Why Is the Appraiser My Friend?
As a REALTOR®, and a former Mortgage Loan Officer, I have worked with many Real Estate Appraisers, some better than others. I have worked with many Home Inspectors, Insurance Agents, Lawyers, Government Officials, Underwriters and Loan Processors; and several things can be said of each profession as well as our own. Among them are words of praise, criticism, observations, and misconceptions, and an assessment that some are better than others.
Today, I was wondering how much REALTORS® really know about Residential Appraisers. Are REALTORS® aware that before appraisers are permitted to sign off on properties, their work MUST BE REVIEWED by their sponsoring appraiser, and this is on every appraisal for a year or more? Where agents and loan officers are required to take a couple of classes and a State exam, appraisers must take close to a dozen courses and State exams. Additionally, once they receive their designations, they must apply to each lender, individually, provide samples of their work, resumes, letters of recommendation, as well as carrying E & O insurance. Then, they spend the remainder of their careers being second guessed by homeowners, REALTORS®, contractors, home builders, governmental bureaucrats, and underwriters.
The appraiser must determine value (1) based on Closed Sales, (2) Replacement Costs, and (3) Rental Income when appraising Income Producing Properties. They must take their own photos (interior and exterior) of the Subject Property, and exterior photos of the Comparable. Appraisers must check public records, address easements, encroachments, right-of-ways, report economic impact, demographics, and justify why they used the selected comps as well as why they did not include other properties. Their comps must meet numerous criteria, and be adjusted +/- dollar figures where such differences as fireplace, bathrooms, garage and basement space differ, square footage, lot size, age, etc. That is a great amount of work, and the final product may well make or break a deal.
How many of us have ever sat down and reviewed the Uniform Residential Appraisal Report, FannieMae Form 1004? Among the Sections that the Appraiser must complete are details about the Subject Property, Analysis of the Contract [Note that FannieMae REQUIRES the appraiser to review the contract], the Neighborhood, the Site, the Improvements, Sales Comparison, Reconciliation, Cost Approach, and Income Approach.
The Real Estate Appraiser is the EXPERT OF RECORD on VALUATION, and the first thing one learns is that BUYER & SELLER establish the basis for arriving at property value opinion. The appraiser’s task is to consider all aspects of the sale before making that determination, such as Is the property as Seller represented, and Buyer presumed? Are their factors beyond Seller and Buyer’s knowledge and understanding? Example: Seller represents square footage as 3,000 sq. feet; but included a non-heated porch/room within that figure. After correction, does the value of the property remain sufficient to support the agreed upon price?
Over coming weeks, I would like to delve into the expertise, responsibilities and other elements of the appraisal process, and the vital role played by the appraiser. I welcome input and questions, and I hope to help others come to know the great contributors to our profession, whom we call appraisers, and many may go so far as to call them friends. I do.
May this serve to recognize the work of those who begin their days with the sun, and outlast it's rays on many days.