I was asked a great question recently. Is it okay to share a previous appraisal with the appraiser? I would say YES and NO. Here are a few thoughts. Anything to add?
1) Data: It can be valuable at times for an appraiser to see what a previous appraiser did, especially if the property is complex. After looking at a colleague’s work, an appraiser might pick up on some insight or glean ideas for how to approach valuing the property. This happened to me a few years ago as I found out about an important easement and an illegal structure after an attorney gave me a copy of a previous appraisal. I still had to make sure the appraiser was correct, but it was nice to get a heads-up by someone who did a great job a couple of years prior.
2) The only appraisal that matters: We have to realize the only appraisal that really matters is the one the current client is going to rely on. A previous appraisal might not cut the mustard so to speak, so sharing something that isn’t any good doesn’t mean much for the current appraiser. For example, I was asked to appraise something for a private loan and the owner shared a previous appraisal with me at $1.2M. Yet this appraisal done during a conventional refinance was definitely inflated by a good 20% unfortunately. Keep in mind a previous appraiser might have included a detached structure’s square footage within the square footage of the main house, but just because it played out that way before does not mean it should happen now (I have a blog post on that here). Also, just because it appraised at a certain level before does not mean a new appraiser is going to think that is anywhere near acceptable.
3) Sharing a specific number: I was recently hired to appraise a property for a cash buyer and there was an appraisal done already from a prior buyer’s loan. The Listing Agent told me, “We had an appraisal done at $425,000 two weeks ago”, though I was not provided the appraisal. This to me seemed like more than anything the agent was trying to influence my value. I’m not saying the agent was slimy or unethical at all. I’m just saying had the agent said, “We had a previous appraisal done. You are welcome to see it if you want,” it would have felt much more like the agent was making data available rather than subtly suggesting the contract price was a reachable target for value. This might sound like I’m playing semantics or being anal about words, but the words we choose matter, and how we say things can be interpreted as influencing an appraiser or not.
4) Difference among appraisers: Some appraisers will not accept a previous appraisal because they feel like it might impact their objectivity, but others will. I don’t think there is a right or wrong answer here as everyone needs to walk out their own sense of morality. Personally I tend to accept previous appraisals in most cases because I like to see how a colleague handled a valuation and I like to double-check my sketch measurements. Moreover, sometimes it helps me prepare my report because the client might be expecting a wildly different value than what is able to be supported. Yet if an appraisal was presented to me in such a way as to influence my value or pressure me to “hit the number”, I would definitely decline and simply say “No thanks. I don’t want to see it.”
Recommendation: In short, in my opinion it’s okay to share a previous appraisal with an appraiser, but it really matters how it is done. If you have a previous appraisal, I might suggest you use my Appraiser Info Sheet to share information appraisers tend to ask about, and then say nothing more than, “I have a previous appraisal if you want to see it.” If the appraiser doesn’t want it, that’s fine. If the appraiser does, that’s fine too.
Questions: What is #5? Which point stands out to you most? Did I miss anything? I’d love to hear your take.
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Great post Ryan. That is a question that I have also been asked and many more times I’m offered a previous appraisal to look at. My opinion is that I would rather have more data than less. I rarely agree exactly with another appraiser’s conclusion, but, like you, I like to see where we differ, especially with the fact sections of the report. If I’m handed an appraisal from two weeks ago that came in at $425k, I think that if all my numbers are coming in at $425k, I would have a hard time reconciling at exactly the same conclusion as another appraiser. Personally, I would be worried that someone might say, “I gave the appraiser a number of $425 and that is what he gave me.” To that one person, might look like I tried to hit a number. That is also why when I’m at a property and people start talking about numbers or acting like they will, I quickly stop them and explain that I don’t want to be influenced or appear to have been influenced, so keep it to themselves. An appraisal on the other hand, I’ll take it, or maybe just a photo of page one and the sketch.
Thank you for your take Gary. I’m with you on having more data. I think your comment reminds me sometimes how agents can give appraisers “comps” and then think the appraiser blindly used them to make value work. Well, the appraiser may have already had those comps in his/her file because they were the best ones. In cases like these it looks like the appraiser was influenced, but the appraiser was already on top of the market. I completely get what you are saying about numbers. I’m not a fan of planting a number in an appraiser’s mind.
On a different but somewhat related note, I just watched a movie called Eye in the Sky. It has nothing to do with real estate, but there is a scene where someone basically wants another person to make the numbers work. In a way it reminded me of this conversation and how easy it is to suggest a value or tell someone what is needed rather than letting the data speak and the professional draw his/her own conclusion.
I was recently thrust into a situation where I completed a private appraisal and then was made aware of a previous appraisal (that had a higher value). It was obvious to me that the previous appraiser had padded the value, but the issue for me is how I addressed the issue with the client (who was also comparing appraisal results with Zillow). I first told the client that Zillow was typically unreliable, otherwise the banks would be using it. I had more difficulty with responding to the previous appraisal and providing an opinion without going through the review process. I more or less fumbled around with an inadequate answer that basically said I would not modify my opinion based on the previous appraisal.
Thank you Mark. I really appreciate your comment and thoughts. I think your situation typifies how big of a deal The Big Z is in real estate. I actually had an attorney hire me recently for a divorce and when the appraisal was finished she asked me to talk about the difference between the appraised value and Zestimate because the home owner was thinking his house was worth 10% more because that’s what Zillow said. This was in a tract neighborhood, but Zillow was definitely missing the market in this case. It’s like real estate professionals (appraisers and agents) almost have to anticipate this conversation and be proactive about it. It’s amazing how the world has changed.
Thanks again Mark.
Ryan, I’m with you about accepting an old appraisal. I too think that there is value in looking at the old appraisal. What if the other appraiser used a sale from a superior area but did not make a location adjustment. This could result in a higher value than what you came in at. By knowing this you can tell your client why there is such a big difference. People always want to assume that the appraiser coming in at the lower value is wrong but this is not always the case.
Well said. Thank you Tom. I agree it’s easy to assume the appraiser is always wrong. It’s pretty common in real estate culture right now to carry that belief. I think this is yet another reason to use graphs in a report. An agent I know recently had a property in contract far above anything else in the neighborhood. The thing was “comps” from across the street were used, but these sales were definitely in a different market with higher values. This is where graphs can be so valuable to help show what value has done over time in very specific neighborhood boundaries.
Good information to pass on to those that are holding on to old appraisals that might or might not cut the mustard.
Thank you sincerely Gabe. I always appreciate what you have to say.
Funny that this just happened with that appraisal you did for me back in January… another appraiser called up to ask about the transaction, and I gave him the figures from your previous appraisal.
From an agent’s perspective, if another appraiser calls me about a listing I have pending, I’ll always tell them if I have the appraisal in. It’s not my listing that they’re appraising, so perhaps the information will be helpful to that appraiser without having any influence on my transaction.
But when it comes the appraisal for our listing, pretty much every agent ever is going to try to influence the appraisal in some way. It mainly has to do with the competitive market. When you’ve got 10+ offers coming in on a deal, the main way to beat out the competition is a higher price. And buyers are willing to pay those higher prices, it’s just that we don’t always have the comps to justify it to the lender. And that’s where you guys come in 🙂
While everyone gets mad at appraisers for being realistic every now and then lol, you guys have a really important job to help protect the market from inflating like the crazy bubble we had back in the mid 2000’s.
Thanks Wes. What, you shared my appraisal? 🙂 Ha ha. This was a pre-list appraisal, so that makes reasonable sense.
There is definitely a line to not cross and it is blurry. Somehow appraisers need to be totally objective and it is not okay to try to influence the value, but agents certainly are in a place to tell the story of the marketing of the property to the appraiser. On that note, appraisers are in a place where they absolutely need to know the right questions to ask agents. I know the questions I tend to ask, and in truth that’s part of the reason why I developed the Info Sheet I linked above. I want to know certain things about the marketability of the property. I want to collect data. As far as agents go, I always recommend for agents to take off their selling hat and put on their data hat when it comes to talking with appraisers. Just share facts and numbers where relevant with the appraiser without any pressure (subtle or overt to “hit the number”). If a property is in contract higher than recent sales, hopefully that is because of the market, which can be supported with making upward time adjustments (and a higher value is usually seen in the higher pendings too). Sometimes properties get into contract too high though as we all know. It can be tricky out there right now though because there is so much upward pressure at the lower end of the price spectrum especially. In truth I think our market is still not anywhere close to the type of crazy offers we see in the Bay Area though, and I’m grateful for that. 🙂
Well said, I learned a lot from reading this blog.
Thanks Craig.
Ryan, great post as always. In my opinion, you nailed it. There is no one-size-fits-all approach. I too know appraisers that will refuse prior appraisals in fear of being “influenced”. However, aren’t we supposed to know and stay caught up on “what our peers are doing”? To me it comes down to intent. If someone is intending to influence me, then no I don’t want any part of that. But if someone is trying to be helpful and provide data (as opposed to a number), then I’m interested to see what my peers are doing, particularly on complex properties. The person’s approach steers my response – commonly the conversation goes something like “I had a prior appraisal about 6 months ago, would you like to see it?” And I typically respond “It’s up to you, I’m happy to take a look at it for measurement verification and data, but I am still required to do my own research and analysis and arrive at my own conclusions, but if you think it will help with my gathering of relevant data then sure”.
Thank you Jacob. I like your statement too. I say something very similar. I will say sometimes when doing appraisals for attorneys I end up getting a copy of the other appraiser’s appraisal. That’s always interesting and it helps me tailor some of what I say too as sometimes all parties involved might be expecting a certain value. At other times I’ve had attorneys show me the other side and ask me to do a formal review of the report and provide my own value. It’s always interesting.
I am not an appraiser but am looking for an answer to a flip-side to this question. Is an appraiser supposed to ask the homeowner what the previous appraisals numbers were? We were doing an addition and had an appraisal pre-build and post build, approximately 11 months from each other. When the second appraiser was in our house I mentioned that we had an appraisal pre-build and was a bit dissapointed in the outcome. He said, “how much did your house appraise for?” I hesitated to answer, but regrettably, did anyway. Based on what you guys are saying, it sounds like while an appraiser can “accept” appraisals if offered, that they shouldn’t overtly things that might influence their opinion (by human nature, not deliberate). Thoughts? Thank you!!!
Hi Barb. Thanks for reaching out. On one hand you opened up conversation about the past value by talking about the appraisal, so I can understand an appraiser following up.
I suppose technically a better question from the appraiser after you expressed disappointment would have been, “What was disappointing for you?” Then you could either volunteer specific information or not. Ultimately on one hand I’m a little bit less concerned about the appraiser asking in this context since the topic was there already. I would be more concerned if the appraiser introduced the topic and out of the blue asked, “What did the house appraise for when you first built the place?” On the other hand I’m conflicted because this is still murky water and it could impede the appraiser’s objectivity because that previous number might get lodged in there.
In this case we really do not know why the appraiser asked or what was done with the information. It could have been casual conversation stemming from the discontent you introduced or it could have been fishing for value context. There is certainly the negative of being influenced by a previous value, but on the positive and practical side sometimes knowing the previous value can help an appraiser prepare his/her report and spend extra time explaining certain things because the owner and client might expect something different.
I hope that helps. Any thoughts?
I’ve heard Phil Crawford’s opinion stated as “absolutely not”, that it biases the appraiser. I understand that sentiment, but I don’t entirely agree 100%. I tend to lean more toward your response in that the answer is “yes and no”. The way I treat a prior appraisal is the same way I treat “comps” provided by a listing agent – it’s just some additional data that I’ll have to sift through and figure out if it’s helpful/relevant or not. Ultimately, it’s MY appraisal and I am the sole individual responsible for the content that goes in MY appraisal. If I choose to rely on someone else’s work, it’s because I have vetted that information and found it to be reliable. Otherwise I ignore it. I think we can look at a prior report and not be biased toward a specific value or even value range. There are times where I’ve looked at a prior report and thought it was junk and completely ignored it. Again – the point is that YOU are the author of YOUR appraisal report and YOU are responsible for the content. That’s not to say that we have to recreate the wheel every single time.
Thanks Jacob. I tend to agree with you. Though I can also see the other side. I don’t know that there is one right answer here. We have to be really careful not to let our value opinions be shaped by those trying to influence. That’s for sure.