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Bee Nguyen, Real Estate Pro in Atlanta, GA

Any thoughts about listing agents who meet the appraiser with comps before the appraisal takes place?

Asked by Bee Nguyen, Atlanta, GA Mon Oct 12, 2009

I have had transactions with realtors who meet the appraiser over at the property with their own comps prior to the appraisal taking place. As the buyer's agent, I am curious to know what other realtors think of this practice. I am wary of this as it compromises the unbiased opinion that the appraiser is supposed to provide.

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I have been following the Q & A's on this page for weeks now and reading with great interest everyone's input. Small world that I just received my local board's monthly magazine that referred to this. Their information came from NAR and , as I understand it, it is okay under HVCC rules.
NAR's website has a page with much information on HVCC: http://tinyurl.com/krssfg
There is much to read on that page should you want to but you might want to first take a look at the link "NAR's HVCC Myths and Facts Flyer."
The "Myth" is that HVCC rules prohibit lenders and Realtors from talking to an appraisars when, in fact, it states under "Facts" that: "REALTORS® and lenders can talk to appraisers, including requests to consider additional data or to correct errors."
Thus, I will continue to do what I have always done for many years. That is -- to be at my listings when an appraisal is taking place. If I have additional honest, truthful & factual information to provide the appraiser I will do so. Whether or not the appraiser makes use of this will, of course, be up to the appraiser.
2 votes Thank Flag Link Thu Nov 5, 2009
Steve,

There is nothing "illegal" about a Real Estate Broker/Agent providing Comparables to an Appraiser, in fact, in a recent article from the National Association of Realtors they supported the practice due to issues that have been created by the HVCC which has had a negative effect on many sales, etc.

In most suburban neighborhoods, this practice is usually not required; however, in many urban intown Atlanta neighborhoods that have been ravaged by foreclosures, short sales, etc. a LOT of sales information is not readily available in the MLS. In fact, greater due diligence must be performed to find Bank Sales, HUD Sales and other transactions that can only be found in tax records, etc.

If someone was providing "False" Comparables, then by all means they should suffer consequences from their actions; however, if the Listing Agent was merely providing Comparables that could be verfied through tax records the Agent is simply doing their job to make sure the Appraiser if doing theirs. If you wait to argue after the fact, the deal may too far gone to pull back together.
1 vote Thank Flag Link Mon Oct 12, 2009
Appraisers should not see the contract, period. They should base their valuation on the data, not the sales price. I am almost finished with the home buying process and just asked my lender if the appraiser will see the contract. I was dumbfounded when she said yes. I feel like I'm getting a good deal, but I want to know for sure what the value is. I'm so frustratred right now.
0 votes Thank Flag Link Wed Jun 1, 2011
One of the reasons the appraiser reviews the contract: it is relevant market data. Another is to determine whether any personal property (non-realty items) are being conveyed with the real estate. The biggest reason is they are REQUIRED to review any agreements of sale within the previous 12 months, including the current pending contract. This is a USPAP requirement; The Uniform Standards of Professional Appraisal Practice is part of the federal code. Thus, if an appraiser does not review the contract he is in violation of federal law.
Flag Thu May 15, 2014
Comp's are comp's appraiser knows they are 3rd party opinion have base of so many other factors, I would not find to be any big deal.
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Thu Nov 5, 2009
Another thought, Dan. Because every purchase is different. Not quite a year ago, I had a young lady who had found the perfect property. It was zoned commercial/mixed use. Just what she needed. It had been a residence for years, but was also designed to be able to do business from the front. Perfect! If she had $180,000 in her checking account, she would have written a check. It was worth it to her. But, alas, she did not have that much in her checking account. So she went for a VA loan. This building was a challenge, because it was built in 1930. And there are not a lot of comps for residence business combos. The VA does not do loans for commercial property. But we got lucky. I met the appraiser - an old black man. Semi retired. Been doing VA appraisals for 50 years. Knew his stuff. We talked, and I explained to him what we were trying to do. He spent 4 days doing that appraisal. He knew how to make it work, and he did make it work. Believe me, that buyer was thrilled, and is still thrilled, and it was a good deal all the way around.
0 votes Thank Flag Link Thu Nov 5, 2009
Also, it is good to remember who the appraiser works for. He works for the bank. He does not work for the buyer, nor the seller. His job is to represent the banks interests.
0 votes Thank Flag Link Thu Nov 5, 2009
An appraisers job, usually, is to determine whether or not a given property is sufficient collateral for the loan the bank is about to give. It is not really a value determination. It is a collateral determination. Value is determined by the market. An informed buyer and a willing seller determine value. A healthy auction determines value. Not an appraiser.

Refinance deals do not typically give the appraiser the target. Guess how often they come out low? But when the homeowner is present, and they will usually be, and they engage the appraiser in what they are trying to accomplish, and what they may have done to the home, then the appraisers job is again to determine if the collateral is sufficient. There are numerous ways to do this. But yes, appraisers work best when they have a target, then they can say this particular property does or does not fall within the target parameters.
0 votes Thank Flag Link Thu Nov 5, 2009
Hank, I read what you wrote. It has explained a lot. It did leave me with one question. Do you mean an appraiser does not care about the value without the contract price? If this is even partly true should the appraiser be unable to see the offered price at all during the appraisal process to be fair and accurate?

Also, as a buyer if I found out a realtor ( mine or the sellers) tried to do anything that could affect what the property appraised at (up or down) why would that not be seen as a conflict of interest? How can a buyer trust an appraisal when those involved are all trying to stack the deck one way or another?

Then finally, if I am looking to buy not in a big city with many sales but a small town of 500 or less with no recent sales how is an appraisal made with no comps?

It sounds like doing, or getting an appraisal is a lot more complicated than people would think. What a question and response section to have found.
0 votes Thank Flag Link Thu Nov 5, 2009
Running comps is only one method an Appraiser can use to determine the value of a property. There are many different appraisal methods: Cost Approach, Income Capitalization, and Sales Comparison (comps).
Flag Sun Jul 28, 2013
The market always has been and always will be the best and most reliable indicator of present value. We all agree that contracts influence appraisers. Let's not overcomplicate this - do a good job with the comps and odds are good that there won't be value problems. Underwriting issues.....different story.

Hank
0 votes Thank Flag Link Thu Nov 5, 2009
Bee, This presents an interesting question and one I hope someone out there can answer. Is it legal for the Buyer's Agent to meet with an appraiser or consult the appraiser for any reason under the HVCC Rules. I have heard different answers from different so called experts and I really don't know the answer.

In relation to Bee's question, I don't think meeting the appraiser at the house with comps is a good practice, but I have had appraisers call me while doing an appraisal to ask for prices on pending transactions or closed sales in neighborhoods where I am considered na expert. I am not even sure under HVCC guidelines that this is a valid practice.

All I can say in relation to all the questions presented in this post is that the HVCC was the worst thing that has even happened to Real Estate and it has not stopped what it was intended to stop and has only created more problems. Let us hope they dump it before they completely trash our industry.
0 votes Thank Flag Link Thu Nov 5, 2009
I appreciate all the different answers and opinions as I have qualms concerning the appraisal practice in general. However, from a legal standpoint, I spoke with the Georgia Real Estate Commission about this practice and just as an FYI for your own business practices, I was told that an agent providing an appraiser with any documentation violates both real estate license law and appraiser license law. This does not in any way alleviate any concern regarding the subjectivity of an appraisal or the competency of a particular appraiser, but legally speaking, it would work in our best interest not to put our licenses at risk.
Web Reference: http://www.leaveittobee.com
0 votes Thank Flag Link Fri Oct 30, 2009
If it was actually possible to mathematically determine an exact price value of a property, you would not see two appraisals with a $32,000 differential in a two week time span. The only reason this exists is because each appraiser was working a different contract. One contract happened to be incorrect.

The real purpose of an appraiser is to verify that the property is sufficient collateral for the loan. It is not, and actually cannot be, a specific price determination of a property. I have several appraiser stories, they all point to the same thing. It would, in my opinion, be more valuable to have supporting documentation that answers the question specifically -- Is this property sufficient collateral for the pending loan?

I had one contract for $119,000 home. The appraiser, in his wisdom, determined the actual value of the home was $117,800. That's baloney. This particular appraiser was actually an apprentice. It worked out good for my client, because the seller reduced the price $1200. But I know for certain another appraiser would have come up with a different answer, and I know for certain that no appraiser can come up with a pinpoint valuation of any property. A range, maybe, not a determination that is supposed to be gospel somehow.
0 votes Thank Flag Link Wed Oct 28, 2009
Bee, that is a good question and does present some concerns.

I personally do not have any problem with a seller or buyer's agent providing comps to be considered at time of the inspection. There is however a fine line between providing additional data for consideration and influencing the outcome, which should be recoginized when meeting with the appraiser. Even before the HVCC, appraisers could not, and/or should not, discuss the appraisal with anyone other than the client who ordered the appraisal (USPAP regulations). Now that is not to say an appraiser cannot discuss the appraisal process and/or method(s), just not the specifics of a particular appraisal.

Others have provided some interesting views and comments. Some of which I agree with and some which I disagree with. They do however show a lack of understanding of the appraisal process and all that is involved and/or required. For example: Edward's comment concerning the contract price. The appraiser is REQUIRED to review the contract and INCLUDE specific information in the appraisal report taken DIRECTLY FROM the contract. One of which is the contract price.

Another misconception, or lack of understanding, is the fact that appraisers do not "kill deals". The market dictates value. The appraiser interprets the data in order to report the value reflected in what the market dictates to the client. That value has to be presented in a numeric form, and can be expressed as either a specific value, OR as a value range. Also for mortgage purposes, the appraisal does not determine value. It's purpose is to ASSIST the lender in determining the collateral risk involved with the transaction. When a deal is "killed", it is usually because there is not suficient legitimate data to support the sale price, or in many cases an inflated sale price.
0 votes Thank Flag Link Wed Oct 28, 2009
Rob -

You bring up a good and valid point - and it illustrates a common theme. The bottom line is that no two appraisers are going to look at something the same way - you do expect however for them to be somewhat close. Purchase transactions theoretically reflect current market attitudes; closed comps reflect past attitudes. When handed a valid contract, I always place a high degree of respect on the agreed upon price; provided it's arm's length and valid. That said, of course it has be supported by the data - if not it's encumbant upon the appraiser to solicit agent feedback and make the final call.

Your first appraiser seems to have recognized the unit was purchased at a good price and likely tried to keep it near the supposed price - remember automated underwritiing issues in the new HVCC era. The second appraiser had a higher first impression based upon the contract and he apparently felt it was also a good buy.

Whether or not appraisers will admit it, the contract price does set a mark in our minds. At the end of the day the value is either there or not, but the sale price at least gives us an idea of the buyer's mindset.

Hank
0 votes Thank Flag Link Wed Oct 28, 2009
I recently had a contract for a new construction Condo in the Nashville area. Contract price = $291,000. This contract price was negotiated over the course of several counter offers. The initial offer was for $265,000. The lender erroneously sent only the initial offer to a local appraiser. The appraiser thinks the contract price is $265,000. The appraisal comes back at $270,000. I advise my clients this is not repairable under any circumstance and to jump ship, begin again with a new lender. They did. This time a local appraiser is sent out to the property with a $291,000 sales contract. The appraisal comes in at $302,000.

This home saw a $32,000 increase in value in just two weeks. Both appraisers were local, knew the local market. Both experienced in their field.
0 votes Thank Flag Link Wed Oct 28, 2009
Bee, this is a truly hot topic. Hank's explaination is understandable and very tactful. Make the 'DATA' available.

However I would like to ask:
"Are you better at recovering from a train wreck or preventing one?"
If your Atlanta listing is being appraised by someone who works 200 miles away, what are your options?
0 votes Thank Flag Link Wed Oct 14, 2009
Thanks Hank, Couldn't agree more! 'nuf said!
0 votes Thank Flag Link Tue Oct 13, 2009
Joan, exactly what does "coming in low" mean? Does it mean that the appraiser is willfully "killing a deal"? These expressions are complete nonsense, who thinks an appraiser even cares about that? They appraise according to what the market supports, no appraiser I know looks forward to having his phone ringing with call backs - value is either supported or not.

Appraisers are required to review contracts as part of their due diligence. They are required to review the data and prepare the new 1004 MC form that summerizes the YTD trends. They are required to provide at least three closed comps and typically listing and/or pending comps. Many lenders expect additional things and appraisers often add data as well.

Reviewing the contract and knowing the terms, do you think an appraiser wants to "kill a deal"? Do you think they even care? I submit most appraisers just want the report in and out - no call backs. However, if the value isn't supported by the data, what is the appraiser to do? Unless the agents provide confirmable and useable data free from opinion, it's worthless.

As I said earlier, the industry is changing for the worse; experienced appraisers are leaving and the gov't micromanagement is crazy. Appraisers are essentially defeated.....now most appraise to the underwriting programs as they've been reduced to form fillers. This is hurting the recovery in my opinion as we can't come out of the hole if we're unable to offer some level of opinion.

As an appraiser with 20 years experience I'd suggest keeping it simple. Prep an info packet ahead of time, leave it at the house labled "for appraiser" and leave things alone. If you think they "killed the deal" then perhaps the value is unsupported. If you feel strongly then call the lender, submit your info and ask for a reconsideration.

Get the data in the appraiser's hands but do it tactfully, we're not really interested in "agent speak" - the data speaks the loudest.

Hank
0 votes Thank Flag Link Tue Oct 13, 2009
David is right on - the HVCC is a disasterous nonsensical reaction led by the biggest windbag around...Cuomo was the HUD sec when the wheels fell off, we need him to now "rescue" us with this nonsense?

The idea of appraisers getting paid less (fees go the those management firms) was supposed to be offset by appraisers staying local and being able to increase volume and efficiency. Problem is, many appraisers are walking away and management firms are giving work to the low bidders. Oh, to keep costs low those low bidders are not getting all the usual data sources....so you have less experienced appraisers with fewer reliable data sources. You might get away with it locally, but not if you have appraisers coming across the state. But, that's not supposed to happen according to Cuomo....

There have been similar discussions on all of this -
http://www.trulia.com/voices/Home_Selling/Is_this_possible_r…

In a situation like David's there is validity to agents getting involved, if the appraiser isn't from the area then your input may be beneficial but each case is unique. Scott, we've had this discussion before about the Atlanta area - appraisers from Marietta or Canton can easily complete in town work just as appraisers from Inman Park or Cabbagetown can complete work OTP. We have access to the same data - including public records for transactions outside of the FMLS/MLS. Stats are easily pulled for the 1004MC form and the idea of "you have to live ITP/OTP to do work in that area" doesn't hold water. Appraisals are based upon historical data (sales) and trends are forecasted from that, not PR. Savannah to Blue Ridge....Macon to Canton...Cartersville to Athens....that's just irresponsible for an appraiser to accept that work.

It's all about the data.

Hank
0 votes Thank Flag Link Mon Oct 12, 2009
Hey guys and gals, you'll love this example I'm about to site showing where now it might make sense to do just that - help appraisers find comps that make sense. Unfortunately, it's kind of an insult to a real professional appraiser. I had an appraisal on a bank owned property a couple weeks ago. My BPO and the appraisal were $100,000 apart on a $250,000 home. The home was in the mountains. The appraiser was from Savannah. The bank had no control over the appraisal as far as who did it, they just ordered through a third party and it is assigned following the new HVCC guidelines even though it wasn't even a purchase. It made absolutely no sense for an appraiser 5 hours away offering an appraisal especially when he missed value by $100,000. Comps used where no where in the vicinity of the subject property nor anything like it. I agree with Hank as usual, appraisers don't want agents meddling in their work just like we wouldn't want them meddling in ours. Unfortunately, the current system is quite flawed and though the intent is to improve the appraisal process in my honest opinion, it's actually made it worse. Nice to see such passion in all the answers regarding appraisals. You think it's an issue today? Of course it is and I'm hearing too many stories of our current appraisal guidelines killing sales due to no real way to dispute an appraisal. Now we don't have the option to interact with the appraiser and I think we've gone over board. I'm sure we'll swing back to the middle which makes sense eventually. I just wonder how many more closings are lost before someone with power and common sense recommends a change.
0 votes Thank Flag Link Mon Oct 12, 2009
Bee, that's a great question and I would like to give you some perspective from California. This has always been a best practive for agents that want to support the value that both buyer and seller have agreed upon. I would have to agree that this practice can be effective. However, the implementation of the HVCC has completely changed the rules of the game. We have been instructed that this practice is at odds with the HVCC and could be cause for a potential loss of license. Regardless of whether an agent's intent is sincere, the way to 'fix' the HVCC issues is not to become your own mini appraiser and provide before appraisal comps to the appraiser!
0 votes Thank Flag Link Mon Oct 12, 2009
If I have an agent that wants to meet me for some reason I just tell them that there's no need for that. If they insist, I'll give them a bogus time, cancel in advance and do the appraisal on my own. They can send any copms they feel appropriate and I'll review them.

Most agents don't provide anything earthshattering anyway and I also view any agent that meddles as having an agenda. If the home is worth it, we know.

Hank
0 votes Thank Flag Link Mon Oct 12, 2009
If I were you Bee, I'd boldly ask the lisiting agent, "what's the purpose of your wanting to meet with my buyers appraiser?" And then Stacey . . . All I can say is I hope you have good E&O insurance! No, make that GREAT E&O Insurance. Getting involved in valuing properties is the job of a certified appraiser, not an "expert" listing agent, and interjecting your "expertise" could not only jeopordize your deal, but your license as well. BPO's and Appraisals are two totally different animals. It's best that we do our job and let the appraiser do theirs, without agents attempting to influence them in any manner in advance whatsoever, unless asked or invited to do so. Afterwards, well . . . . that's a different story, argue with them all you want.
0 votes Thank Flag Link Mon Oct 12, 2009
Bee,

With the enactment of House Value Code of Conduct (HVCC), the appraisal rules have changed the playing field. If I look at it from the perspective of selling my own home, as the Listing Agent I would absolutely meet the Appraiser to review the Comps they are using to determine the value of my home. In some cases, I will even take the lockbox off the door so they have to call me to get into the home. With that being said, I would do this for every one of my clients.

The purpose of the HVCC is to help curb inflated appraisals and mortgage fraud. So on the surface, I am completely on board with this Code; however, there have been some repercussions that have afftected the process. The fees paid to appraisers are now lower and therefore breed less experienced appraisers who may spend less time on accurate and thorough appraisals. A bigger concern is that quite often appraisers are not familiar with a specific area of town and therefore may not have all the information they need to make an accurate judgment of the value of a specific home. I would expect a Listing Agent to be an "Expert" in the area they take a Listing and therefore have the most complete and accurate information which they can share with the Appraiser to make sure they can make the best informed valuation.

I think this is a good practice for a Listing Agent.
0 votes Thank Flag Link Mon Oct 12, 2009
Sounds like the agent, if they represent the buyer, is doing their job. I'd steer totally away if I were representing the seller for fear that there a possibility or appearance of a pay-off. In todays market with the HVCC regulations, and appraisers working in an unfamiliar territory, they may need the expertise of the agent to be able to help find, or direct them to, comparable properties. It is a touchy subject and any agent who does this is doing so at their own peril. Not to mention if this is a government backed loan, with it's regulations on 2nd. appraisals, etc!!! It's best to ask the appraiser beforehand if they can be of any assistance to them in compliling the necessary information. If not, stay at the office and let the chips fall as they may, and then if there is a discrepency, deal with that at that time. Having a upfront, open honest conversation with the lender, regarding the appraiser and appraisal process is always advised. Remember the appraiser represents the LENDER! Good luck!
0 votes Thank Flag Link Mon Oct 12, 2009
Bee-

I don't know if you have had the experiences that myself and many other agents in the area have had with appraisers that do not know the neighborhoods and have driven all the way in from LaGrange Georgia but if it is THEIR unbiased opinion of an area they are completely unfamiliar with then YES I will certainly try to meet them and give them information that pertains to the property and the immediate area. I have found appraisers that are not used to much other than suburban subdivisions with all houses and lots being close to the same and not wanting to use an extremely comparable property less than 1/2 mile away because it was considered "too far" in an "intown" neighborhood. Please remember that our "intown" neighborhoods such as Druid Hills, Morningside, Decatur, East Atlanta, Grant Park and Ormewood all cover more than a 1/2 mile. What I have found over the last few months is that houses seem to be priced well and agents, sellers and buyers seem to be more understanding that the house will need to appraise and the sales price seems to reflect this "supply and demand" of current market conditions. So....if an appraiser is unfamiliar with the territory then some information provided by someone that knows the area and the interior finishes of each and every house on the comparable list might be useful/helpful to all involved.
0 votes Thank Flag Link Mon Oct 12, 2009
I personally have never done this nor have I had to have the comps handy because the appraisal came in low...however...I understand that some agents have had to do that. I have not heard of them going to the appraiser ahead of time. That just sounds unethical. But, having to argue their numbers after the fact, yes.
As my mom always taught me "When in doubt...don't". If you think it's wrong...it probably is...so don't do it. I like to base my life and my business on that principal.

Good Luck Bee!

Jodi Smith
Atlanta Real Estate Agent
Keller Williams Realty Consultants – Roswell, Georgia
678-763-6025
jodismith@kw.com
Tweet Me: http://twitter.com/JodiRSmith
0 votes Thank Flag Link Mon Oct 12, 2009
I am more concerned that the appraiser is told the contract price BEFORE doing the appraisal. If he or she is to do a really fair and unbiased appraisal, why can they do the appraisal first, before knowing what the contract price is. Somehow the appraisal almost always (miraculously) comes in at just over the contract price!

Ed Francell
Prudential Georgia Realty
0 votes Thank Flag Link Mon Oct 12, 2009
Since lenders now have no control of who the appraiser will be, except in the cases of government loans, it is not a bad practice in my opinion.
We have had appraisers from Rome and Canton come to "intown" Atlanta to try and do appraisals and welcome some input.
We feel if an agent merely meets to appraiser and hands them a file of comps, then answers questions the appraiser may have, the integrity of the appraisal should not be compromised.
0 votes Thank Flag Link Mon Oct 12, 2009
I agree it does seem to compromise the integrity of the appraisal somewhat. As the buyer's agent this would bother me. As the seller's agent, I understand why this is happening. Many times there are properties that have sold that the appraiser does not seem to have on their radar. I've just experienced this for one of my clients recently. The appraisor actually had over a year old appraisals and went way outside the mileage of my listing. There were like properties right in the area of my listing that sold and were under six months old. What do you do in this case? Any suggestions?

Aleta C. Saunders, Broker
Marquis Brokers
678-849-6920
aleta@marquisbrokers.com
0 votes Thank Flag Link Mon Oct 12, 2009
I personally do not do that unless the appraiser asks me for any comps in the area. It is best to let them do their job and if they do not appraise the property, then I would talk to the appraiser and see if his comps match mine. It's a delicate subject since there are many new rules now days; lenders cannot tallk to appraisers, appraisers may not even talk to realtors. The best thing to do is get very good comparables and keep handy in case you need them if the property does not appraise.

Anna Lee Trinidad
Prudential Gary Greene Realtors
2900 Weslayan, Suite 150
Houston, TX 77027

713-823-3108
0 votes Thank Flag Link Mon Oct 12, 2009
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