Don’t Like Your Home’s Appraisal? Here’s What You Can Do
October 17, 2017 08:00 AM
CHICAGO (Oct. 17, 2017) – If consumers are unhappy with the appraisal of a home they’re buying or selling, they have options available to them, the president of the nation’s largest professional association of real estate appraisers said today.
“Homebuyers and sellers should first understand what an appraisal is and how it’s used,” said Appraisal Institute President and Acting CEO Jim Amorin, MAI, SRA, AI-GRS. “Real estate appraisals for mortgage finance applications are prepared for the bank or financial institution so they can better understand the collateral risk in making the loan. This can be confusing, because homebuyers typically pay for the appraisal and receive a copy of it.”
He noted that in some cases the appraisal may not match the contract price. But just because an appraisal comes in below – or above – the listing or contract price doesn’t mean it’s flawed, Amorin said. The agreed-upon contract price may be above market value, for example. In those situations, the buyer and seller often renegotiate the contract at more favorable or balanced terms, he explained.
Amorin also said that homebuyers should ask their lender for the qualifications of the appraiser, including whether they are designated by a professional association like the Appraisal Institute. A qualified and competent appraiser knows how to conduct a thorough market analysis and make appropriate adjustments.
He said the homebuyer also can ask whether the appraiser is directly engaged by the bank or whether the bank utilizes an appraisal management company, and what their procedures are for engaging qualified appraisers.
“The best way for consumers to combat potential problems with appraisals is to ensure the appraiser hired by their lender is highly qualified and competent,” Amorin said. “Consumers have every right to demand the use of a highly qualified appraiser, someone with field experience in their market and knowledge and experience to handle the assignment properly.”
Amorin said that contrary to incorrect interpretations of appraiser independence requirements, appraisers welcome information that would assist the development of credible assignment results. If lender policies permit, consumers can accompany appraisers when conducting the property inspection and may provide the appraiser with any information they consider important, he noted.
Amorin recommended that consumers ask their lender for permission to do so, and confirm the appointment. Most importantly, he said, consumers should take note of whether an adequate inspection is performed. Did the appraiser spend enough time at the property to observe important features or improvements or potential problems?
Amorin encouraged homebuyers to take advantage of their right to obtain a copy of the appraisal report. Even though the appraisal is ordered to help assess lender collateral risk, buyers are entitled to a copy of the appraisal report, he said. Federal regulations require lenders to provide property buyers with free copies of appraisal reports no later than three days before the loan closes.
Although appraisal review is best performed by qualified appraisers, Amorin said, consumers should examine the appraisal for potential deficiencies. According to “Appraising the Appraisal: The Art of Appraisal Review,” 2nd edition, common errors in appraisals include: misuse of adjustments to comparables, disregarding special financing and concessions, or miscalculation of gross living area.
He said consumers should ask themselves:
· Do adjacent homes add or detract from the value of the subject property?
· Is the subject property equal to or lower in price than surrounding homes?
· Does the floor plan have any functional problems?
· Does the house (particularly the kitchen and bathrooms) require major remodeling to make it comparable with similar homes in the same price range?
· Is the number of bedrooms and baths in the home comparable to similar homes in the same price range?
· Did the appraiser perform an adequate inspection?
“Most lenders have appraisal appeal procedures, known as ’Reconsiderations of Value,’” Amorin said. “If you’re aware of recent, comparable sales information or items that may not have been available or considered by the appraiser, provide those to the lender. If problems were found with the first appraisal, you can and should obtain a second appraisal.”
He also noted that consumers can file legitimate complaintswith the appropriate state appraisal board or professional appraisal organizations. To contact the appropriate appraisal board, visit https://www.asc.gov/State-Appraiser-Regulatory-Programs/StateContactInformation.aspx. Referrals about Appraisal Institute professionals can be made via the organization’s Professional Practice Center at http://www.appraisalinstitute.org/ppc/ethics.aspx.
Learn more about what consumers can do if they don’t like their home’s appraisal: https://www.appraisalinstitute.org/assets/1/7/what_consumers_need_to_know_about_appraisals_and_appraisers_2_29_16.pdf
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The Appraisal Institute is a global professional association of real estate appraisers, with nearly 19,000 professionals in almost 60 countries throughout the world. Its mission is to advance professionalism and ethics, global standards, methodologies, and practices through the professional development of property economics worldwide. Organized in 1932, the Appraisal Institute advocates equal opportunity and nondiscrimination in the appraisal profession and conducts its activities in accordance with applicable federal, state and local laws. Individuals of the Appraisal Institute benefit from an array of professional education and advocacy programs, and may hold the prestigious MAI, SRPA, SRA, AI-GRS and AI-RRS designations. Learn more at www.appraisalinstitute.org.