No, but you can take a few steps to make them less likely
Appraisers lacking experience or familiarity with an area continue to be a major problem for home sales, but you can minimize the chances of a bad appraisal killing your transaction by helping to ensure the appraiser knows what you know about the property, valuation pros say.
Ever since New York entered into an agreement with secondary mortgage market companies Fannie Mae and Freddie Mac in the wake of the mortgage crisis several years ago the industry has been plagued by what practitioners say are inexperienced and geographically incompetent appraisers. That agreement, called the Home Valuation Code of Conduct (HVCC), has since been replaced with provisions in last year’s Dodd-Frank Wall Street reform act. The new law aims to curb bad appraisals by regulating how appraisers are chosen. Although the use of third-party appraisal management companies (AMCs) isn’t mandated under the rules, many lenders comply with the law by contracting with or operating their own AMC. Practitioners say many of these AMCs are undermining appraisal quality by hiring inexperienced appraisers who are willing to work for less money and comply with what many appraisers say are unrealistic time frames for turning around valuations.
Whatever the experience level or geographic competency of the appraiser who’s been assigned to conduct a valuation of the house you’re listing or selling, you want to minimize the possibility of an inaccurate appraisal by doing four things, says Anna Ruotolo of RPM Mortgage, Inc., in Walnut Creek, Calif.
1. Meet appraisers when they arrive at the house. Offer to show them around just as you would if they were home buyers. That way there’s a better chance they’ll see the unique features of the house the same way the buyers do. And don’t let the appraisers tell you they can’t talk to you. They can. The law prohibits agents and others from pressuring them to arrive at a certain value, but there’s nothing in the law that prohibits the two of you talking and sharing information. “You can talk to them about anything,” she said.
2. Provide them with comparables that you think are appropriate. They might or might not use them but at least you’ve made them available.
3. Provide a sheet of predominant features. These can be anything that sets the house apart from others.
4. Document any discrepancies with the assessor’s data. It’s not uncommon for there to be inaccuracies, so you want to make sure the appraiser knows if something’s not right. Sometimes the inaccuracies are as obvious as a misstatement of the number of bedrooms.
You also want to ask questions of the appraisers, Ruotolo says. That way you can determine their level of experience and geographic competency. The fact is, there are rules for establishing geographic competency, and if they don’t meet those rules, you can raise the point with the AMC or lender. Among the questions you want to ask:
1. How far is their office from the property?
2. Do they have access to the local MLS data? They can’t know all the facts of the listing if they don’t have that.
3. Are they familiar with the area?
4. How frequently are they in the area? When was the last time they were there?
If you suspect the appraiser lacks geographic competency, raise the issue with the AMC. You might also raise the issue with the agency in your state that regulates appraisers, but you don’t want to file a complaint if it’s just a value dispute.
“You have the right to insist on the competence of the appraiser on behalf of your clients,” said Frank Gregoire, an appraiser in St. Petersburg, Fla., and a past chair of NAR’s Appraisal Committee.
To provide help with these appraisal issues, REALTOR Magazine is hosting a webinar in a few weeks with Ruotolo. She’s going to use the webinar to expand on ideas about meeting with appraisers when they arrive at the property, providing them information they might not know about, and documenting dscrepencies with the assessor’s valuation.
She’s also going to talk about questions you should ask appraisers before they get to work, like, “How far is your office from here?” “Do you have access to local MLS data?” “Are you familiar with the area?” “How frequently are you in the area?”
There’s also the matter of what to do if you genuinely believe the appraisal is off the mark. Who’s the best person to call?
The webinar lasts an hour and is free. It takes place Thursday, Jan. 12, at 3 p.m. Eastern Time. If you register but can’t make it, you can watch it when you have time. We’ll be sending you a link with the archived version after the live webinar concludes, so whenever you have time you can click on the link and watch it.
Here’s a link to learn more and register: Productive Engagement with Appraisers
On this Veterans Day, Nov. 11, 2011, here’s a great story about how much “home ownership matters” to an American serving our country abroad. It’s from REALTOR® Regina Acosta Tobin, ABR, agent-owner of RE/MAX Metro Plus in Columbus, Ohio:
On Aug. 22, I got a lead on one of my listings that was almost in contract. This was the message I received: “I was searching on Trulia and found your listing. Please send me more information about 262 Thurman Ave., Columbus OH 43206. Thank you.”
We e-mailed back and forth, and I discovered my prospect, Lt. Brock Nagel, is currently a lieutenant stationed in Afghanistan. He had graduated from Ohio State University in Columbus and was interested in buying a house while still active duty. He e-mailed me his USSA pre-approval letter, and I set him up on an auto-notification property search. After several weeks of e-mailing back and forth regarding several houses, I got this e-mail from him regarding a new listing at 448 E Kossuth. “Regina, love this house, and I am thinking about a possible offer.”
We made arrangements for his father, who lives in Toledo Ohio, to look at the house before we put in an offer. After a “thumbs up” from his father, my client set up a phone date with me. I could hardly believe I was talking with someone in Afghanistan, 8½ hours ahead of Ohio time. We put together the purchase offer and — together with a team dedicated to this sale (the sellers, his father, and the lender, title processor and listing agent) — we closed on Monday, Oct. 31.
I e-mailed Lt. Nagel as soon as we closed. Happy endings!
Indeed. Thanks, Regina, for sharing your story, and Happy Veterans Day to all our active duty and retired military.
Vito Pampalona (standing), with retired Army Sgt. Nicholas Koulchar, is a 2011 winner of REALTOR Magazine’s Good Neighbor Award.
This month, REALTOR® Magazine pays tribute to Vietnam veteran Vito Pampalona. Since 2003, Pampalona has been providing a warm welcome to injured war veterans on their return to the United States. He will be recognized at the REALTORS Conference & Expo General Session on Saturday, Nov. 12, as a 2011 Good Neighbor Award winner.
The National Association of REALTORS® Home Ownership Matters campaign is dedicated to reminding consumers and Congress about the importance of home ownership to individuals, communities, and the nation.
By Robert Freedman, senior editor, REALTOR® Magazine
An op-ed that the Wall Street Journal ran earlier this week (on the eve of the REALTORS® 2011 Conference & Expo in Anaheim) dismisses concerns of NAR and other organizations as well as members of Congress over the drop in FHA and conforming loan limits at the end of September. The editors say the new high-cost loan limit of $625,500 (down from $729,750) has led to only a 1.3 percent drop in transactions, suggesting that concerns over the lower limits’ impact haven’t been borne out. In support of their point they cite House Financial Services Chairman Spencer Bachus (R-Ala.) as saying “the lower loan limits only affect a very small slice of wealthier homeowners in high-cost areas.”
But The WSJ editors paint a partial picture of the issue at best, because that 1.3 percent only appears to represent impacted transactions as a result of the high-cost limit drop.
What they don’t address is the impact of the change in the loan-limit formula to 115 percent from 125 percent of the area median home price. When that part of the drop is factored in along with the impact on move-up sellers who can’t sell, the impact on home sales is probably three times as high, about 6 percent, NAR researchers calculate. And that’s on a national basis. Obviously some markets are being hit much harder than others.
The editors also dismiss NAR’s point that the higher limits are only intended to be in place for another year or so to give housing, and therefore the broader economy, a chance to recover. They say once the temporary limits expire, real estate interests will just return to Congress seeking another extension. But the higher limits were passed in 2008 as part of emergency legislation, and that emergency isn’t over yet. As NAR President Ron Phipps says in a letter that appeared next to the WSJ op-ed on the day that it ran in the newspaper (although it was in response to an earlier story about McMansions, not the op-ed), “People across the country are trying to gain a foothold in these trying times. We need to give them the resources to do so.”
The WSJ editors are clear they don’t want the loan limits to go back up to their emergency level. It would be helpful, though, if they talked about the full impact of the loan-limit drop and not just the impact of the high-cost area drop, as they appear to be doing.
By Brian Summerfield, Online Editor, REALTOR® Magazine
Are you ready for the largest, most electrifying real estate event in the world? The REALTORS® Conference & Expo — which kicks off on Friday, 11/11/11, in Anaheim, Calif. — will attract attendees and speakers from all over the Unites States and beyond who are looking to learn, network, and explore everything new and exciting in the industry.
There’s something for everyone at the big show: Whether you’re looking for information about energy-efficient home materials or risks and rewards of online marketing, you can find it here. Plus, the event offers informed, valuable perspectives on the latest developments from Washington and Wall Street, and how they’ll impact real estate.
If it’s motivation and inspiration you’re after, the conference has got you covered. From dynamic presentations conducted by best-selling author Jack Canfield, leadership expert William Taylor, and media and investment mogul Michael Eisner, to the Good Neighbor Awards ceremony, you’ll find plenty to encourage you to push your career to higher heights.
Plus, attendees will have a chance to explore the latest solutions and services for their business on the expansive Expo floor, and share experiences and ideas with thousands of real estate pros at several social events.
Can’t make it to the Conference & Expo? Check out REALTOR® Magazine online frequently for updates: We’ll be reporting highlights from Anaheim on our Web site and blogs such as Speaking of Real Estate, the YPN Lounge, and Styled, Staged, & Sold. Also, be sure visit Conference Live regularly to get posts, pictures, and social media updates from attendees.
Whether you’re attending or not, don’t miss out on all this online coverage. On a scale of 1 to 10, the great tips and strategies this event offers ‘go to 11.’
By Robert Freedman, Senior Editor, REALTOR® Magazine
Former FHA official Brian Chappelle has come up with a few ideas for getting the housing market back on track that are notable for one thing: They make so much sense that you wonder why these ideas haven’t been implemented already.
Chappelle posted his ideas in a piece he did for American Banker, and many of them accord with ideas that came out of the housing solutions conference that NAR leaders participated in last month with other industry leaders, members of Congress, and policy analysts.
Chappelle says his laundry list of ideas can be thought of as a “Moneyball” approach because although each idea is relatively modest, when combined with the others they equal a powerful way to stimulate home sales and, by extension, the broader economy. That’s got to be something Fed Chairman Ben Bernanke would love, because he has had one of the loudest voices this year for lawmakers and policymakers to do something to get housing moving again, because as long as sales stay down, the economy can’t grow itself out of its doldrums. Continue reading »
Earlier this year, during the brouhaha over NAR’s dues increase, we spent time looking at the long-term value of political advocacy. We sought to share stories about policy victories that had a direct impact on the bottom line for REALTORS® and real estate consumers.
The ordinances include:
- Consolidating permitting functions within Atlanta’s Office of Buildings.
- Laying the groundwork for a fast-track process for interior tenant buildouts of up to 3,000 square feet, with higher thresholds to follow as more permit technicians are trained and certified.
- Providing financial incentives for employees to become certified as permit technicians or combination inspectors.
- Ensuring that permit fees will be used for improvements within the Office of Buildings rather than siphoned into the city’s general fund.
For Reed, the reforms fulfill a campaign pledge he made to streamline the permit process. The legislation also represents a long-sought victory for the association, which in 2009 supported Reed in a runoff election against a decidedly anti–real estate candidate, according to Robert Broome, governmental affairs director for the Atlanta Board of REALTORS® and the Atlanta Commercial Board of REALTORS®.
“Reforming the building permit process in Atlanta is an important step toward making our city a more attractive location for companies wanting to expand or relocate their business here,” says John Ferguson, 2011 president of the Atlanta Commercial Board of REALTORS® and executive managing director for the Southeast region of CB Richard Ellis Inc.
“We are proud to support this effort, ” Ferguson says, “because we know that it will mean better customer service and a reduction in costly delays for our clients on all sides of the transaction.”