BLOG VIEW: The home appraisal has been requested … and the waiting begins. As a lender, many questions race through your mind: “Will the property condition be acceptable? Will repairs be needed? Will the appraiser give credit for all the upgrades in the home? Is the appraiser familiar with the neighborhood? Will the appraiser use good comparables? Will the appraised value be sufficient for the loan?”
It is not difficult to guess what you are thinking: “If I have questions, what am I allowed to ask? Will I be seen as overstepping the law? Should I trust that my appraiser is correctly valuing this house?”
Real estate professionals often struggle with confidence in knowing where their boundaries are when communicating with their appraiser. This leaves the ultimate lingering question: “When does communication go too far and when does it not go far enough?”
Although in most cases real estate appraisers know what qualities to look for in their business relationships, they can occasionally experience situations where they are unfairly and perhaps unexpectedly pressured by people involved a mortgage transaction. This can include improper forms of influence such as inflating the appraised value, overlooking repair items, misstating facts, ignoring/concealing external influences, and misrepresenting market conditions. Because of this reality, many laws and regulations have been enacted over the past 10 years to discourage improper communications with the appraiser.
These laws have, unfortunately, created tension between real estate professionals and appraisers – which we will aim to diffuse via the pointers below. The following list, while not all-inclusive, should provide a general guide. The following items are intended to help mortgage lenders and appraisers foster a healthy, proactive relationship via improved communication.
Please do the following:
1. Read the entire appraisal report before contacting the appraiser with questions;
2. Contact the appraiser when you need more explanation;
3. Contact the appraiser when you need the appraiser to provide support for an adjustment (including a “zero” adjustment);
4. Contact the appraiser when you need support for market conditions;
5. Contact the appraiser when you believe a factual error has occurred;
6. Contact the appraiser when something important is unclear;
7. Contact the appraiser when you have additional appropriate and relevant data for the appraiser to consider;
8. Understand that the appraiser is required to perform assignment with impartiality, objectivity and independence;
9. Recognize the appraiser as a trained professional; and
10. Understand the appraiser must comply with laws and the Uniform Standards of Professional Appraisal Practice (www.appraisalfoundation.org).
Please do not do the following:
1. Assume the appraiser is wrong simply because someone else has a different opinion;
2. Tell the appraiser you think something is incorrect – ask the appraiser a question;
3. Threaten or withhold payment because an appraised value is insufficient for the loan;
4. Forward additional sales to the appraiser without first checking the sales for relevancy;
5. Provide additional sales to the appraiser and demand that they be included in the report;
6. Expect the appraiser to be immediately accessible for questions or corrections because they are often in houses or driving;
7. Be afraid of asking the appraiser questions about the appraisal report;
8. Be afraid of asking the appraiser to provide additional support/explanation;
9. Communicate with the appraiser in a manner that compromises their independence and objectivity; and
10. Demand or suggest that the appraised value is wrong – focus questions on the things that lead to the appraised value.
In sum, the appraisal industry has undergone a positive evolution with firmer guidelines regarding industry best practices. Although change can sometimes be jarring, appraisers and real estate professionals must keep their eyes on the prize and recognize the good intentions behind the improved guidelines. They must also recognize that much of the tension that has surfaced from this change can be diffused with more fluid dialogue between both parties.
Proper communications with the appraiser are permissible and necessary; however, do remember to consider whether the right processes are in place to facilitate and govern such conversations.
Adam Johnston is chief appraiser for Genworth Mortgage Insurance.