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.
Two Things About Influencing Appraisers:
- 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.
- 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?”
I hope this was helpful.
Action Steps:
- 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.
- 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.
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.
Great post Ryan. Real estate agents can and should provide information to the appraiser and the appraiser can and should ask lots of questions.
Agents are the ones with their finger on the pulse of the market.
Agents know first hand how prospective buyers view a particular property.
Agents know more about the property that they are selling than most other parties.
If there is not a flow of information from agents to appraisers, then appraisers will have a much more difficult time of getting things right.
I sincerely agree. Thank you Gary. Agents have given birth to an escrow and have been with the property for weeks or months in most cases, whereas an appraiser is parachuting into the situation toward the end. There can be a helpful exchange of information then…. if the right questions are asked and/or the right information is given.
Very nice, Ryan. The more info the appraiser has regarding WHY a particular property sold at a particular price; the better.
Very well said, Wendell. Thank you. Anyone can see facts such as square footage, lot size, bed/bath count, and sales price. But why did it sell? Who was interested in it? Who else was willing to buy it? Why did the seller accept the offer? What were other offers coming in at? Very relevant questions. Thank you again. Nail on head.
Eeeeeexcelent post Ryan!!! Just what I needed, thank you soon much! 😉
Thanks so much Bev. Hope the new year is starting out well for you!
2016 is going to be awesome, thank you! I hope the same for you and the family! 🙂
Great post-Ryan! There is a difference in sharing information and coercion. Recently, we were appraising a property and there was a sale in the neighborhood that appeared to be below market value. It really didn’t make sense with the other sales so I contacted the real estate agent to find out about the sale and I was informed that the property had foundation issues. There was nothing about this anywhere in the MLS and there was no way for us to know unless we had reached out to the agent. I have always felt that the more information we have the better we can make decisions about market reactions when appraising.
I appreciate you making that distinction. Thank you so much. I completely agree with you about the difference between information and coercion. However, I have had some people say, “But sharing ‘information’ like this is really meant to influence the value.” It’s not really my place to argue either way, but this is where I draw the line to say: 1) I’m not a lawyer who can interpret Dodd-Frank; 2) As an appraiser I want as much information as possible, so agents can decide what to do. I appreciate agents being intentional and proactive to answer questions appraisers normally ask. Thanks Shannon.
Agreed. Great discussion here. Thanks, Ryan!
Ryan, thanks to you I never feel bad talking to an appraisers. I know they are going to use the information that’s appropriate to use however I will provide list of upgrades or any other info that’s not evident as well as my comps justifying list price.
We all want to do the best job for our clients.
Good for you Jana. I’m so glad you are intentional about talking with appraisers. Thanks so much.
I can’t really fathom any type of information that wouldn’t be okay to share with an appraiser… the more they know about the properly, the more accurately they can appraise it, right? So how could someone say there’s something they shouldn’t know? Seems like a strange idea to me.
Hi Yuliya. Thank you for the comment. I appreciate your questions too. There is often a line that is crossed to pressure appraisers to “hit the number”. This happens in subtle and overt ways. For instance, imagine the common scenario of handing an appraiser “comps” and then saying, “Do your best to hit the contract price.” I’m not bringing out the hammer of judgment for such a statement, but at the same time I’m guessing an agent would not say that if the Department of Real Estate happened to be on the inspection too.
In my mind it’s sometimes about how the information is shared rather than having information shared. While the former example is an example of very mild pressure, that could have been avoided altogether if the agent filled out my information sheet (or something else) and said something like, “Appraisers normally ask me these questions, so I helped answer them on this sheet. I also often get asked how I came up with the list price. I’ve attached some research if you’d like it.”
Can more information lead to a more accurate value? Probably so. But does the real estate community want a more accurate value that exposes more of the faults of the home? This is why documents and repairs are sometimes not disclosed to the appraiser from lenders, appraisal management companies, agents, etc…. Certain repairs can delay or stop escrows in the eyes of lenders (and appraisers too), so that is certainly part of why information is sometimes not shared.
Thank you again.
There needs to be an impartial clearing house of information that appraisers can access without having to go through agents. That would make your job much easier.
Hi Sarah. Thanks so much. I would love to see one place where all documents had to be uploaded so there would be something closer to full disclosure to appraisers. But then again, the temptation would be to make sure certain bits of information doesn’t make it into the documents in the first place. What is not written cannot be read. 🙂
I actually do like talking with agents because agents often have very relevant insight into the property, neighborhood, and how the market responded to the home. This is exactly why agents need to be proactive to communicate with appraisers. I would hope appraisers would be proactive about asking the right questions too. Over time hopefully communication can improve. That’s all we can hope for.
Ryan, you make an interesting point about items being left out or kept from the appraiser. I agree that this can also be construed as influencing value. On a final note I would like to say that appraisers are trained and educated professionals who take the information given and sift through it to see if it is relevant. We are not easily influenced as we have too much to lose if we are found guilty of shoddy appraisal work.
Thanks Tom. Yeah, I just like to bring up that point because it’s worth conversation at least. This conversation often only focuses too much on the act of providing comps. I appreciate your commentary on professionalism. It is certainly true that appraisers have to sift through information to recognize relevancy.
Look, I’m all about getting information from agents, but there have been too many times where the agent has flat out lied through his teeth about certain information pertaining to the property. The agents are there to sell and influencing the appraiser is not something they should have any part in. As an appraiser, our job is to be unbiased and if you let an agent influence the value then you are doing exactly the opposite. As an appraiser, we don’t need to know why the seller selected the offer, what sales influenced the value, feedback the agent got, etc. The most I would ever want to know is a little bit about the neighborhood and the upgrades the sellers did the to property.
Thank you Austin. I appreciate your thoughts and you are always welcome to share your take.
I agree there is a definitive line not to cross. Agents need to be profoundly careful about not influencing the appraiser. Their duty is to get the best possible price for their client, yet agents are still bound by ethics and must be ethical. Bottom line. I too have had agents lie and it’s disappointing to say the least because I cannot trust that agent again. Sometimes when an agent says “there have been multiple offers”, I’ll ask the agent to email me all the offers so I can know whether that is true or not. I do that very respectfully of course and it’s great to see an agent is indeed telling the truth. Keep in mind one of the reasons why it is valuable to get information like this in writing is that it’s one thing to say “I had 4 offers” while on the phone and another to put it in writing. I think sometimes we are more prone to tell the truth when we put something in writing (obviously that’s not always true (I’m just saying there is something to that)).
I get what you are saying about wanting to stick with your list of what you want from an agent, and that’s fine if it works for you. Yet the reason why I think these questions I included are actually important is because the answers help paint a context for value. How does the subject property fit into the context of the market? That’s the question I”m attempting to answer in my appraisal report, which is why I need to do all I can to get information about what happened when real buyers and a seller engaged with the subject property on the open market. Thus the answers to these questions might help give me perspective on the property. As we know, real estate is not just about facts like square footage and lot size, but about emotion. Thus understanding what is behind the offers and what is motivating buyers and sellers is a very key point in my mind (and these things are not readily understood all the time unless we ask the right questions and dig deep for the answers). I understand some appraisers don’t want this sort of information, but sometimes the background details on the subject (and the comps) can really help paint a picture of the way buyers and sellers are viewing certain aspects of a property or the market.
I don’t think appraisers need “comps” from an agent, but personally I like to ask an agent for the sake of perspective. Once in a while I might see something I wasn’t seeing before. Yet other times I see very clearly that a property was priced based on other homes that don’t compare at all. In many cases a property will simply be priced using price per sq ft figures that are totally irrelevant for the subject. Personally I like to see this type of information and it can even help me craft a report to help address some of these issues in the final reconciliation section so I am telling a compelling story of value in the report.
I agree with you our job is to be unbiased. I don’t view this type of information as letting an agent influence me at all, but only giving space for an agent to tell the story of the property in a way that sticks to the facts and gets specific about the transaction. I teach classes all the time and I tell agents to stick to the facts of the property and tell the story of the marketing of the property without pressuring appraisers to “hit the number” in any way. Vague statements like, “buyers loved the home” or “this one should have no problem with value” do nothing to give the appraiser any real data or perspective to consider. I’m not a fan of any statement either that gives even subtle pressure to “hit the number” so to speak. But when I hear how important an open room concept was to buyers or how vital the local elementary school is, that is something I may want to pay attention to because there might be something there for me to consider through the course of the appraisal and in comp selection. Knowing why the seller selected the offer too can be telling at times as to why the contract is much higher or lower than other offers (and the comps). Sometimes I might find out a family member or neighbor’s offer was accepted too, and that’s definitely valuable. Could I appraise the property without that information? Sure. But why not ask and potentially get information that might be useful in some way? It’s only potential perspective or data that might help me get a better understanding of how the subject was perceived in the market. Or if I hear there were 7 offers on a property at or above list price, and my value is looking like it is lower, maybe there is something more I am not seeing about the market (for any onlookers, multiple offers doesn’t mean the appraised value is going to be that high for many reasons). In that case I would go back to some of my pet questions and ask them. Maybe I am missing something about the context of the market or the location of the property (maybe not too of course).
Ultimately I want as much data and perspective as possible from agents so at the end of the day I can do my job well and come up with a supported value conclusion. Of course I’ll sift through any baloney that is thrown my way.
It’s worth noting that what an agent tells me might be very important and give me some fantastic perspective, yet the proof of value is going to be found in the comps and other data. Appraisers aren’t going to give full weight to what an agent says and blindly gloss over comps and data.
For any appraisers reading this comment or thread, please know I have a high respect for the diversity in how appraisers approach interacting with agents and reconciling value. There is no one way to do it right and nobody has to do it like me either. If anyone does have a better way or you want to make my “Info Sheet for Appraisers” better, please do so and email it to me.
Any thoughts?
Appraising a property in an area that is not homogenous and in an upcoming and coming neighborhood can present challenges for appraisers. I happen to sell in those areas and if you get an appraiser who mostly does suburban homes and are not familiar with urban areas, is where I see most problems. You can have two homes same square footage in the same neighborhood and the remodeled home has 6 offers and if the appraiser isn’t familiar with those types of areas he/she will usually go with a lower offer not knowing buyers in those areas have no problem and are buying because they can see the changes. These are usually areas close to large urban cities.
Thank you Kevin. I agree. This is exactly why appraisers need to be cautious about accepting work if they are not competent in the market area. Or if they accept, they need to let the client know what steps they’ll take to become competent. On paper it can look like value is one way, but in reality it might be another with a proper understanding of the market. Again, thanks for the thoughts.