As a Real Estate Agent, it’s possible you have been the victim of an appraisal that came in below the contract price. Then when you saw one or two of the sales the appraiser used, you were upset. You wanted to scream, “But that house has X, Y, and Z differences!” In many of those cases, it’s possible that the market just didn’t support the contract price, while in other cases, it was the result of a bad appraisal. Here are some tips to help you prevent the latter from happening.

Experienced Appraisers like to think we know it all; we know everything about every street in every one of our neighborhoods. But the truth is, we don’t. As Certified Licensed Appraisers, we are required to be geographically competent in the areas we work. However, in my case it is impossible to know the intricacies of every street and neighborhood in entire San Francisco Bay Area and surrounding suburbs. A truly good Appraiser makes use of all resources available to ensure they are giving their clients the most thorough, accurate appraisal possible, and that includes reaching out to Real Estate Agents and accepting/analyzing any sales they provide. In a lot of cases a good Realtor can have more knowledge about a neighborhood where they work and farm more so than most Appraisers.

There is a myth that Real Estate Agents can’t talk to Appraisers. Appraisers are by law required to develop a well-supported, unbiased opinion of value. We must be independent, impartial, and objective and cannot be an advocate for either side of the transaction. As long you, the Real Estate Agent, are not trying to influence or pressure the Appraiser to arrive at a particular value, we should not only welcome a conversation, but seek it out. I want as much information as possible, and if the Agent feels it would be helpful to provide me with some comparable sales to consider, I am happy to look them over. Does that mean I will just take the three sales you give me and use them in my report without completing my own due diligence? Of course not. When I’m provided with sales, that is exactly what they are, sales. They do not become comparable sales until the appraiser has analyzed them and decided that they are the most similar sales in the neighborhood and are the best indicators of market value.

It is most valuable when the Agent gives me two or three truly comparable sales from the MLS with notes pointing out things that may not be easily observed just by looking at the listing sheet. It is less valuable when I’m given a stack of MLS listings by the Agent and it appears that the only search criteria they used was all properties that sold above the contract price of the subject. A thorough appraisal should always include an exhaustive search of all sales and listings in the subject’s market area and only those that are most similar to the subject should be selected.

In some cases, it is the most helpful when I am provided information on a sale that appears to be similar to the subject but sold below the subject’s contract price (believe me, we are going to find it anyway and it is best to explain the situation up front). Here are a few situations I have run into in the past when a sale appeared to be very similar to the subject but there were certain issues that could have been easily overlooked or were not properly communicated on the MLS:

 A sale was listed as a 4 bedroom, but 2 of them were in the basement and represented that way on the MLS listing.
 The house was located on the rear of the lot and it sold lower because it lacked a backyard with privacy.
 The only bath that a Tudor style home had was on the first floor while all three bedrooms were on the second and therefore functionally undesirable to most buyers.
 The home’s basement had flooded after being listed (therefore was not mentioned on the MLS listing sheet) and the buyer negotiated a lower price to factor in the cost of rehabbing the basement.
 Homes on the one side of street A are selling at a premium to the other side because they back to other single family homes while the other side backs to 2-4 flat buildings or a main feeder road.
 The subject is a unique house for the area with no recent sales of similar houses on the MLS, but there was a similar home that sold as a FSBO recently (we can typically verify those through various sources but may not have initially found it on our own if it was not listed on the MLS).

Many of you also often specialize in a particular neighborhood and can let us know these things. There are endless of examples that I could give of situations where the Real Estate Agent made me aware of something I otherwise may not have noticed or known.
As Real Estate Agents, you have an advantage over Appraisers with regards to access to the buyer/seller’s thought process. You are meeting buyers and sellers every week and you get to hear what buyers think and how they are making their decisions. You have walked through or toured the interior of many of the sales and listings in the neighborhood and have heard feedback from your clients (aka “The Market”). This can be very valuable information for appraisers as we are trying to determine “Market Value”.

It is our job to reach out to you. Unfortunately, in many cases we are given a short timeframe from the time of the inspection to have the completed report submitted to the client. That means if we call and leave a message letting you know we have a question, we really do need to hear back from you that day or the next. It is not uncommon for me to get a call a week later when I have already signed and submitted the report. It is much easier to edit a report with new information BEFORE it is signed and submitted to the lender. We know you are busy and your time is just as valuable as ours, which is why I make sure to let those that do take a couple of minutes with me on the phone, that they are appreciated.

Appraisers are trained in many different techniques to analyze the market but similar to Real Estate Agents, not all Appraisers were created equal. Some are willing to go the extra mile, while some may not. And you as the Real Estate Agent can be a really good information resource for those appraisers willing to reach out and those agents willing to share their knowledge. By pointing out some of the issues listed above, you could end up avoiding an “appraisal problem” in the future.

If you have additional questions you can always reach us at Best Bay Area Appraiser


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BREABureau of Real Estate Appraisers (BREA)
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