Borrower’s Commonly Asked Questions and How an Appraiser Should Answer Them
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One of the aspects I love most about appraising is that every day is different. I inspect an average of 3.25 houses per day. Since every house is different, every day is unique. Despite the variety we enjoy, I have also recognized that, though the setting varies each time, there is some repetition. Specifically, the questions we get from borrowers seem to be similar over and over again.
One of the best lessons I have learned as a businessman is that, if there are any processes which are often repeated, developing a system for handling them will allow you to increase efficiency. This is true with answering questions that come up regularly. The following is a list of some questions (and my answers) I get most often from borrowers about appraisals and appraisal inspections:
“Do you need any help?”
Though by asking this question they are just trying to be nice, I am an introvert by nature and I really do not like the borrower peering over my shoulder through the entire inspection. Therefore, I can usually circumvent the question through my greeting. After introducing myself and telling them how the inspection will proceed, I always add “Now, I’ll try to stay out of your hair as much as possible, but will have a few questions for you before I leave.” That normally gives them the correct hint to just leave me alone and let me do my thing.
“Why are appraisals so expensive?”
Since this question usually stems from the fact that they paid for the AMC fee as well and the loan officer just called it all an “appraisal fee,” I tell them the truth. “I wish I was getting paid all that! Frankly, I get only a portion of that fee due to the middle man that your bank hired.” When they ask how much I get, I inform them that my contract does not allow me to reveal that, but that they ought to ask their banker.
“Does your iPad do all the calculations for you?” or “Well, that was sure fast (speaking of the inspection time).”
I put these two together because my answer is the same either way. Both comments stem from the fact that they cannot believe I am getting paid so much for doing so little, so my answer reflects what they are really asking. “I wish it were that easy. I still have several hours worth of research, crunching numbers, and reporting before I will be done on this. The inspection is the easy part.”
Does this [fill in the blank with the feature here] add value?
A person’s home is their castle. Homeowners hate to be told that something they spent their hard-earned money on does not add dollar for dollar value to their home. If they went to Home Depot and spent $97.95 on a ceiling fan, they expect their $100,000 home to now be worth $100,097.95. Since I don’t like to upset them, I would never say something terrible like “Well, if that is what you were going for, you wasted your money.” Instead, I try to be more diplomatic when I tell them the truth. “I look at every feature in your home and it all goes into my calculations. Though you will not see a line item adjustment on the report for your ceiling fans, I can assure you they all are considered and help determine the overall quality and condition of the home.” That usually is sufficient.
So, what do you think? We need [$$$ fill in the blanks] to make this work.
Probably the most common question asked of appraisers. I still get this one about 40% of the time. Thankfully, there is an easy and lighthearted way to answer it. “I wish I was that good. Boy, if I could calculate value right here at the inspection, I would make a lot more money than I currently do.” If they follow up with the inevitable “Do you think you will be able to hit the magic number?,” I am completely honest with them. “At this point, I would have no idea. If I tried to guess, you would probably just be upset with me later. If I guessed too low, you would think I was incompetent. If I gave a number that turned out to be too high, you would wonder why the value dropped between the inspection and report. The nice thing is, appraisers do not determine value—the market does. In a very short time, I will know what the market says about your home. I hope it has been good to you.”
Though this is not an exhaustive list, I seem to get these questions on a fairly regular basis. I find that answering a borrower honestly, but in a positive way will go a long way in building a relationship of trust and educating them at the same time. What questions do you get at inspections? What is the strangest question you have ever received? Comment below.
Though not a frequently asked question, I got a funny one once. I did an appraisal inspection for a family who had recently immigrated to the United States. They spoke no English. They had been cooking tamales all day and asked me if I wanted any. Now, I make it a rule to NEVER, NEVER, NEVER accept gifts (no matter how small) from the homeowners. I just do not want there to be any incorrect perception or cause them to feel like I owe them something. In this case, my refusal was not accepted. Either they did not understand the gestures of holding up both hands in protest or shaking the head vigorously, or they did not care. They set the table and nearly shoved me into the seat. I ate a tamale (and drank a Fresca). It was very, very good. I got ready to rise and another tamale was on my plate. The entire family was surrounding my plate and cheering me on. This happened over and over again till I literally could not eat anymore. After the inspection, I headed to my vehicle (which happened to be a Honda Shadow that day). They follow me with two grocery bags full of tamales to take home. After filling my saddle bags, I still had to hang a bag on the handlebars for the drive home. My family was grateful I did. Like I said, every day is different as an appraiser.