An appraisal is an important part of any real estate transaction. It helps the seller determine an asking price, and helps the buyer’s lender determine a maximum loan amount.
Yet, given its important, how does a buyer or seller know they can trust that number?
Recently, mortgage giant Fannie Mae introduced a service called Appraiser Quality Monitoring, a list that serves as a guide to banks and lenders about doing business with a number of appraisers, based on appraisal data collected, monitored and evaluated.
While the list is available only to Fannie Mae-approved lenders, it already has put several appraisers on a so-called “blacklist” for inflating appraised value of homes, errors in reporting the characteristics of a home and not using comparable sales of similar homes.
“They very closely review the quality of underwriting and appraisal work, and if they see repetitious inaccuracies in appraisals or appraisal companies, they may end up on that list,” says Don Maxon, an independent certified financial adviser in San Rafael, Calif.
Here, real estate experts offer suggestions to help ensure you receive a fair appraisal:
Keep It Local
Lenders cannot choose a specific appraiser to assess a property. But by speaking with your mortgage adviser about which company they work with, you can help ensure that the appraisal company is local and experienced, says Sean Murphy, a mortgage consultant at RPM Mortgage in San Francisco.
Appraisers that have knowledge of the local market, its housing trends and the local community are vital, as these aspects can affect a home’s valuation.
“Particularly in an area where there might be more uniqueness to the properties, getting a local appraiser can be important,” Maxon says.
The appraiser will try to find comparable sales that are good fits for your property, says Mark Bird, an independent appraiser with Bird & Associates in Oak Hill, Va. Features such as proximity to a city, size of the home and the property and waterfront or scenic views are all qualities that affect a home’s valuation.
If the appraisers are not local, you may want to consider another lender, Maxon adds.
Bring Your Real Estate Agent
Stricter regulations that prohibit undue influence on an appraiser’s valuation have been imposed since the global financial crisis.
“Appraisers have become much more resistant to any kind of influence of the valuations,” says Maxon.
However, the presence of a real estate agent can help facilitate the process by offering helpful information to the appraiser, says Murphy, who recommends presenting a list of any updates, changes or upgrades made to the property.
It’s important to remember that the general marketplace may not interpret the unique features of your home as valuably as you see them.
“Homeowners generally tend to think that their exclusive taste and their interior improvements have a lot of value,” Maxon says.
Further, when it comes to appraisals, you may get what you pay for.
“You can’t do a thorough job for a real discounted fee,” says Bird, who has worked in the real estate industry for more than 25 years.
Large mortgage lenders may be willing to accept low bids from appraisers, which can mean using the services of appraisers who are less experienced or less thorough, says Bird.
To be sure, talk to your lender to find out what type of fees the appraiser will be collecting for the service.
© CTW Features