transaction. This will typically include the (1) loan officer, (2) underwriter, (3) bank president, (4) buyer’s attorney, (5) seller’s attorney, (6) buyer, (7) seller, (8) the appraisal management company, and (9) the appraiser.
Step 10: Copy all parties on the report—absolutely everyone.
If an appraisal is not true to the market, it in fact, runs counter to the very definition of Market Value as defined by USPAP. It is a false opinion from a government licensed or certified “professional.” False opinions—when stated in writing—that damage other parties—are actionable in a court of law.
When the Appraiser makes the initial contact with me to gain access to the home I ask them if I can have a conversation with them about the property. Frist, you want to always make sure you as the Listing Agent are first contacted by an Appraiser. Based upon their answer I know instantly if we're going to have a challenge.
Next, I immediately ask the Appraiser if they will share their email address. Next, I ask them if they have done a preliminary search of comparables for the subject property. Then, I ask if they would allow me to share my research? I tell them I desire to be both helpful to them and to save them some time. If they have given me their email address they are going to get my research before they tour the property.
Upon scheduling access to the property, I meet the appraiser at the subject property with a copy of my comparables I give to them before they tour the property. Please know in my telephone conversation and my in person meeting I am very respectful of their expertise.
I have found it is this kind of homework we as Listing Agents do in advance helps get our listings appraised properly. May I add, this technique primarily works when I know I have strong comparables to support the sales price. What I mean by strong comparables? They should be no older than 6 months old, similiar square-footage, and hopefully within 6 blocks in any direction of the subject. Make sure you have a minimum of 3 solds selling for near the subject's sales price!