This has certainly been an interesting several years for the housing markets. The prices of homes have been anything but stable during the past several years. First, home prices were increasing at a frenetic pace. We then saw a drop in home prices in most areas of the country and the drop was even more precipitous in those areas that experienced the largest increases earlier. Then for several years, home prices recovered significantly. Finally, in the midst of the pandemic, house prices increased at an even greater frenetic pace.
No one has been affected more by this “housing valuation yo-yo” than the real estate appraiser. Sworn to identify the accurate value of a property to support mortgage loans that are secured by real estate, the appraiser has to deal with a variety of factors. These factors include all parties of the transaction having a vested interest in supporting the sales price–including the seller and purchaser. The factors also include trying to nail down the right data to support the sale, which is increasingly difficult when values are changing rapidly. Finally, in the era of tighter financial regulations, agencies have made it more difficult for appraisers to communicate with the participants to obtain up-to-date information for fear that the appraiser will be subject to undue influence.
Just to add a bit more complexity, now appraisers many times will not inspect a home before making a determination. Even though desktop and drive-by appraisals have become the norm during the era of the pandemic, non-inspections were already increasing before we got hit with the most recent changes.
It is important to note that it is the homebuyer who determines whether a desktop will be acceptable – they can insist on a full inspection. And the loan officer and agent should give them advice in this regard. Certainly, if they purchased on-line without an inspection, they may insist on a full-inspection.
On the other hand, in some states and some situations, an inspection may not be possible during this pandemic. What does this mean? It means that if you want to obtain the most accurate appraisal of a property, you must be even more proactive in the process than normal.
Inspection or not, here are some tips to help you further your goals in this regard–
If there is an inspection, the owner and/or the listing agent should be at the property when the appraiser visits. Don’t just be there to greet them, be proactive during the inspection. Stay with the appraiser every step of the way and point out features that you feel are important — but don’t get in the way, especially when they are taking pictures.
Make sure the appraiser does not miss anything of importance and that all areas are accessible (no locked doors). It is understood that as a homeowner you may not know what is important and what is not important. That distinction does not matter. It is up to the appraiser to decide and if you do not give them all the information, they can’t make a good decision.
Ask as many questions as you can. Does the appraiser have the right boundaries of the property and even the right boundaries of the neighborhood? Does the appraiser know distinctive information about your neighborhood that may make it more attractive, such as distance from schools and other amenities? If you have a recent survey of the property that would help.
If there is no inspection, it is even more important for the homeowner to provide copies of other important documents to the appraiser. If there is no inspection, provide pictures and/or videos of the inside and outside of the property. Include the latest tax bill and copies of invoices for any major home improvements. While the cost of every improvement does not necessarily add the same amount to the value, knowing the cost will help the appraiser come up with the most accurate value for each improvement. Do not include routine fixes.
Describe anything unusual about the property — both negative and positive — but emphasize the positives. And make sure you get their business card so that you can follow with information and make sure that the person who compiles and signs the report is the same person who viewed the property (again if there is an inspection).
The real estate agent should play a role in providing information. as well. A great determinant of the home’s value will be determined by the use of comparables. If the next-door neighbor sold his/her house for “x” dollars just a few weeks ago, and their house is the same model, has the same improvements, is the same size and is in the same condition, you can see why this data would be important. On the other hand, even when everything seems to be the same, there can be differences. Perhaps the neighbor had to sell quickly because of a relocation and that means the price was discounted.
Many times, the information available on comparable sales are not accurate. Going back to the neighbor, perhaps the homeowner added an extra bedroom that they do not have, but it shows in the data as having that extra bedroom. Beyond the neighbor, this is why the real estate professional is so important. The agent should know much about these comparables and should actually be suggesting the best comparables for your property.
When the appraisal does not come in at the agreed sales price, this does not mean that you should accept the value. The appraisal is the property of the lender and the purchaser. The lender must provide the homeowner with a copy of the document for review. It is important to make sure the value is accurate and the purchaser of the property has a vested interest in determining this as well. Every lender should have a procedure for appealing an appraisal’s value. But do not move forward without solid evidence