Real Estate Agents and Appraisers
July 5, 2018
Woody Fincham, SRA, AI-RRS, Member of RAC
I live in a wonderful community. I love Charlottesville, VA. We got some bad press last year because of a bunch of outsiders using our community as a match to set off a flame. This area has a very diverse group of people from all over the world. The University of Virginia attracts some of the best and brightest from all over, and the locals are accepting and friendly for the most part. Because of the diversity we have some great ethnic restaurants in addition to the myriad of farm to table and haute cuisine from the region. This diversity also offers lots of great professionals in the real estate profession.
The spark for this blog has come from my interaction with agents and brokers here in Charlottesville. I have worked in four distinct markets in my career. I have found that since I have been here in Charlottesville that the agents that I work with are a bit stand-offish. I do not mean that in a negative manner, as they are very polite and professional but pretty much steer clear of the appraiser. In every other market I have worked in the agents were very interactive with the appraiser, in some cases almost too much so; like anything there is a balance. This is problematic in many ways and I think the reason why I say that will be evident in the following narrative.
Before I dig too deeply into the purpose of this blog, I want to make something clear. I have nothing but respect for professional real estate agents and brokers. They represent an important function in the real estate transaction. I have tried myself to work as an agent and learned quickly that it is hard work and requires a set of skills that must be honed.
Why is the Relationship Between Agents and Appraisers Important?
I teach residential valuation classes for the Appraisal Institute. This means that I facilitate and lecture education for those starting out in the profession, those that are seeking continuing education and those seeking the prestigious SRA and AI-RRS designations. I mention this because every class that I do facilitate, I inevitably talk about the psychology of the real estate transaction. This requires discussing the importance of an open, honest and transparent communication between valuers (appraisers) and agents and (brokers).
Valuers analyze data and legally are required to maintain an unbiased position within the transaction. This means that we are not able to consider emotional reasons or circumstances to influence what we do, or we can face lots of trouble. Why do I mention this? Because, with residential real estate, there is often lots of emotions tie d up in the transaction. This, after all, will be someone’s personal residence; their castle. This can include purchases of vanity homes, homes to raise children in, very simple homes etc.
Appraisers do not normally deal directly with the consumers that are buying and selling real estate directly. Often, we are dealing indirectly with consumers through the lens of the agents that were involved with the sale, both the selling agents and the listing agents. Therefore, the relationship is important. I have a requirement to verify sales information like concessions, buyer and seller motivations, and other things that relate to confirming if the transaction was arm’s-length.
Because we need to understand the psychology of the transaction, we must have communication with those that were party to the transaction. Often enough this will be the agents. We certainly like to speak to sellers and buyers but that is often not feasible or even possible. We email and call the agents to confirm what we can. But this is not just limited to the comparable sales and listings that we use, it is equally important to discuss with the agents on a property that we are valuing for a pending sale.
Agent and Appraiser Interaction on a Mortgage Transaction
When I am working on a file that is a sale involving a lender, I really like to have the agent(s) available to answer questions. It is imperative that the listing agent make themselves available at least vie phone or email. I love to have the listing agent present at the appraisal observation on site. It allows me to discuss the listing history, price changes, and even market reaction. Feedback from showings can be extremely important as is the motivation from the seller as to why they are selling. This is important because the appraiser must determine if the sale is arm’s length or if it may have some form of duress that affected the price.
I also like to discuss how the property was priced. I find that in the appreciating markets that we are currently under, it is useful to be able to see how the property was priced. Of course, I do my due diligence and locate and utilize sales that I believe to be the best and most representative in comparison to the subject. But I do like to get input form the agent, as it helps me tell the story of the listing history and motivations. If there are multiple offers, escalation clauses, etc. These things can show pent up demand and it is important to let the appraiser know these things.
Some Agents Have a Negative Perspective of the Valuation Process
Having read several blogs lately from agents discussing the problems that they have with appraisers it seems some really dislike having to deal with appraisers. I get it. To many agents the appraisal is just a box to check. In all honesty, that is a common perception for loan originators as well and they are the client of the appraiser writing the report. But appraisals are more than that, they require a full-blown research process followed up by supportable analysis based on market reaction.
Many reports that I write take anywhere from 8-20 hours in total file time. It is not a simple undertaking in many respects. To use familiar terms to an agent, it is like taking a CMA (comparable market analysis or BPO, Broker price opinion) and adding the requirements to measure the property, take lots of pictures, address any needed problems or repairs, be familiar with lending guidelines such as Fannie Mae, Freddie Mac, VA, FHA, USDA, various investor requirements and interagency guidelines. Not to mention the myriad of client additional requirements. There is much more to the appraisal than just what is typically seen at the property observation. In fact, on many files that I do, the data collecting that I do at the property observation is the easiest part of the assignment.
My point here is that appraising for lending institution is not easy. It has lots of moving parts and requires specialized knowledge to do it. And this is in addition to understanding how to value a home. There are many hours of education and many pages of books devoted to this topic. Even simple homes require lots of work to just value it. For the agents and brokers that I work with here in Charlottesville, please ask questions. Please attend the appraisal site visit if you can. Please share notable information. Your involvement and communication to the appraiser is key to our abilities to do our jobs the right way.
Some Appraisers Have a Negative Attitude Towards Agents
The only advice that I can give to valuation professionals on this is to stop. Agents and brokers can and are required to advocate for their clients. This can be frustrating to appraisers but that is their job. I understand frustration, but I see some vitriolic comments and less than professional attitudes out there. And while I sometimes share in the less than positive experiences, I try to live by this mantra: “I may not agree with you, but I will do everything that I can to explain to you why my opinion must be different”. We are not in the appeasement business, we are in the appraisal business. Sometimes we are not going to make folks happy, but it is better to respectfully disagree.
Thanks for Reading
I appreciate that you have read this blog and I hope that it serves as an informative piece. While I want to communicate with agents and brokers how important their availability is to the appraiser, I also want to remind my valuation colleagues that we need to be talking with and engaging with agents and brokers. In these hot markets that we all are dealing with (agents and appraisers) open and professional dialogue is needed.
I have also linked to this blog the National Association of Realtors: Residential Appraisal Process – FAQs for Agents
Tom Horn, a colleague and fellow blogger put this out on his blog Birmingham Appraisal Blog.
Ryan Lundquist who publishes Sacramento Appraisal Blog has a great article on challenging an appraisal.
Please feel free to reach out and let me know if I can help you in any way.
Woody Fincham, SRA, AI-RRS, Member of RAC