A Virtual Conversation With An Appraiser Over a Cup of Coffee the KW Information series

The real estate appraiser. Your Realtor doesn't get to select him, and rarely gets to speak with him. The mystery... The horror stories. I combed over an online forum where people asked quite a few questions of a licensed appraiser in another state. All his answers still very much apply in California. Keep in mind though, this is NOT legal advice. This is just a collection of Q's and A's to hopefully give you a better idea of what is happening behind the curtain.

⦁ The most difficult appraisals I do are the ones that rely heavily on extrapolation. That is the bane of real estate appraiser's existence. If the 2nd biggest/best/nicest house is worth x, how much is the biggest worth?

⦁ Real estate appraisers are REQUIRED by law to analyze the contract, which is why we ask for it. Market value is the value a home should sell for given intelligent, adequately motivated parties with adequate representation. Meaning, if your transaction involved all of those qualifications, it sold for market value. Which is why my appraisals often come out exactly at the contract price. No bank has told me what they want since 2007.

⦁ The appraiser is not an expert in building codes, insect infestations, mold, title issues, or zoning. We do not actively look for any of these things, and every report will contain a statement as such.


⦁ Neighborhood, to an appraiser, does not mean the same thing as neighborhood to most people. We look at "a group of complementary land uses." Sometimes my neighborhood is pretty big, sometimes it is small, but I try to consider where buyers for my property would look.

⦁ We all know values are cyclical and move in waves. The issue with appraisals is that we only know past data. So if a property sells in January for 300k, February for 302k, and March for 304k, then we're going to say in April it's going to be worth 306k.

Don't expect any bonus in value if you replace this old range.

⦁ Many appliances are personal property and not considered in the report. If it is a stove that can be unplugged, unhooked from the gas line and dollied out, most banks don't want to lend on it.

Q + A:

Q:) How much impact does the surrounding neighborhood have on a new construction house at appraisal? This is an established older neighborhood where the houses are not uniform and some are not kept up.

A:) Location, location, location. The surrounding neighborhood has a huuuge impact on the value of a property. The uniformity is not a big deal necessarily, but the condition of the homes and the individuals who would look in that market is could be. Is it a gentrifying downtown where buyers would love to have a new home walking distance to the restaurants? Or is it a decaying neighborhood where people aren't keeping up their houses because the ROI doesn't make sense.

Q: We had an appraiser coming and we cleaned the house and staged it like we were selling it. Was this helpful or necessary at all?

A:) A perfect appraiser sees past your clutter. There are very few perfect appraisers. I have a strong feeling that clean houses appraise for more than dirty ones. Maybe the appraiser assumes a very clean person is more likely to maintain the furnace, clean the gutters, and have roof inspections?

Q: I am in the middle of a refinance and have an appraisal next week. Should I point out updates made since I purchased 2 years ago? I know that comparable sales are the biggest factor, but we've done a lot of updates since we bought. We've updated 3 bathrooms, added new flooring to the lower level, bought a new water heater, re-landscaped, and added new gutters. Basically, should I actively point these updates out, or let the appraiser decide for himself?

A:) Even better than pointing them out is making a list AND pointing them out. No decent appraiser is going to be offended by that. We all realize that for most people, their home is their most valuable asset, and as long as you aren't super-annoying, the appraiser appreciates the info. There are a plethora of real estate related reasons why everyone should keep receipts and invoices for improvements to any piece of real estate going back a few years.

CMA Vs Appraisal

Q: What's the difference between an appraisal and a real estate agent estimate? I know there was a acronym for it, CMA, maybe?

A:) CMAs (Comparative Market Analysis)) are un-adjusted reports that the MLS system creates based on parameters. You input the market, any variable ranges you'd like and it returns a list of sales that meet those parameters. If you live in a beige 2-story with 2200 sf, built in 2010, 7/3/2.1, and all your neighbors do too, it will work just fine probably. If you live on a rural 13 acres, operate a blueberry farm, and have a bunch of barns and a custom log home, then a CMA is not going to go great for you.

He just got his appraisal report.

Q: Can you talk about the proper way to get an appraisal revised and what methods a buyer or a seller would be most successful with?

A:) Throw a tantrum. Make sure the lender knows you consider him to be responsible for the quality of his appraisal. In addition:

1) Call the loan officer, make a list of rational, reasonable discrepancies and explain that you hold him responsible and you'll take your business elsewhere. 2) Call the appraiser, make a list of reasonable, rational discrepancies and explain that you hold him responsible and you'll be sending the report to the state licensing agency. The appraiser has no duty to speak with you, so don't expect much. The report is not made for you, rather for your lender. Technically, the appraiser cannot discuss assignment results with you, and most appraisers choose to misconstrue this to mean they cannot talk to you at all.

Q: I found errors in the appraisal report: a picture of our property, isn't our property. The analysis, best I can tell is from another appraisal as the figures are incorrect. He references comparable home #4 as a pending sale 4 and a comparable home # 5. Comparable home 4 is not a pending sale and there is no home #5.

A) Wrong picture? When the appraiser tells you he isn't going to change the report, ask him if he wants the state licensing agency to look at that picture. He'll change the report. The people down at the state might not be experts, but "wrong picture" is a slam dunk.

In-depth and final question...

Q: Our house was appraised for $408,000 initially (strange because that was exactly what we ended up offering and the seller accepted). After our home inspection, we discovered that a lot of work needed to be done to the house and the seller agreed to pay for it after some hard bargaining. We have the receipts for everything, but the largest amount of work done was quoted initially for $20,000. Now that the work has been finished, the bank has had another appraisal done and stated that the house is worth only $345,000. This is a burden because now we are slated to have to buy PMI. What the hell is going on? How is it possible for money and work to be put into the house and have the appraisal come back for less?? This seems like the bank we went through is doing some shady dealings to me, but again I have no experience with this sort of thing. Can you shed some light on the situation for us?

A.) Market value being equal to the value the market decided it was worth, isn't weird at all. If you and the seller are both reasonable, rational, well-informed people and neither are under duress, that is exactly what the house is worth.

Whenever there is an issue like this, I prefer Hanlon's Razor. Never attribute to malice what can adequately be explained by stupidity. Without seeing the report, I can't tell you anything, both of the appraisers could be wrong for all I know. However, your bank makes money making loans, not losing them. Get copies of both appraisals, set them side by side and go through them to determine what is different.

I hope you gained some insight here. Again.. NOT legal advice up above. Real estate lawyers can answer these questions perhaps even better. I am happy to answer other questions about real estate. Let's have our OWN cup of coffee. Soon.


Created with images by Melanie Lazarow - "cup of tea" • pthread1981 - "Appraisal" • Cubosh - "my neighborhood" • joebeone - "Michelle has a gas stove!!!" • fczuardi - "Upgrades" • soukup - "Angry Man! / Spew Love"

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