All of us are fully aware of the recent changes in the appraisal industry.Â Another victim of yesterdayâ€™s market, there is now a â€śhands offâ€ť message that lenders take very seriously.
What I have observed is that the bigger the lender, the more distance that exists between loan officers and appraisers.
For instance, itâ€™s my understanding that Bank of America uses a third party company to set up appraisersâ€¦whereas some of the more local lenders are able to â€śselectâ€ť a pool of local appraisers thru whom they can rotate business.
As a listing agent, I have found that my input in this new climate is crucial.Â My job is not to influence, but to educate.
In a couple of instances, I have opened the door for appraisers who were clearly outside of their geographical comfort zone and the information and comps I have provided were important in verifying a clear market value.
A recent experience clearly confirmed the need for listing agents to meet with appraisers.Â The names, location, and exact pricing have been changed to protect the innocentâ€¦but, otherwise, this is a 100% true story.
In September, I received an offer on a condo that was listed for $1.45 million in Georgetown (three cheers for Georgetown, right? But that’s another story of market holding strong).Â After a round of negotiation, the seller accepted an offer for $1.375 million.Â The lender for the buyer was a large, national company.
Although I asked the buyerâ€™s agent to let me know when the appraisal was scheduled, the lender did notÂ keep either of us in the loop (perhaps he couldnâ€™tâ€¦because he, too, was not in the loop) and, because the building had a concierge, the appraiser did his on site inspection without giving me notice.
The first I heard about the appraisal being done, is when I got a panicked email from the buyerâ€™s agent, informing me that the appraised value had been set at $1.2 million.
The â€śgoodâ€ť news?Â A copy of the appraisal showed errors in square footage and amenities, as well as the use of â€ścomparableâ€ť properties that were clearly comparing apples to oranges.Â Also, the buyer was financing just a little over 50% of the purchase price, so he could clearly go forward if desired.Â The â€śbadâ€ť news?Â The buyer, as was allowed under the terms of the contract, asked the seller to reduce the sales price to the appraised valueâ€¦and then obtained a release from the contract when the seller refused.
Two weeks later, the property received another offer.Â This one was at $1.4 million and, again, was being financed by a large, national company.Â This time, I made it clear that I needed to be the contact for the appraiser.Â I met the appraiser, loaded with information verifying the correct square footage, provided a floor plan, and also pointed to comparables that were in similar condo developments.Â The result?Â This second appraisal came in at $1.4 million.
Two appraisersâ€¦and the price differential was $200,000…common?!
So, what have the new appraisal rules accomplished?Â I would argue that they havenâ€™t accomplished much.Â Iâ€™m sure that there were abuses under the â€śoldâ€ť system, but I donâ€™t think that the answer is to set up policies that make it possible for appraisers to work outside of their geographical areas of expertise and go mostly unchallenged.
Once an appraiser establishes value, I understand that it is extremely difficult to get him or her to make changesâ€¦even in situations like the one outlined above where the appraisal contained clear inaccuracies.
And, of course, if the appraisal is for an FHA loan, the assigned value remains with the property for 6 monthsâ€¦so a â€śbadâ€ť appraisal can hold a seller hostage for an inordinately long time.
I know itâ€™s always our job to adapt to different markets and to adjust our services accordingly — but when the pendulum has swung too far; and appraisers have become hamstrung, spineless or — any combination there of, I can’t help but have little sympathy for the appraiser (euphamism of the year for me!).
Regardless, in my humble opinion, any listing agent who isn’t bending over backwards to “work with” appraisers (at least from my experience), is probably doing a disservice in the current market.
What have others seen out there?