By Harold Copher, Jr. • Willow Bend Mortgage
Appraisers have a tough job, too. I think their profession is a lot like officials at a football or basketball game. They have guidelines or rules to conform to and are asked to form an opinion about a situation (or property) based on what they see and how what they see aligns with the rule book.
In mortgage lending, the basic premise for an opinion of value is not necessarily the intersection of “the value a willing seller places on the property and a willing buyer will pay.” Mortgage lenders are looking for a value better described as “how much did the last seller and buyer of a comparable or similar property agree to.” Let’s compare that to your sales price.
The process generally works. The contract amount and property value are in sync, data from similar transactions are incorporated into the negotiations for price, resulting in the buyer, seller, sales price and the appraiser all ending up on the same page. However, most of us have seen transactions where the above parties are not on equal footing regarding factors that influence the agreed upon sales price.
Keep in mind, an appraiser is required to include a minimum of three recently completed sales transactions for comparable properties. Ideally, one sale with similar, but slightly less value; one sale with similar, but greater value; and one sale considered most similar to the subject. In certain markets, there may be more than three comparable properties and the report may also include a currently listed property whose sale has not been finalized. I suggest that you be prepared to help make sure the appraiser has access to all pertinent data prior to their selection of comparable properties.
In today’s market, I think most appraisers would appreciate any additional information about comparable properties and sales that may be difficult for them to uncover. For example, if your seller accepted a contract offer that is a margin above the list price; let the appraiser know your client selected the contract offer after reviewing multiple offers that came in above the list price.
If you know the unusual floor plan or unique color scheme did not appeal to many potential buyers, and that was the reason the “most obvious” comparable sale sold for a lower price than the square footage and property condition warranted, share that with the appraiser. If you visited the property or have saved peer survey sheets saved from the listing, even better.
Perhaps there is a pending sale in your office scheduled to close that would help support the value of your subject. You may also be in a position to know about closed transactions in the neighborhood that are not included in the MLS database.
If an older home has not been updated, or has been remodeled, that is usually fairly obvious to both the client and professional. However, some functional updates get overlooked or are not always visible. Provide a detailed list of everything that was updated, including line item costs.
Recognize that you may have information useful to the appraiser, and always assume that pertinent data not otherwise available will be welcomed. With one caveat, it must be delivered in a timely and professional manner.
When the appraiser schedules the inspection, let them know there’s some additional information in a packet on the kitchen counter. Or, offer to e-mail them some additional data points for their consideration.
Caution! Data presented in a professional manner early in the process is generally much better received than “rebuttal” information presented after the fact. Along those same lines, sharing your thoughts on alternative MLS listings not chosen and/or providing information readily available, may not be seen as helpful or seriously considered.
I’ve known agents who make it a point to share information and establish a line of communication with the appraiser when scheduling the appointment. In almost all cases, that information is well received. Sounds a lot like “make sure you do your homework, and turn it in on time” doesn’t it? RL