Appraisal Report in MLS Listings
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- Bias in Automated Valuation Models - February 28, 2022
Your Appraisal Report Attached to a MLS Listing….
Private prelisting appraisals are a good revenue stream for many appraisers. Do your clients understand the intended use and intended users? Do you, the appraiser, understand the intended use and the intended users? We often get complacent and assume everyone understands, and then the unthinkable happens; you find your appraisal report attached to a MLS listing or worse, attached as a photo on Zillow. Yes, this actually is happening!
On recent MLS listings, the following statements were found:
“Offers accepted until… Owner reserves the right to accept or reject any/all offers – Home inspection and two appraisals will be provided
Recently appraised for $315,000! – See attachments for a copy.
It is our job to ensure we as appraisers understand how, when and by whom our appraisal reports will be used. The time to obtain this information is in the engagement stage. It should also be fully explained within the report. This is not boiler plate language similar to what is preprinted on the URAR. In other words, make sure there is no misunderstanding and both you and the client fully understand the intended users and the intended use of your appraisal report. Even with a restricted appraisal report, does the client fully understand its limitations? Take the opportunity to educate your client. If you don’t agree with how the client wants to use the appraisal report and can not come to a mutual agreement, should you complete that assignment? What, if any recourse will you have if your appraisal report ends up being used for another use or by someone who is not the intended user?
Have you ever received a sales contract $30-40,000 above the comps? Some agents are using the appraisal as a negotiating tool. Phil Crawford, Voice of Appraisal podcast E164, exposes a theory that agents are telling buyers the only way to obtain this home is to offer $30,000-$40,000 above list price.
“Don’t worry, the house will never appraise and we will negotiate the price after the appraisal is completed”
In this scenario, the appraisal report is being used for an intended purpose and by a different intended user than what the appraisal was for, the lenders security of a mortgage loan.
Phil also points out an agent he knows was offered $30 to show a property. If the property went under contract as a result of that showing, the agent will receive a $500 bonus!
Yes, this stuff is actually happening!
Good advice to follow: Make sure you and your client have a complete understanding of your role, the intended user and intended use. Make the sure the verbiage in your report is appropriate and complete for that particular assignment. Boiler plate states may be more harmful than no statement at all. Check with your E&O company for advice on how to protect yourself from unintended liability.
Listen Phil Crawford’s Podcast E164 Tricky Points, Rural Appraisers, A new “Skap” Report!!!