Here are a few key items to take into consideration when know who you are working with on your appraisal:
Did you know there are two types of appraisers? – Licensed and Certified Do you know the difference?
- Larger banks are paying less to appraisers through Appraisal Management Companies. Almost all of the banks own them so they can make more money. This is not always a “good thing”. Often times you will get an appraiser with less experience or one that will rush through the process because they have to make up their income by doing more volume. Appraisal companies are in place to put a buffer between the lender, Realtor and appraiser to perpetuate a more “arm’s length” transaction. What has resulted is that the banks are using this as a profit center and not always employing best in class appraisers.
- Check with the appraiser’s competency and local knowledge. Ask where they are located and if they are familiar with your property/area. Additionally, ask how long have they been appraising homes? Lastly, check and see if they work from home or office? Many small owner operators work from home and as a result, don’t get exposures to other appraisers. This lack of networking, idea sharing and updates on the market can hurt appraisals.
- Education for appraisers is getting tougher. There is an apprenticeship for 2 years now.
- There are two types of appraisers – licensed and certified. Licensed Appraisers can only do values up to $1,000,000. Certified Appraisers can do any property value. Additionally, Certified Appraisers must take a test and have a Bachelor’s degree. Lastly, only Certified Appraisers can appraise FHA loans.
What you need to be prepared for your appraisal:
- Always bring your own comparable sales – make sure they are good comps so you can build creditability. Even bring low sales and let them know what the issues were that resulted in their low sale – pet odors, back to power lines, short sale, foreclosure, etc.
- If at all possible, provide plat/floor plan – proper measuring is critical because if its 100 square feet off the true square footage you will have issues
- Bulls eye approach – first look in subdivision, then do a radius search of 1 mile, 2 miles, etc. to find the right comparable properties.
- Use a couple of higher sales, couple of smaller home, the radius approach to finding properties and a couple within the timeframe of settling within 3 months or less
- You now need to have 5 to 6 comps
- Provide 1-2 under contract comps as part of your presentation
- Find FSBO too! They can help your cause
- Pass on any and all information you know about your property – list all recent improvements and their cost/value to help support your price.
- Provide details on other offers if you had multiple offers
- Provide additional pricing details like the Home Pricing Wizard, RBIntel statistics, and articles relating to escalating prices.
Steps to overcome low appraisal
- Get a “good” conversation going, kill them with kindness
- Provide new info that the appraiser might not be aware of when you met initially at the property
- Be there when the appraiser wants to meet at the property
- Use their language
Appraisers need to be concerned with the following items:
- Safety – the house needs to be safe, easy to explain
- Soundness – the house needs to have structural integrity including but not limited to the roof and foundation
- Security – the house needs to have locks on windows and doors
Integral issues for appraising
- You have to know the condition and the subsequent ratings of the properties condition. The rating scale goes from C1-C6. One is the best and 6 is the worst. Speak with the appraiser in terms of the condition to get more value for your clients
- You also have to know the quality of the construction in order to help get more value. Was the home custom built or was it a cookie-cutter built in the late 70’s with 7.5 foot ceilings? These rankings range from Q1-Q6