When can agents talk to an appraiser? What can they say? What if an appraisal and purchase price don’t match? Realtors talked to appraisers at NAR’s recent meetings.
WASHINGTON – Appraisers are an integral part of the real estate sales process, making it imperative that agents not only understand the fundamentals of the appraisal system but also follow the best practices for communicating with appraisers.
At an interactive session at the National Association of Realtors® (NAR) recent 2021 Legislative Meetings, panelists shared best tactics for working with appraisers and making the process as smooth as possible for all parties. Here are five of the most pressing points discussed.
Interacting with an appraiser at a property
Michelle Bradley, vice chair of the Appraisal Standards Board at the Appraisal Foundation, recommended that agents bring a packet of information about their listing for the appraiser. Making face-to-face contact will help build rapport – even simply introducing yourself, handing over the packet, leaving your card and letting them know you’re available if they have any questions – is helpful, she said.
While appraisers can’t discuss comparable properties, Bradley said agents can still provide MLS data sheets with brief explanations of why similar homes are relevant to your listing, such as whether they were built by the same builder, have a remodeled kitchen or involve other comparable elements. Agents can also explain why some sales are not comparable.
Look up the legal description of the property and include a copy of the most recent tax bill, which can show whether the home is in a special tax district, said Maureen Sweeney, a residential real estate appraiser and member of the Illinois Real Estate Appraisal Administration and Disciplinary Board. If the appraiser doesn’t accept the agent’s packet of information, then follow up with an email, copy the lender, and list the paperwork and data you attempted to share so that everyone has a record, she said. “This way you have done your due diligence.”
However, agents and brokers should never try to influence the appraiser, said Peter Gallo, owner and chief appraiser of HomeSight Appraisal in Charlotte, N.C. Don’t tell the appraiser your client needs a certain value, for example.
“Good appraisers want as much information as they can get,” said Claire Aufrance, an appraiser and broker from Greensboro, N.C., who sits on the North Carolina Appraisal Board and the Appraisal Institute Board of Directors. “They’ll figure out what to use. But I would be careful not to say, ‘You have to use these comps.’ “
How multiple offers factor into the appraisal process
Bradley says some real estate pros give her a spreadsheet of the multiple offers on the property. “We are in an unprecedented market with historically low interest rates and a shortage of housing supply,” she said. “It’s highly critical to give appraisers all of that data. Let them know how many offers came in. If there were 87 showings and 15 offers or more, that’s absolutely demonstrative of the demand.”
It’s also the appraiser’s job to develop an opinion on a home’s fair market value, and just because the buyer and seller have agreed on a price doesn’t mean that’s the true value of the property, said Francois Gregoire, broker, appraiser, instructor, and president of Gregoire & Gregoire Inc., a residential real estate appraisal firm based in St. Petersburg, Fla.
“The appraiser has to look at what is the subject property’s competition,” Gregoire said. “If there is no competition, and you’ve got no supply, that has an influence on the value of that property.”
Different appraisal requirements
The appraiser has a scope of work for every lender client, which differs depending on the mortgage product, said Bradley. For example, you may have heard of “drive-by appraisals.” It’s not the appraiser’s decision to do a drive-by appraisal; it’s the lender’s decision based on the loan product the buyer is getting, Bradley said.
If a buyer is using an FHA-insured mortgage, the appraiser has to fulfill both the lender’s and HUD’s requirements, Bradley said. HUD requires the house meet safety, soundness and security requirements, so there might be requested repairs related to those categories. If the buyer is getting a VA-guaranteed mortgage, that adds safety, soundness and sanitary requirements to the appraisal.
Even Fannie Mae and Freddie Mac require appraisers to report “true property condition” for conventional loans, Bradley said. “Don’t advise your seller to accept one offer over another just because you think there’s going to be a difference in repairs,” she added.
While some buyers may waive an appraisal in a multiple-offer situation, the lender will likely still require it. Waiving the appraisal means the buyer will purchase the property regardless of the outcome of the appraisal, said Lynn Madison, trainer and CEO of Lynn Madison Seminars, who currently serves on NAR’s Professional Standards and Real Property Valuation committees. “Be careful about waiving the appraisals and what that means in your marketplace pertaining specifically to your contract,” she added.
What happens when the appraisal and purchase price don’t match?
Once the appraisal is completed, the appraiser can no longer communicate with the agent; communication must be done through the lender, Madison said. Parties can request clarification or additional information or ask the appraisers to consider additional data, which would be submitted through an intermediary on the lender side.
“Pertinent data would be a property that is competitive with the subject property that sold recently and that your buyers would probably consider as an alternative to the property your buyers made an offer on,” Gregoire said. Because of lags in reporting, the appraiser might not have been aware of those comparable sales, or there may have been errors in the appraisal report that need correcting.
Racial bias in home appraisals
Every two years, all credentialed appraisers in the U.S. are required to take a day-long course from the Appraisal Foundation on the Uniform Standards of Professional Appraisal Practice. The next edition of the course will heavily focus on fair housing and illegal discrimination.
“The profession is taking this very seriously, and if there are problems, the profession wants to root out those problems,” said Gregoire. “We want allegations to be investigated, and if there is illegal behavior on the part of licensees, they should bear the appropriate punishment.”
If you or your client believe racial bias influenced an appraisal, a complaint should be filed through your state regulatory agency, Gregoire said. The Appraisal Subcommittee also has a website to help complainants determine the appropriate legal authority to receive their complaint: refermyappraisalcomplaint.asc.gov.
“The appraiser side of the business is doing exactly the same thing we’re doing on the brokerage side of the business, which is taking a good hard look at how we do everything to make sure there is no bias in what we’re doing,” said Madison.
Source: National Association of Realtors® (NAR)
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