The real estate crash hit the appraisal industry harder than any other. The end result has been even more controversy as many experienced appraisers left the mortgage related side and those that remained become almost “radioactive”. The role of an appraiser, how they work and their relationship with agents is arguably as tempestuous as it has ever been. This is in large part to an incredible lack of understanding on how to communicate and work with an appraiser. In short, communication with appraisers is fine as long as that communication isn’t intended to unduly influence the outcome of the report.
The Appraisal Foundation spends a significant amount of time dispelling many of the myths surrounding working with appraisers in the current environment. The info graphic in this post hits many of the most common misconceptions and it reinforces just how inaccurately viewed the role of an appraiser is. Noteworthy:
- Appraisers do not set the value for a home. The role of an appraiser is to provide a credible opinion of value based upon comparable market data. They do not set values nor do they confirm sale prices. The market determines the value of the home, not an appraiser.
- Agents CAN SPEAK with appraisers and provide appropriate and relevant data to help the appraiser complete the assignment. They CANNOT exercise undue influence and attempt to manipulate the end result.
- Appraisers get sale contracts to fully understand the terms of the contract; they DO NOT get them to simply have a “predetermined number to hit”. The market is the best indicator of value but there are many cases where a sale price is just not supported by the comparable data. In that case, clients may want to challenge the appraisal; something that is often done.
- Construction costs for a new home have no bearing on the appraised value. The value of a new home is indicated by what the market is willing to pay, not what it costs to build.
- Owner added options and upgrades are not likely to reflect a dollar for dollar increase in value. While some increase in value can be expected, the market establishes what increase – if any – there is.
The appraisal industry has forever changed but the changes are largely internal. The role of the appraiser hasn’t changed and the only thing reinforced has been the “undue influence” aspect. That’s always been there, even if it wasn’t always adhered to in the past. The single best thing others in the real estate industry can do – particularly agents – is familiarize themselves with how appraisers work and what role they play in a real estate transaction.
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- See more at: http://hankmillerteam.com/2014/05/06/appraisers-are-not-radioactive-you-can-work-with-them/#sthash.ct07dZv2.dpuf
