So why won’t that pesky appraiser call you back? His (or her) opinion of value on the house you are selling came in lower than the contract price and you want to know why. You are unhappy about this result and want to get to the bottom of the issues and that plenty of sales in your neighborhood support the price per square foot of your contract price.
I can’t even begin to start counting how many times I have received this phone call as a real estate appraiser. I will say that there are many appraisers out there, not all, that simply do not call people back because they do not want to have a conflict or they do not know how to properly answer questions AND if they even can. Let me help clarify this situation.
An appraisal report will have certifications and a scope of work within the narrative or pre-printed on some appraisal forms such as the Fannie Mae 1004 appraisal report: the most common form seen in the mortgage lending world. Per the 1004 appraisal form:
“SCOPE OF WORK: The scope of work for this appraisal is defined by the complexity of this appraisal assignment and the reporting requirements of this appraisal report form, including the following definition of market value, statement of assumptions and limiting conditions, and certifications. The appraiser must, at a minimum: (1) perform a complete visual inspection of the interior and exterior areas of the subject property, (2) inspect the neighborhood, (3) inspect each of the comparable sales from at least the street, (4) research, verify, and analyze data from reliable public and/or private sources, and (5) report his or her analysis, opinions, and conclusions in this appraisal report.
INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the subject of this appraisal for a mortgage finance transaction.
INTENDED USER: The intended user of this appraisal report is the lender/client.
DEFINITION OF MARKET VALUE: The most probable price which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgeably and assuming the price is not affected by undue stimulus. Implicit in this definition is the consummation of a sale as of a specified date and the passing of title from seller to buyer under conditions whereby: (1) buyer and seller are typically motivated; (2) both parties are well informed or well advised, and each acting in what he or she considers his or her own best interest; (3) a reasonable time is allowed for exposure in the open market; (4) payment is made in terms of cash in U. S. dollars or in terms of financial arrangements comparable thereto; and (5) the price represents the normal consideration for the property sold unaffected by special or creative financing or sales concessions* granted by anyone associated with the sale.”
Let’s talk about the intended use and intended user. You are the seller of the property; a home you have lived in for 20 years, raised kids, spent a small fortune on keeping up with maintenance and worked your tail off to pay off the original mortgage early. Now you are selling your pride and joy to a new family with small children who want to do the same. They are in love with your home and are willing to pay you over your asking price in order to make sure you accept the offer. You accept this offer with a contingency that the families financing goes through. To ensure that the collateral (the home) supports the loan, the lender orders a third-party appraisal. Then, the appraisal is completed, and the opinion of value is $15,000 below your ask price and $20,000 below the agreed contract price. What now? Your realtor has guaranteed that your price per square foot is accurate and the family wanting to buy the property has good credit and can’t stand the thought of not living in this house. Let’s call the appraiser and ask some questions on why the opinion of value is so much lower.
So this is where the disconnect usually occurs. Notice the intended user of the report is the “client” which in this case is the lender of the loan. This means that the lender owns the appraisal and per the certifications # 20 and 21 contained in the 1004 report I cannot provide you any information from the appraisal without the permission from the identified client, the lender. This is the same for the borrower of the loan as well.
“20. I identified the lender/client in this appraisal report who is the individual, organization, or agent for the organization that ordered and will receive this appraisal report. Uniform Residential Appraisal Report File # Freddie Mac Form 70 March 2005 Page 6 of 6 Fannie Mae Form 1004 March 2005
- The lender/client may disclose or distribute this appraisal report to: the borrower; another lender at the request of the borrower; the mortgagee or its successors and assigns; mortgage insurers; government sponsored enterprises; other secondary market participants; data collection or reporting services; professional appraisal organizations; any department, agency, or instrumentality of the United States; and any state, the District of Columbia, or other jurisdictions; without having to obtain the appraiser’s or supervisory appraiser’s (if applicable) consent. Such consent must be obtained before this appraisal report may be disclosed or distributed to any other party (including, but not limited to, the public through advertising, public relations, news, sales, or other media).”
The proper way to gain more information regarding the appraisal results is to contact the client of the appraisal. Most mortgage lenders will create a “rebuttal” opportunity where other parties outside of the identified client can submit information and data as to why they do not agree with the opined value. The lender/client will then submit to the appraiser as a formal reconsideration. It is important to understand that there are no guarantees that the lender will ask the appraiser to reconsider or the appraiser will change the opinion of value, but we are human and can either make mistakes or overlook data from time to time. A good appraiser will have ample support for their findings and will be able to thoroughly explain the concluded opinion and/or admit when something was overlooked. Remember: realtors are trained to price a property and appraisers are trained to value a property.
The client may also distribute the report to which parties they choose. If the client is willing to provide others with a copy of the report, make sure they provide a full copy to you. A good appraiser will have plenty of narrative to explain reasons for adjusting and/or other considerations within the report. You may even consider asking the lender to hire a review appraiser for an opinion of the report as a sort of second opinion as well.
I can almost guarantee that if you take these steps in a situation like this that more will get accomplished instead of waiting for a return phone call from an appraiser. DFW Appraisals is always committed to professional customer service. If we can be of any help to you, please feel free to reach out to us via phone or email.