I just returned from a speaking engagement at Vintage Real Estate in North Portland. Darin Provost invited me to address Principal Broker Julie Broderick, his fellow real estate agents, and a couple of lenders on how real estate agents and appraisers can work together to make each other’s jobs easier, and make transactions go more smoothly. Vintage Real Estate has a great group of friendly professionals. They provided some excellent questions that spurred interesting discussions. Additional topics covered today included defining market value, discussing the job of a real estate appraiser, how to select comparable sales, how to challenge a “bad” home appraisal, and what you should not say to an appraiser?
A large part of today’s presentation was explaining how many closing delays and problems common to appraisals can be prevented by the appraiser simply asking the right questions before, after, and during the appraisal inspection. These questions include making sure contract repairs are complete, fully understanding the contract, and fully understanding everything that the agent knows about the subject property, the subject’s marketability, and the surrounding market.
Since most appraisers are not psychic and not every appraiser remembers to ask all the important questions, a proactive agent can communicate important information to the appraiser, bridge understanding, and avert potential problems later. A proactive agent can also sometimes avoid an appraisal value conclusion that does not support the contract price (and thereby cause a failed sale). Neglecting to inform the appraiser about something that makes the home more marketable, or concerning key market conditions can cause aggravating delays. It is much easier for agents to communicate with the appraiser during the process than rush to fix appraisal-related problems right before closing deadlines. Below is a checklist that I provided to the agents to consider before the appraisal and start conversations appraisers.
1. Make sure all contract repairs (including smoke and CO alarms) are performed or let the appraiser know so that the lender client can decide if the appraisal should proceed or be delayed until after the repairs are done.
2. Make sure utilities are on or let the appraiser know so that the lender client can decide if the appraisal should proceed or be delayed until service is restored.
3. Make sure the appraiser will have access to all rooms, accessory structures, and basement. For FHA, VA, and USDA loans, appraisers need access to attic and crawlspace. If not, notify the appraiser before the inspection.
1. Provide a list of significant updates, upgrades, modifications, or repairs that the seller has made to the property.
a. Providing rough prices and how long ago the updates were made can help the appraiser understand the condition of the property and to better communicate it.
2. Identify how the list price was developed.
a. Were there any specific sales used? This is an opportunity to provide the appraiser with sales that might be useful. Do not provide a list of all sales in the area, just those that might be most meaningful.
b. Are there comparable sales that you know something about and the appraiser may not? For example, the neighboring property just sold, but it was a distressed sale due to a family emergency and needed repairs.
3. Explain any failed sales of the property.
4. Identify the number of offers and offer prices. (Many offers can show how much demand there was for this property.)
5. Explain why this offer was selected over any others.
6. Tell what features or amenities set this property apart from similarly priced competition.
7. Recount what you have noticed happening in this local market. For example, in the last month, most of the subject’s competition has gone off the market.
a. Detail if there is a change occurring in this market area that might be influencing prices like a new employment center, a new school, zoning adjustment, tax abatement, and so on.
8. If the property is a condominium, provide an HOA contact or a condominium data sheet.
9. If there are additions, provide any permit information available.
1. Provide the general geographical area that the buyer was considering and how long.
2. Identify the property’s features that buyer particularly liked over others that were considered.
3. Furnish the buyer’s plans for the property such as renovation, leave as is, subdivide, and so on.
1. Ask the appraiser if they have a complete contract with all addendums and signatures. If not, offer to provide it.
a. Identify how many pages or addendums should be in a complete contract.
2. Point out any concessions in the contract. Please list any cash, financing, or personal property.
a. Explain if the concessions were offered to the buyer in lieu of a repair.
3. Explain if the buyers and sellers are disinterested parties.
4. Identify if a different agent from a different office represents both parties. If not, explain.
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Thanks for reading,
Gary