Your Role in Communicating with Appraisers
Forget the rumors that you have to keep silent. But that doesn’t mean your communications still can’t get you in trouble. Here’s everything you need to know about the appraisal process.
Dave Massey loves nothing more than to walk into a property to do an appraisal, and the REALTOR® hands him an “appraiser packet,” complete with upgrades, updates and renovations, any pertinent neighborhood data and any factors that may impact the value of the house. It’s even better if they have already sent the information before he even gets there.
“All of this is welcome information,” says Massey, owner of Massey Real Estate and Appraisals in Burlington.
So, why isn’t this the norm? Unfortunately, there are a lot of misconceptions and myths surrounding the preferred relationship between appraisers and REALTORS®. Some brokers don’t interact with appraisers because they feel it is against the rules.
“The main rule is ‘please do not attempt to influence or pressure the appraiser to hit a certain value,’” he says.
Massey is the chairperson for the NC REALTORS® Appraisal Section, a specialized division helping to advance professional appraisal careers. His advice to brokers is to take an appraisal continuing education class to learn more about the process. Classes on developing an appraisal, adjusting sales and the sales comparison approach will create not only a more knowledgeable broker, but one that can better price their listings and understand how to communicate with the appraiser during the process.
Understanding the Appraiser’s Process
“Few realize the amount of work that goes into the process before I even leave the office to do my fieldwork,” says Massey.
The first step in the process is entering data. Massey’s daughter, who is his assistant, takes the appraisal order and enters it into the appraisal software on their computer network. She then gathers the tax data, GIS data, along with deed and plat information.
Then, it’s off to the property to look at its overall condition, quality, materials used and special features. Massey gathers information for his sketch or floor plan of the house and takes numerous photos. The information given to him by an agent can assist him in this part of the process. The fact that the homeowners replaced the water heater two months ago, painted the entire outside of the house last summer or put in new landscaping recently, all matter during the appraisal process.
What doesn’t help is last-minute requests. Because of the desire to promote more efficient mortgage and real estate systems, many times lenders are not ordering appraisals until the last minute after the loan has closed.
“They are trying to save the consumer money,” says Vic Knight, president of Chapel Hill Appraisals & Consultants. “I truly buy into that, and it’s a fair way to do things. However, the outcome is that I’m getting a very significant amount of appraisal requests for what we call emergency inspections.”
For instance, he got an appraisal assignment that needed to be done very quickly. He called the agent, and the agent didn’t answer the phone, but sent a text that the door was open.
“I get to the house after driving 20 miles, go up to the front door, and there is no lockbox, and no way to get into the house,” he says. “Luckily, I found someone who knew a way to get in with a hidden key. That’s not always the case.”
Knight has had to make second trips to other properties just to get in the house for an appraisal. All of it can delay an appraisal and, ultimately, a closing.
Knight began appraising in 1979 and also served as former chair of the National Association of REALTORS® (NAR) Appraisal Committee. As someone who has been in the business for a while, he continually observes how newer brokers sometimes undervalue the appraisal process. There is a need for more communication between the two professionals.
“Their brokers-in-charge tell them not to go to all that trouble [putting together an appraiser’s package]. But, when the appraisal comes in low, brokers on all sides get upset,” Knight adds. “They don’t understand the value of having a constructive conversation with an appraiser early in the process.”
What REALTORS® Can Do to Help
So, how can REALTORS® better communicate and assist the appraiser through their process? Here is a list of tips from Knight:
- Don’t put restrictions on when the appraiser can make an appointment to inspect the property.
- When the appraiser calls, respond with as much information as needed. Return the call quickly, even if the listing has closed.
- Do the proper due diligence on your listing, which gives you a good reputation among your peers and local appraisers.
- Provide an appraiser’s package in advance, have it available at the property during the inspection by the appraiser or meet them at the property to answer questions and inform them of unique features.
- Talk to your seller or buyer about the role of the appraiser. They are not there to confirm the sales price but to give the lender an independent opinion of the property’s value.
- You and your clients can be present during the appraisal, but make sure you allow the appraiser space and time to do the inspection.
- Candy Cooke provides tips for working with appraisers to close more deals in the March 2021 Center for REALTOR® Development podcast.
Don Rodgers, executive director of the North Carolina Appraisal Board, says they often hear an agent or broker comment that an appraiser is setting the market.
“It is the appraiser’s job to interpret the market,” he says. “Appraisers do not set value. They attempt to understand and anticipate the actions of a typical buyer.”
The aim of the appraisal is not to validate the contract price but rather to estimate value under the intended use of the appraisal and applicable assignment conditions. REALTORS® should explain to their clients that the appraisal performed is an opinion. An analysis supported by data and research, but an opinion, nonetheless, he adds.
“Appraisers, however, are required to remain impartial and objective irrespective of the purpose of their client,” Rodgers adds. “The impartiality that appraisers bring is key to those that rely upon the appraisal for a financial decision. Attempting to influence the appraiser could jeopardize the process and promote financial choices that may be reckless or possibly dangerous. Trying to influence an appraiser by intimidation or open threat is inappropriate and unethical.”
Appraisal Threshold Amended
Since the mortgage crash in the late 2000s, the appraisal process got complicated. Many regulatory changes happened. The Dodd-Frank Wall Street Reform and Consumer Protection Act became law in 2010.
“It did not restrict the ability for a regular brokerage world to have a conversation with appraisers. But, you had to have that conversation early,” Knight says. “Once I finish my appraisal report and send it, the window of opportunity has closed.”
Just last fall, for the first time in 25 years, federal regulators raised the limit on most home sales requiring an appraisal from $250,000 to $400,000. According to the press release, the change came about “to provide burden relief without posing a threat to the safety and soundness of financial institutions.”
Agents should know that this new limit does not apply to homes backed by government loans such as FHA, VA, Fannie Mae, Freddie Mac and more.
Massey comments that his appraisal business has not seen a drop in appraisal orders since the number changed to $400,000. He still remembers a quarter of a century ago when the threshold increased to $250,000. He’s hearing the same questions now as in then: Will this spell the end of appraisals? Will real estate appraisers still be relevant, and will the business still be viable? “Fortunately, for the appraiser industry and the public, these fears never become reality,” he adds. “Investors in mortgage products still want appraisals. The public still wants an unbiased third party to produce credible appraisal reports.”
“Appraisals seem to be among the most misunderstood legal issues for REALTORS®,” says Mel Black, an attorney with Everett Gaston Hancock in Raleigh. He also is owner, founder and educator at BrightPath Education Services, a statewide appraisal and real estate school and remains a licensed appraiser and real estate broker.
“Make sure you know that ‘the client’ that ordered the appraisal is the lender, not your client,” he says. “A lot of agents understand that, but some don’t. It’s a basic issue.”
Also, when the appraisal report is complete, it goes to the lender—not the home owner or home buyer.
According to Black, before the mortgage crisis, many people were trying to influence appraisers, trying to sway them, coerce them or promise additional work.
“When I’m in a room full of appraisers, and I ask them if they have ever been misled during an appraisal, the hands fly up,” he says. “The myth has grown through the years that appraisers cannot be communicated with at all. The truth is that the broker can provide solid, factual data. And the appraiser can ask for it, too.”
At the most basic level, real estate brokers need to recognize that it’s the duty of competent and qualified appraisers to provide credible opinions of value for homes. Any information that assists an appraiser in that objective is not only allowed, it is welcomed.