Great ... The Appraiser Undercut the Sales Price! Are You Sunk?

By
Real Estate Agent with Keller Williams Realty

Business Man Thinking clipart

First of all know that an appraiser is often time shielded from having direct conversation with the loan officer, agents, buyers and sellers.  This wall of division from the appraiser was implemented to protect them from being unduly persuaded to meet a price goal.  No undo influence.  The path for communication may be filtered through the underwriter who can review information prior to submitting to the appraiser.  

A reconsideration of value can be sought.  Things to be aware and incorporate in this reconsideration are:

• Request from the lender a list of the comparable sales the appraiser utilized.  If you can get a copy of the appraisal, go for it.  Also if they will release this information - what adjustments were made on the report?  How did they value certain improvements of the home being appraised?  Get into as much knowledge on the front end as possible.

• Be thoughtful in the choice of comparable sales that you submit to elevate the price.  Appraisers try to use homes that are within 6 months in time frame of sold date, same neighborhood, similar square footage, similar age (don't throw in a new home if your home is preowned and there are several sales that sold as preown). Eliminate sales that have amenities that are far superior like pools, views, condition where you property is not as appointed.  In other words select homes that are most like your property and would require little to no adjustments.

• Be aware of homes that may have had seller contribution to buyer costs.  The appraiser probably deducted that out as an adjustment so that would lower the value of the comparable sale.

• Find out what the square footage adjustment utilized on the report.  It is not the price per foot but a lesser amount that just reflects the living area.

• Trouble shoots information.  If sales utilized on the appraisal has problems like odor, finish quality understated, condition, traffic or negative influence be aware and see if the appraiser made appropriate adjustments to reflect these differences.  If not, provide verifiable information to the appraiser regarding the problem and that it should be reconsidered higher because of the negative for this issue.

• Quality of the home.  Sometimes an appraiser is unfamiliar with an area and uses comparable sales that were from an inferior builder in the area.  Point this out and why your home has more quality - points of difference.

• If your sales price exceeds the list price then there may be a problem.  If the home has been listed for an extended time at the list price then it probably will not value over that unless there have been some verifiable condition changes on the home. 

Remain professional; never lose your edge of a business productive conversation.  Stay away from any comments that would be condescending.  Remember the honey rule ... no time to dish out the vinegar.  You have a goal and that is to get the value elevated. 

Huge Tip - NEVER, NEVER start a conversation with an appraiser or underwriter with "well the price per foot in the neighborhood/area is ...".  That is the quickest way to shut the appraiser down in conversation and stop listening to your input.  Appraisers do not,  again I repeat, do not value with a price per foot.

The best proactive tip is to submit to the appraiser upfront good information about a property so that there will be less likely problem of the value being cut.  But those tips will be in my next blog.

 

Comments (5)

Mike Klijanowicz
Cummings & Co. Realtors - Perry Hall, MD
Associate Broker @ Cummings & Co. Realtors

6 months?  The appraisers that I meet with nowadays want the last 90 days MAX.  I have also had a few get sent for a re-valuation of property prior to settlement lowering the overall value...

Feb 05, 2009 03:52 AM
Connie Goodrich
Keller Williams Realty - McKinney, TX
CRS ABR (McKinney Realtor)Texas

Yes 6 months but appraisers can use up to one year.  It all depends on the area, unique features of the home and location.  The comparable sales date used also can be restricted by certain lender requirements so the 3 months you are seeing is for that purpose especially in a down market.  Where I am located, the market values for the most part are stable.  Good luck!

Feb 05, 2009 04:02 AM
Kim Dean
www.GoSimplyTexas.com - McKinney, TX
Simply Texas Real Estate - Broker/Owner

Connie - I had to have another appraisal done on a listing last year. The first appraisal came in way too low, using all the wrong comps...the second one came in, but said that the foundation HAD to be fixed as a condition. Talk about frustrating!

Feb 05, 2009 06:42 AM
Stephen Kappre
KW Hometown - Mantua, NJ
Helping You Home

I find this interesting just because of all the "stuff" that will be underway ordering appraisals from a central office, etc.

Also, in the past we used comps even over a year old with "white elephant" properties - even comps some 10-15 miles away when you have very unique properties. BUT that was an appreciating market. I'd be completely surprised if any appraiser, or lender for that matter, worked on comps over 6 months. Not to say it won't happen, but in a depreciating market, everyone gets all funky.

Keep in mind too if it is an FHA appraisal, that goes in the system. Conventionals have a bit mroe flex.

Feb 05, 2009 08:24 AM
Connie Goodrich
Keller Williams Realty - McKinney, TX
CRS ABR (McKinney Realtor)Texas

I'm fairly fortunate to be in the Dallas, TX marketplace where we have had fairly stable home values.  In a declining market the lenders certainly will look towards the more 90 day sales or expect some depreciation figure to be applied if the values are going down and there are a limitation of sales for the analysis.  Comparables a distance always has presented some issues unless the buyer is very strong and a nice amount down.  Appraisers cannot manufacture non-existant data so the lender sometimes either can accept the explanation of time of sale, distance, etc. or just flat out refuse to make the loan.  Unfortunately they may deny and that home may have difficulty with buyers able to purchase due to limitation of mortgage companies willing to lend.  Catch 22.  Thanks for your comments!

Feb 05, 2009 08:36 AM