“Just give me a call if value looks like it’s going to be an ‘issue’.” I hear this fairly regularly from real estate agents who ask me to let them know if the appraised value is going to be lower than the contract price. The goal is really twofold: 1) If value doesn’t seem reasonable, the agent can offer additional market support for the appraiser to consider; and 2) The agent can help prepare the seller or amend the strategy for negotiations.
Agent: Are we good on value?
Me: I can’t talk about value with you since you’re not my client.
Agent: Don’t tell me the exact number. Just let me know if I’ll be happy or not.
Who is the appraiser’s client anyway? Unless hired directly by a Realtor for a private appraisal, the appraiser should not be giving a “courtesy call” to discuss confidential information (value) with anyone besides the client. Despite the agents, home owner and borrower being tied to the transaction, the only 
client is the party who ordered the appraisal. This can be frustrating to digest, but think of it this way. If an attorney hired you to do research for a court case, you shouldn’t talk with anyone about your work besides the attorney, right? Keeping confidentiality seems obvious when talking about a court of law, but the same is true with a loan appraisal. While agents, owners and buyers may end up relying on the appraisal as a tool for negotiation and confidence in the transaction, ultimately the appraisal is really for the lender to assess whether they should risk making a loan or not. Since the lender has initiated business with the appraiser, the lender is the appraiser’s client. This means when appraisers share about value with other parties, even when they are connected somehow to the transaction, it’s a violation of client confidentiality (which can also actually damage negotiations).
Suggestions for talking with appraisers: This doesn’t mean agents and home owners cannot talk to appraisers. It’s just important to realize appraisers cannot divulge confidential information to non-clients. Since appraisers won’t be discussing a specific value with agents, I recommend for Realtors to be proactive about talking with the appraiser before the appraisal is complete, and feel free to share recent potential comps if you’d like – whether at the inspection, on the phone or via email. Also, if you are an agent, it may be worth considering saying something like, “Call me if you have any questions or need something from me to support your value” instead of “call me if there are value issues.”
Question: Realtors, do you find appraisers do share value with you when you ask? Or do appraisers say, “sorry, I can’t talk about the value with you”?
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That is a good point you make about not being able to communicate or even give hints to the RE Agents involved about value.
Shoot, even me as the lender who hires the appraiser cannot get the appraiser to give me an indication if the appraisal will come in $50,000 short of the negotiated selling price.
Do you often discuss anticipated value with the lender who hired you before the report has been completed?
Hi Brad, thanks for checking in. Great question. I do not give any indication of value beforehand for loan appraisals. Anything can change in the process of research, so beyond ethics, it’s bad news to share value since it would create unnecessary stress anyway. Also, appraisers are liable for even verbal values (a verbal value is technically an appraisal), so appraisers have to be really careful. Sometimes investor clients like to hear the status of reports and talk about the market before I’m completely done with reports.
As an appraiser we do hear this question all the time. VA has an interesting process called the Tidewater Initiative from 2003 which allows an opportunity for a designated “point of contact” to provide market evidence for the appraiser’s consideration Prior to establishing the final URAR value. The appraiser can call the point of contact and say the value appears likely to come in under sales price – the appraiser cannot discuss the appraisal content but only let them know they have 2 business days to provide additional closed sales data to support the value to be considered by the appraiser. All communication must be documented.
For non VA work agents can provide appraisers with the information they used to set the sales price prior to the appraisal being done which the appraiser can consider to determine if it does in fact meet appraisal criteria. There are times an agent has data that was not in MLS or was a pocket listing that would be important to provide.
I run into all too many agents that say “this will be an easy one” with no support found in the market.
Cynthia, thank you for bringing that up. I don’t do VA appraisals for the time being, so I’ve never used that. I have heard of it. Part of me is curious why an appraiser would go through that process.
I agree with you on the importance of obtaining data from agents and/or pocket listings that can be verified. I hear that all the time too…. “you shouldn’t have any problem with this one.”
I have one on my desk right now with a sales price that is almost 70K above anything else competitive in the market. It is a private sale. I’m not sure how they arrived at that sales price, but I look forward to hearing from the buyer on how the price was established.
Ryan
The process allows for the appraiser to ask for the documentation that agent used to set their price.
This year we have seen some market with limited or no inventory and at times like that there are often more “pocket listings” that never hit MLS; therefore the appraiser would not have the information on that sale that would be necessary to compare it to the “subject” property unless they know who handled the sale for more information.
Understanding motivations and reasoning behind the contract price can help the appraiser analyze it to see if it meets the criteria for the appraisal or not. I would rather understand the thought process that set the price and analyze it prior to completing the report than to receive information that they did not realize could have had an impact on understanding the data in a reconsideration of value. A timely well supported report is so important to meeting the short timelines we currently see in sales closing. Waiting to get this information in a reconsideration of value can mean the loss of the sale or loss of a rate lock. I believe more knowledge makes for a better researched report.
That makes good sense and I agree with you. Part of me thinks the appraiser should be pursuing agents to get information already – but without saying, “it’s going to come in low”. I suppose having the extra “it might be low” card, can help facilitate an exchange of information. I do have an agent friend who recently experienced a Tidewater situation and it ended successfully for her after she did provide more insight.
I am working on a VA deal. I represent the buyer. The appraisal came in below the sale price. I’m in a quandary now because I have no other data to support the sale price. We won a bidding war. I do believe we are high, but I don’t know by how much. The appraiser told me he cannot give me the price he came up with and that it would be sent to the lender. In the meantime, do I just wait and hope it comes in before the inspection period is over? Once the lender has the appraisal can the lender tell me what it came in for so that we can negotiate the price? Thank you!
Hi Christine. Thanks for reaching out. As of right now I don’t do VA appraisals, so I welcome any colleagues to speak definitively on the VA process. Here is what I found online though as well as some thoughts below:
“In brief summary, the Tidewater procedure allows an opportunity for a designated “Point of Contact” to provide market evidence for the appraiser’s consideration prior to establishing the final URAR value. The appraiser initiates the procedure by alerting the Contact person that the appraised value appears
likely to come in under the sales price. The appraiser should not discuss the appraisal contents except to explain that the comparables located by the appraiser do not adequately support the sales price. The Contact person then has two business days to provide additional sales information in support of the sales price. Verification of closed sales is required. (Pending sales may be offered, but should only be used to support time
adjustments.)”
I am not sure if the appraiser reached out to you or not, but if you are the point of contact (as listed above), then I suppose you’ve already had a conversation with the appraiser. In that case you could have potentially supplied some other sales not used in the appraisal report already. I would think the buyer would be able to get a copy of the appraisal and/or see a revised value if it has been revised. Otherwise you would not see a copy unless someone happened to get a hold of the appraisal and give it to you. I would have the buyer reach out to the lender/loan officer so you can be in the know and negotiate if needed. I wouldn’t wait though when precious days are being used up.
Best wishes.
Christine
The appraiser cannot discuss the appraisal with you, that is not allowed in any appraisal transaction without the lenders express approval and I have never seen them give it (I have been appraising for 25+ years).
If the value did not come in at your sales price then per VA protocol the appraiser would have invoked Tidewater with the lender, requesting any additional information to support the sales contract/offer. It sounds like you do not have any; however if you had the lender would be the likely person to reach out to you to request additional information to provide the appraiser. The appraiser is correct, they can only upload the appraisal to the VA portal, then the lender can disclose the appraised value and provide the borrower with a copy. The lender’s Staff Appraisal Reviewer (SAR) has up to 5 business days after the report is uploaded to the portal to review the report and issue a Notice of Value (NOV). Not a lenders handle it the same, some will not disclose until the NOV is issued some do but it is the NOV that is the determining factor in a VA loan. The Veteran has a right to a copy of the appraisal and the NOV, you do not. The agent does not have a right to the appraisal, however they most often end up with it. The contingency period the agent’s agreed upon has no affect on the process for the appraisal, as all work must be done within the VA required time frames and in a timely manner. We are seeing contracts written that do not always allow enough time for the process to work thru and at times the lender for what ever reason does not place the appraisal request right away.
Thank you Cynthia. Good point on the contracts too.
I was involved in a private party purchase (no Realtor involved, just a lawyer handling the contract between buyer and seller). When the bank contracted appraiser was at the house doing the appraisal, the appraiser made a comment to the seller of the house that they were “selling the house way under market value” and asked why they weren’t trying to get more for the house. This seems like an ethics violation doesn’t it?
Hi Richard. Thanks for chiming in. I want to be careful about saying whether something is or is not an ethics violation because I’m not a judge and I don’t sit on a state board of any kind. I’m really not the authority to issue statements. Though I will say it’s Appraisal 101 to not discuss value with anyone besides the client. Even beyond ethics, when appraisers say things like this it can screw with any future negotiations for repairs, price changes, willingness to work with someone else, etc… To me this sounds like information an appraiser should keep to himself / herself.