Home > Blogs > Georgia > Fulton County > Atlanta > Why Appraisers Hate Real Estate Agents
75,567 views

Metro Atlanta Real Estate News

Sales & Appraisal Expertise in Atlanta Since '89

By Hank Miller - Broker/Appraiser | Broker in Alpharetta, GA

Why Appraisers Hate Real Estate Agents

appraisal issuesThe reasons why appraisers hate real estate agents (many of them anyway) are both varied and lengthy; almost all have to do with agent ineptitude and ignorance of how appraisals are completed and how data – specifically comps – are selected and utilized. I’m an active certified appraiser since ’89 as well as an active broker; I see this issue from both sides. HVCC has driven most experienced appraisers out, moving in have been fee chasing  appraisers concerned more with speed than quality; some blame belongs on this side of the fence. However, in 23+ years of dealing with agents, the consistent ignorance that most show makes me wonder if they are dumb or willfully ignorant. These are my opinions so if you have issues with any of this, I speak for myself and no one else. I'm not taking about overall issues - I'm specific to the issues surrounding appraised values and comparable selection. 

 

I’ll Tell You Whatever You Want to Hear

There’s a reason the real estate sales industry has the pathetic public perception it does, just look in the mirror. Of course there are solid agents, but the vast majority of agents I run into:

  • lack the fortitude to deal honestly with sellers and buyers.
  • tell sellers what they want to hear just to get listings.
  • tell buyers “it’s a great time to buy” even when it might not be for them or for that certain area.
  • repeat the industry talking points without formulating their own opinions.
  • vomit back “scripts” instead of relying on research to answer questions candidly and accurately.
  • point fingers at everyone and assign blame – appraisers, inspectors, lenders…it's always some else’s fault.
  • think this is a part time business – the DNA agents that prey on friends and family…they lack the experience required to properly represent clients but guilt people into using them…often with substandard results.

The public is obviously to blame as well, if they are content shopping fees and not properly verifying agent experience and production, then they get what they ask for. It’s pretty easy to convince a seller that their home isn’t like the rest, that they will buck the trend – and some agents know that and exploit that just to get a listing. Setting unrealistic expectations right out of the gate – for both sellers and buyers – sets the table for failure.

The Appraiser Killed the Deal

If there’s a more stupid comment than that, please give it to me. Everything in life happens for a reason – something motivates someone to do something. What motivation is there for an appraiser to “kill your deal”?

Appraisers are becoming simply form fillers, the reviews completed are becoming more and more reliant on automated reviews; programs look for variables outside of given parameters. Do you like Zestimates? (of course you do when they work in your favor). Appraisals have been and continue to be reviewed by programs like that – with the new UAD requirements that will be enhanced and that was one of the major reasons for changing the form. If you think Eddie the Appraiser is your enemy, think again.

When Eddie does his job correctly and you scream “the appraiser killed the deal”, a few things happen:

  • you start with the histrionics and vilifying the appraiser for being inept.
  • you immediately have “great comps that the appraiser didn’t use” and tell everyone (including your client) that you’re right and Eddie is crazy.
  • the mortgage broker/lender contacts the appraisal management company, who then contacts the appraiser.
  • the appraiser then has to pull that file and wait for the “great comps that the appraiser didn’t use” to be sent over.
  • once those come over, Eddie now has to spend time and review them – often having to provide written explanation as to why they’re not truly comparable.

This takes time – and since HVCC started time is money for appraisers. Given that Eddie isn’t paid to handle appeals, this costs him money.

Given this process, what is Eddie’s motivation to “kill your deal”? I can tell you from personal experience, if I saw a purchase appraisal is coming in low I’d call the agents and give them a heads up. I’d give them a day to support the contract, if they sent nonsense I’d move ahead with an appraisal that accurately reflected the current market value based upon the closed comps.

What is a Comparable Sale?

Do you know? Do you know what current appraisal guidelines require for comparables? If anything, the idea of proper comparable selection epitomizes the dumb or willfully ignorant agent. Simply put, a comparable is a reasonable alternative purchase to the subject. If the subject isn’t available, the comparables should fill as many of the requirements of the subject as possible. This means location, room count, design, living area, age……it means understanding that different homes will appeal to different buyers. Comparable = Comparable.

It DOES NOT MEAN simply grabbing the sales that fit your argument because they are close in sale price. It DOES NOT MEAN pushing forward comps that are over a year old or not comparable by expected standards. It DOES NOT MEAN simply throwing as much nonsense against the wall and hoping that something sticks.

Reliable comparables are:

  • CLOSED SALES that are preferably within 6 months but not more than 12 months.
  • the same style/utility - a 4BR/3.5B traditional home on a finished basement IS NOT comparable to a 3BR/1B ranch home on a slab. Overall condition should be similar.
  • are actually closed; listings hold little credibility, pending sales a bit more. However, closed sales are what are required.
  • Comparable sales ARE NOT just sales that support your idea of value.
  • DISTRESSED/REO homes CAN and SHOULD be used IF COMPARABLE.

You’ll see that this isn’t a long list – and that’s because this isn’t rocket science. It is opinion however and we know what that's like. However, the comps will tend to cluster and once that general value range is found, the comps tend to rise to the top.

At every step of the way, appraisers, reviewers and the automated review programs will be looking for the demonstrated value support. Demonstrated value support is based upon RECENT CLOSED COMPARABLE SALES.

Get Educated About Appraisals

Any true professional knows their business inside and out, how much do you know about appraisals? The axiom of “a little knowledge is a dangerous thing” applies here, now more than ever a competent agent needs to understand the URAR and how it’s prepared. I won’t argue that the appraisal industry doesn't have issues; however everything is based upon the data. If you understand and abide by the comparable requirements then you’ll be well versed in the most important part of the report.

Will there be things missed? Yup. Will you call it good condition and the appraiser average? Yup. Will you expect a new coat of paint to add 10%? Uh Huh. Obviously three appraisers looking at the same home will have three slightly different opinions - but as long as everyone understands the parameters the opinions shouldn't be that varied.

Do your job properly researching and evaluating your market, be honest with your clients and understand the appraisal process and what appraisers deal with…you’ll save yourself headaches and won’t need to assign blame. No appraiser really cares about "killing deals", all they care about is trying to make a living. And no, I'm not a bitter appraiser - I'm appraising primarily lender owned foreclosure properties and enjoy having the ability to pick the real estate clients that I work with. I've found that what Sy Syms used to say..."An educated consumer is my best customer" rings true; the folks I deal with appreciate my candor.
_________________________________________________________
Hank Miller is an Associate Broker & Certified Appraiser working full time in real estate since 1989. He specializes in the north Atlanta real estate market which includes Atlanta, Alpharetta, Marietta, Roswell, Duluth, Kennesaw, Sandy Springs and surrounding areas. Visit the main site at  
www.hounddogrealestate.com and reach Hank anytime at 678-428-8276 or hank@hounddogrealestate.com



Comments

By Sam Thompson,  Mon Nov 21 2011, 16:56
Great article hammerin hank.....and the truth shall set us free!
By Linda S. Cefalu,  Mon Nov 21 2011, 16:58
Wow, Hank, sounds like you had a really bad one. But..........that's what friends are for. Most of us here at Trulia have sounded off at least once for one reason or another.

Be careful though, not all of us agents are as inept as you think. I wouldn't want all agents rolled into one anymore than I would say that all appraisers are equal. I have experienced some real doozies.

Sounds like you are one of the smarter ones.

Love your picture.
By Hank Miller - Broker/Appraiser,  Mon Nov 21 2011, 17:15
Hi Sam - hope all is well...

Linda - I've not had a bad anything, I'm just calling it as I see it - and have seen it since 1989. As I pointed out, I'm not on the retail side anymore as it's nonsensical. That said, I do work with many of the agents in my office that come to me whinning about "low appraisals". What I invariably see is an agent ignorant of the process, too lazy to properly complete their own research or someone that just panders to their client. In short I see an agent that needs to get it in gear.

Obviously the appraisal industry is no bargain either, I'm not defending it but there are mitigating circumstances and clear differences. The requirements for an appraisal license are much much harder than that for a sales license. Appraisers tend to be in the field much more than part time agents - definately in the data much more.

I'm not rolling all agents into one ball - just the ones that give this industry the poor reputation that it has. I think everyone will say more need to go and that the requirements for a license and maintaining a license should be increased.
By Scott Hulen,  Mon Nov 21 2011, 17:38
You make many valid points but the problems remain the same, the pool method by which appraisals are done, hiring appraisers from over 100 miles away to do appraisals in an area they know nothing about except a Zillow estimate ( ha ha ) , the banks cutting the fees paid to appraisers so they are not encouraged to be through or have an open mind, the part time agents who might think they know something, the lack of understanding when a builder has an end of the season SALE and that automatically becomes the new comp standard, when we question an appraisal because the home had 2 full baths and not 1 as listed on the appraisal report, when we question the sq. ft. that is reported on the county website they have not updated since the room addition 5 years ago that was left off the appraisal, then we get a ration of shi_ pie when we bring it up because the appraiser wanted to prove a point and brought the property in 2000 under what we need to do the transaction, and this run on sentence goes on and on
By Isabel Elsesser, R.E. Pro,  Mon Nov 21 2011, 17:48
I agree with Scott because I have seen appraisal errors this year.
By Hank Miller - Broker/Appraiser,  Mon Nov 21 2011, 17:53
Scott -

No argument that there are appraisers that make errors. In that situation they need to be lit up.

The one constant in all of that remains the bottom line....value is based upon the pool of closed comparables. That pool will include builder bargains, REO, short sales......There are "X" amount of potenial comps - the challenge is using the most reliable ones.
By Darrell Hess,  Mon Nov 21 2011, 19:37
I agree on the fact that the method in which real estate licenses are handed out needs to be reassessed. A lot of fluff running around in this business and not much rock.
By Francois Gregoire,  Thu May 3 2012, 15:48
Hank, As an appraiser since 1977, my response is "I Love Real Estate Agents!" By means of explanation, for a number of reasons, I am not involved in appraisals for mortgage loans, but I rely on real estate agents for referrals, and depend on them to provide important information about transactions and properties I consider as comparable sales.

As a long time practitioner, it's clear to me we are all in this boat together, have different tasks and responsibilities, but must cooperate and work together. Part of my responsibility is to assist others in understanding appraisals and the appraisal process. To that end, I have written continuing education courses for real estate licensees about appraisal, and regularly speak with agents and brokerage offices on valuation topics. The communication with real estate licensees helps me network, builds personal and business relationships, helps me better understand their business and frustrations, and provides an ever increasing source of information for my upcoming appraisal assignments.

Like it or not, the real estate profession (appraisal and brokerage) is a people business. My choice is to like the people I do business with. Your mileage may vary.
By John Potter,  Wed May 9 2012, 07:26
Good comments except the one about using foreclosure or short sales. They do not conform to the definition of market value and to the scope of work. Put in a second grid with these sales and compare the difference. Then adjust the foreclosure sales up by the difference between the market and distress sales. Make sure the grids are labeled properly and the sales are labeled correctly. Otherwise the report with short sales will be WRONG.
By William R Hall,  Thu May 10 2012, 15:44
John, what if a particular market is primarily short sales and foreclosures? What then? Do you expand your search radius 2 miles? 3 miles? By that time, you are no longer in your subject market and are comparing apples to oranges. I've performed quite a few appraisals utilizing short sales and foreclosures because they were the only types of sales in the subject market. After this recent housing market, I think it might be time to review and revise the definition of "market value".
By Gwyn Ice,  Sat May 19 2012, 10:17
Sounds like an opportunity for an appraisal class for real estate agents. I know I would attend! Understanding how the comps are chosen would be invaluable to leading sellers in a focused, correct direction.
By Hank Miller - Broker/Appraiser,  Wed May 30 2012, 19:11
John - A comp is a comp. In many areas distressed homes are a major part of the market. As Bill said, the immeidate market area has to be considered and if distressed homes are comparable and common, they are in the pool.

Gwyn, there are plenty of appraisal classes designed for agents to get familiar with the business. That is time well spent!
By So tired of looking,  Wed Jun 12 2013, 06:57
I find it strange that you don't want buyers to think it's the appraiser making the deal fall through, yet out here in California, 90% of deals fall through at the appraisal. As a buyer, what am I supposed to do when I am buying a house that is not in distress at $299K but the appraiser has NOTHING else to comp other than foreclosures and short sales at $200K? They are comparable square footage but mine needs nothing on the inside. STILL the appraiser doesn't see a need for it to be over what the comps are??? What if there are no other houses in the entire place that haven't sold in distress? SO what's a buyer to do if they ONLY have $75K to put down and are losing their market at every turn? Now you know why people hate the appraiser. You want this market to turn? Time for the realtors to get into the appraisal market.
By Hank Miller - Broker/Appraiser,  Wed Jun 12 2013, 07:21
So Tired - I could say the same thing about buyers blaming appraisers. If you want to assign blame then:

1. Look at the underwriters. Appraisers write to underwriting standards - they are TOLD what the parameters are for an appraisal. Underwriters have their programs and these flag anything out of the guidelines. When that happens, files are held and appraisers questioned. Often, after extensive back and forth the underwriters do what they want "according to guidelines".

2. Look at the "help" from Washington. When Cuomo decided to push for management companies to "stop collusion" all he did was drive experienced appraisers (like me) out of the mortgage appraisal business. I'm not working my but off to give 20% of my fee to some middle man that is worthless and does nothing to help my situation. Now the industry has a pool of appraisers working for reduced fees and giving that type of product.

3. Look at the over regulation. Why does a report have to expand to 20+ pages? The essence of the report is rather simple, yet reports now are convoluted piles of data that do nothing but confuse. This is not an improvement, doesn't create more accurate reports and only results in meaningless pablum.

As for you, easy with the drama as 90% of deals are not impacted by appraisals. And as a buyer, why not use that "low" appraisal to your advantage? As for agents getting into the business, please. The vast majority of agents are inept and the industry bar for that is insulting low. How people trust major purchases like homes to many of these agents is mindboggling - but then we saw that very thing happen during the boom.

You want change? Get on the phone and emails to your state and federal representatives.
By So tired of looking,  Wed Jun 12 2013, 12:37
As for me, there is no drama. As for my wife, she is nuts that her last 5 attempts to buy a home for our family have failed because of low appraisals. As for that low appraisal, the lower it goes the more I have to bust my ass to come up with more cash. What an advantage I have on that one.

As for agents in the business, it would be nice. We would have someone from our AREA who knows the value of houses NOT in distress, and one who could get the job done. You seem to think all agents are stupid, but in the end, they are the ones that have to walk these deals through the low appraisals. We are lucky to have the agent we have now. She is solid and brilliant and could argue with you a little better than I can.

News flash: Not all buyers have 100% cash for the deal.

Unfortunately, the answer to all of your questions about regulations and why they exist goes something like this....Once upon a time, there were some realtors, appraisers, banks, and politicians who thought they could manipulate the market and lending practices by >insert rant here< and in the process, they created what is known as the bubble burst of 2009....
By Hank Miller - Broker/Appraiser,  Wed Jun 12 2013, 12:57
The second chapter of your once upon a time story is that all of the offenders - every one - got off without penalty.

The third chapter is that we the taxpayers bailed out these same offenders then let them off the hook for all their foreclosure nonsense - courtesy of the Feds

The fourth chapter is that the Feds "help" has stunted the return of buyers like you.

The fifth chapter is that the Fed is actively propping up the market by holding down rates and FNMA pushing prices/pushing homepath mortgages that don't require appraisals - http://hankmillerteam.com/2013/02/13/is-fnma-forcing-owners-into-foreclosure-or-helping-expedite-short-sales/

As for you wanting someone from your area to evaluate the homes, if those are the CLOSED sales, how would like them to look at things? If the comp pool is that, what is a local agent going to do to sway some checklist underwriter in Oshkosh WI? Do you understand that underwriters don't care? They follow the guidelines set down by the lenders and the feds. What do you think will happen when Bernake pulls the Fed purchase of MBS? He touched on it a week ago and rates spiked....

I don't think that we really disagree - the issue is above the appraisal level. And BW, most agents are stupid - there is no industry with such low entrance and maintenance standards. Brokers care only if an agent pays their fees, there is no performance expectation. The public allows this to persist because they feel compelled to use people they know or they are incapable of demanding excellence. The public spends more time thinking about dinner than they do selecting an agent.

Last thing - did you ever stop to think that maybe you're looking in areas that truly don't support whatever price home you're chasing? Five attempts? At what point do you ask yourself "maybe these areas just don't support the value"? Might be time to ask that solid and brilliant agent that question.

POST
 
Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer