Sacramento Appraisal Blog | Real Estate Appraiser

Real estate appraisals for divorce, estate settlement, loans, property tax appeal, pre-listing and more. We cover Sacramento, Placer and Yolo County. We're professional, courteous and timely.

HVCC

Thoughts on real estate agents influencing the appraised value

By 22 Comments

I wish every agent would be proactive about talking with appraisers, yet not everyone is on board with that. In fact, someone recently told me he thinks using my appraiser information sheet is a violation of Dodd-Frank. So I’d like to unpack two thoughts when it comes to influencing appraisers, and then give a helpful statement that might be useful for agents when sharing information with appraisers. I’d love to hear your take in the comments.

providing comps to the appraiser - sacramento appraisal blog

Two Things About Influencing Appraisers:

  1. Providing Data: As an appraiser I want as much information about the property as possible. I want to hear how the market responded to the home. How many offers were there? What price levels? What type of feedback was given from buyers and other agents? What recent upgrades have been made? The answers to these questions can be helpful since my end goal is to figure out how the subject property fits into the context of the market. Sometimes these insider details really can help paint context, so I need to be in tune with the details. I definitely prefer agents to share any sales, listings and data that were used to price the property too if possible because I want to understand the mindset of the agent or seller. Yet I am not a lawyer, so I cannot tell anyone for sure that providing sales is okay in the eyes of Dodd-Frank. I recommend each agent and brokerage to figure that out. However, on a practical level as an appraiser I know I want to get as much information as possible about the property, so I am in the habit of asking many questions. This is one of the reasons why I developed an appraiser information sheet so agents can be proactive about answering questions appraisers tend to ask.
  2. Hiding Stuff: Sometimes I hear the real estate community say, “It’s not okay to give appraisers comps because it’s an attempt to influence the value.” I get that because trying to pressure or coerce for a certain value is off-limits. That’s so 2005, right? Yet is giving appraisers “comps” the only way influence can happen? What about all the documents that are hidden on purpose from the appraiser? Pest reports, agent visual disclosures, contract addendums, repairs negotiated between the seller and buyer not mentioned on purpose in the contract, documents uploaded to MLS during the listing but then removed before the appraisal is ordered, etc… I’m not pointing fingers or sitting on a moral high horse by any means, but only saying influencing an appraiser can show up in many different ways. Sometimes it’s about what is said, but can it also be about what is not said or disclosed? Thus the conversation about influence seems to be about more than just giving an appraiser “comps”.

Agents need to take Dodd-Frank very seriously because it is professional and ethical to give appraisers space to be an unbiased neutral party in the transaction. Bottom line. Yet in my mind it is also professional for agents to serve their clients well and be proactive and prepared to answer questions appraisers tend to ask. Bottom line. Thus if you use my info sheet or something like it, I recommend using a statement like the following to explain why you are providing this type of information to the appraiser during the appraisal inspection.

A Statement I Recommend Agents to Use:

“Appraisers normally ask me questions like this, so I answered them for you to be proactive and professional. Would you like this information?”

information-to-give-to-the-appraiser

I hope this was helpful.

Action Steps: 

  1. Consider using the statement I mentioned above to help clarify and describe your actions as being proactive about answering questions rather than trying to steer a value. If an appraiser doesn’t want to take your information, respect that decision and move on.
  2. Feel free to use the “information sheet” I developed. If you think any portion of it could potentially improperly pressure an appraiser, then edit or change that portion. You be the judge.

A Quick Year in Review to Use: Here is a quick year in review graphic for the Sacramento housing market. Feel free to use it unaltered on your blog, on Facebook, Twitter, etc… I always appreciate a link back.

year in review - sacramento real estate market - 2015

Questions: Agents, what do you tend to hear in your office about what is okay and not okay to share with appraisers? Appraisers, in what ways are you being pressured right now to “hit the number”?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

The big problem of low fees in the appraisal industry

By 21 Comments

There is so much conversation about the appraised value coming in too low, but let’s turn the tables to talk about appraisal fees being too low. I know, who cares, right? But if you are a home owner or work in real estate, it’s good to know what’s going on. Is this happening during your escrows? Is it fair to pay so much for an appraisal when a huge chunk of the fee gets skimmed off the top by a management company?

Low appraisal fees - image purchased by Sacramento Appraisal Blog and used with permission

Why This Matters: 1) Low fees for purchase and refinance appraisals are crippling to the longevity of the appraisal industry. If fees are too low, appraisers simply cannot stay in business. Also, if you think it’s taking too long to get an appraisal back to you right now, just wait until the industry shrinks more as appraisers leave because they can make better money elsewhere; 2) Consumers are likely not keen to pay good money for an appraisal only to have Appraisal Management Companies (AMCs) scrape a substantial amount of the fee off the top.

Here are three real life examples of low fees offered to appraisers:

EXAMPLE 1: Low fees with the promise of bulk business

low feesComment: It’s shocking to see marketing emails like this because fees haven’t been this low for decades. Of course the consumer is probably paying at least $450 to $500 for the appraisal. The ironic thing too is the word “reasonable” in the last line. This word is used strategically because AMCs are mandated under Frank Dodd to pay customary and “reasonable” fees.

EXAMPLE 2: Cheap fees with a quick turn-time:

need a 4-day turn time at $250

Comment: Most local lenders easily pay the appraiser $400-500+ for an FHA appraisal, so $250 is definitely low. The kicker is the appraisal was ordered on a Thursday and due by Monday morning at 10am. When is the appraiser going to have time to do the report?

EXAMPLE 3: A blast order sent to MANY appraisers

field review

Comment: This was a blast order to who knows how many appraisers. A massive blast email is one way for an Appraisal Management Company to get the quickest and cheapest appraisal fees because someone is going to accept it (which is a different issue). Some AMCs use a blast email system like this with a link. Whoever clicks “accept” first gets the order. This lender is wanting to do “quality” control, yet they are reaching out to pay an appraiser only $200 for a field review of a complex property. Do you think they can get quality for such a low fee?

ACTION STEPS:

  1. Agents Find Out: Real estate agents, be aware what your recommended lenders are paying appraisers and how they order appraisals. I’m not talking about what your buyers are paying, but what are appraisers actually getting? If you are concerned about appraisal quality as well as reasonable turn times, choose lenders who build a relationship with appraisers and pay them well. There are many local mortgage companies (and some national companies) with in-house appraisal departments who hand-pick a group of local appraisers and pay them a reasonable fee. I tend to like this system the best, though there are also some larger AMCs that I hear are okay overall. Remember, what happens to one group in the real estate community can end up impacting everyone else.
  2. Appraisers: Work for Reasonable Fees: Appraisers, are you working for clients like the examples above? Or maybe you are approved with several AMCs that seem okay overall, but their fees are still too low. Hey, we all need to feed our families, and there is no fault in getting paid. But why not start looking for better clients and then begin dropping the bad ones? Heck, start an appraisal blog to share your voice and expertise. It may take many months or even years to diversify your clientele, but go for it. Who do you want to work for? What type of work do you want to do? What does it look like to be intentional about finding great clients over these next 1-2 years?

I hope this was helpful. I’d love to hear your take in the comments.

Questions: What do you think of the examples above? Does it surprise you to see these real life examples? Any stories or insight to share?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

A “cheat sheet” for agents of information to provide to the appraiser

By 24 Comments

I recently appraised a custom home, and when the order came through the property looked overpriced. I thought, “Yep, I’m going to look like the bad guy when this one appraises too ‘low'”. However, after doing all my research AND asking all the right questions to the listing agent, this property was clearly worth slightly more than the contract price. Ultimately I left the transaction feeling a bit curious why the agent did not offer more information about the property until I asked. At the end of the day her insight was actually vital since I found out there was a back-up cash offer above asking, one other full-priced conventional offer, and another listing coming on the market priced at a similar level – not to mention the feedback on the layout, landscaping, and location. The agent spent so much time, effort, and money to market this listing, but when it came to communicating with the appraiser, her approach was hands-off.

A “cheat sheet” to communicate with appraisers: What if you had a document on your desktop to simply address some of the questions appraisers tend to ask? You could quickly fill it out, and then email it or give it to the appraiser in person. Check out the document below, and you can download in WORD or a PDF.

information to give to the appraiser

This document addresses how the market responded to the subject property, and it also gives an opportunity for the listing agent to share any insight about the neighborhood, school district boundaries, market trends, important reasons buyers might be looking in the neighborhood (that the appraiser may or may not know), or insider knowledge about the subject property or street. Remember, this is potential market data, so it can be important for the appraised value. Also, you can look like even more of a rock star to your client when your client sees how intentional you are with the appraiser.

Some quick tips:

  1. Save this document to your desktop and use it for each listing.
  2. Tell the truth in everything you write.
  3. Feel free to skip, delete, or add any categories.
  4. Take 10 to 15 minutes to answer questions.
  5. You don’t need to write a novel, but it’s okay if the document ends up being more than one page (try to keep it less than two though).
  6. Remember, this information is about sharing facts instead of pressure to “hit the number”. This is exactly why it’s okay to share this type of information.
  7. Try to avoid subtle pressure statements like, “Please get value as high as possible”, or “We really need this one to work out”, because that comes across as trying to steer the value.
  8. Be specific about upgrades. For instance, instead of saying, “The house was remodeled throughout,” unpack what that means and when any remodeling was done (if you know).
  9. If you don’t feel comfortable providing sales or listings to the appraiser, that’s okay. However, if you do provide sales, make sure they are actually competitive to the subject property. If you know the sales well, you can always write out any differences at the top of the MLS sheets. I recommend saying “here is data I used to price the property” instead of “here are your comps”. If the appraiser doesn’t want to take any sales from you, maybe the appraiser would still take this information sheet.

DOWNLOAD the WORD DOCUMENT or DOWNLOAD a PDF.

Is there anything you’d tweak about this document? Speak up or offer constructive feedback below. If there is enough response, I can post a second round of an improved document in a few weeks. I’m all for better communication, and I would LOVE to get more information like this on a regular basis.

Questions: Do you think this document would be useful? Anything you’d add or take away?

If you liked this post, subscribe by email (or RSS). Thanks for being here.

How to work with appraisers before, during & after the inspection

By 2 Comments

Are you doing all you can to work with appraisers? The appraisal is one of the most important parts of a real estate transaction, yet many agents have a very hands-off approach when it comes to communicating with appraisers. Sure, you don’t want to pressure for a certain value, and it can be hit and miss whether the appraiser will even talk with you. But at the same time there are definitely things real estate agents can do to help communication flow, which in turn can make a huge difference in the appraised value. Enjoy some practical tips below. Anything you’d add?

prepare for appraisal inspection - image purchased and used with permission by sacramento appraisal blog - 530

BEFORE THE INSPECTION:

  • Let your seller know how intentional you are about communicating with appraisers. This will help you look good.
  • Make a great impression on appraisers. In an industry that tends to think of appraisers as a necessary inconvenience, why not stand out from the crowd? What does it look like to represent your industry well? Do that.
  • Choose to have a positive attitude about this next transaction even if your last deal didn’t go well because of the appraisal.
  • Make a written list of all upgrades to give to the appraiser (with costs). Or have your seller make the list for you. Use my information sheet format if it works for you.
  • Choose some competitive sales and listings you used to price the property. Write out any significant differences between the “comps” and the subject property at the top of each MLS sheet. You might know something important about some of these properties that isn’t obvious. Share that type of stuff because it can make a huge difference sometimes in the appraised value. Make sure your “comps” really are competitive though. This means a buyer would theoretically purchase them instead of the subject property.
  • Make arrangements for the appraiser to have access to all rooms and structures at the property.
  • Realize the appraiser may have just received this order and probably has one week to complete it.
  • Please make sure the dog is tied up (have your seller pick up the poop too).
  • Prime the meeting, “I’ll have some information for you”.  Is there anything you need from me?

Image purchased at 123rf dot com and used with permission - 14688774_s - smallerDURING THE INSPECTION:

  • Be the professional and give off a personable vibe. Be awesome.
  • Be emotionally fresh (don’t bring appraisal baggage from the last transaction)
  • Don’t rant about the last appraiser who was an idiot.
  • Say “hello” to the appraiser first before talking on your phone and returning emails.
  • You might want to ask the appraiser if it would be best to chat before the inspection begins or after the inspection. Plan to have a brief conversation.
  • Helpful statements: “Let me know if you have any questions about the property or neighborhood” or “Call me if you need anything.”
  • Share your list of potential comps and say, “Here are some sales I used to price the property.” You’re only saying “have a look at my research” instead of “Here are your comps to use”.
  • Give a written list of all upgrades and repairs made.
  • Share insider information. How many offers, showings and calls did your listing have? What were buyers attracted to about the house? What sort of feedback did you get from agents? This type of information is often useful because it’s market data for the appraiser to consider. Please be honest.
  • Share any neighborhood information you might have. Is there something you know about the street or community that impacts value (or will impact value)?
  • You can walk around with the appraiser, but don’t hover. It’s probably best to give a little space so the appraiser is not distracted. Remember too if you walk into a room first, this means the appraiser will have to wait for you to get out of the way to take a photo.
  • Point out anything you think the appraiser should know about.
  • Avoid subtle pressure statements (I hope it “appraises”, I really need this to “make value”, You shouldn’t have any trouble “meeting value”)
  • Get the appraiser’s business card.

AFTER THE INSPECTION:

  • Hope and pray the value will be okay.  🙂
  • Email the appraiser to say it was nice to meet and that you are available for any further questions (remember, you got the appraiser’s business card).
  • Remember the appraiser probably has a number of days or even one week to finish the appraisal (so don’t call multiple times).
  • When the appraisal report is finished, pour yourself a cup of coffee and enjoy an enthralling read (that’s sacasm). Seriously though, as you open up an appraisal report, forget about minor clerical or spelling errors. Focus on issues that can really sway value. Is the square footage and bed/bath count correct? Does the value make sense for the neighborhood? Are the comps good substitutions for the subject property? Do adjustments make sense? Are the neighborhood boundaries correct? Was the market described correctly? (increasing, declining, stable)
  • If the value is off-base, you can use the lender’s rebuttal system to challenge the appraisal. It won’t do you much good to contact the appraiser directly, so use the lender/loan officer as a vehicle to help communicate with the appraiser. If you end up asking for a reconsideration of value, focus on critiquing comps and give the appraiser at least two other sales to consider. Try to build a case for why the value should be re-examined rather than making an emotional argument void of market support. Don’t suggest a target value either, but let your research speak for itself.

I hope this was helpful.

Questions: Anything you’d add? What have you learned about working with appraisers?

If you liked this post, subscribe by email (or RSS). Thanks for being here.