Helpful Appraisal Tips From the Seattle Chapter of the Appraisal Institute
Last Fall I had the pleasure of attending the annual conference presented by the Seattle Chapter of the Appraisal Institute. I was able to sit in on some interesting educational sessions. With all the conversation in industry surrounding CU and other initiatives directly impacting appraisers, I felt highlights from the educational sessions would be beneficial. The following information is from a presentation by Clark Dickson with HomeStreet Bank called, “Appraising for Lenders in Today’s World.”
Mr. Dickson’s presentation was about appraisal quality and what it takes to have your appraisal be acceptable in today’s lending environment. He said that everything in an appraisal now has to be perfect. Small infractions like checking the “HOA” box by mistake can no longer be overlooked. The appraiser will now be getting the appraisal back to fix these types of errors.
All this attention to detail may be painful for the appraiser, but on the bright side, it means that the appraiser has become a very relevant asset to the lending process. Dickson feels that appraisers who think this business is fading away may want to rethink that concept. Lenders are scrutinizing appraisals these days because they are critical to the security of the loan. Dickson believes that good appraisers can be viewed as an ASSET to the lending process when they strengthen their credibility by consistently providing solid valuations and high-caliber customer service. In turn, this can generate greater efficiencies within the process and increased income for the appraiser.
Before getting into more detail about the specifics of the appraisal itself, Dickson reminded everyone that they are also in the customer service business. This applies to both dealing with the lender who hired you and the borrower whose house you are appraising. If a lender finds that you are difficult to deal with directly or that you did not present yourself well at the property, the client can and will drop you from the roster. Don’t make the mistake of thinking that doing good work alone will keep more assignments coming your way.
Also included in his discussion on providing outstanding customer service to your client are some basic rules. These include such things as:
- The due date IS the due date. You need to always be on time. It is acceptable to ask for an extension when circumstances fall outside of your control such as incorrect phone numbers, borrower out of town, etc. However, any requests for extra time should be made no later than the day of inspection. “I’m too busy” or “I’m on vacation” are never valid reasons for being late.
- Ask a question if in doubt. Don’t be afraid to get direction from the appraisal coordinator. (Editor’s note: This is why we have very robust messaging functionality on AppraisalPort. If in doubt, use it).
- If you lack expertise or feel uncomfortable with an assignment, decline it. Common examples of assignments that are declined due to a lack of specific expertise are condos, manufactured homes, and 2-4 units.
- At the inspection – present a business card, dress business casual, be on time, gladly accept any information the borrower or Realtor provides you (you don’t have to use it in the appraisal), and be positive in all communications.
At this point in the presentation Dickson turned to more specific issues with the appraisal. His overall theme is that the appraiser should “tell the story.” In other words, you are the eyes and ears of the lender and you need to use as much detail and commentary as needed to explain exactly what is going on with that specific property. Don’t just use canned comments. The most important comments with be about the particular area and property-specific issues. It is also very important to be consistent throughout the appraisal. Fannie Mae is now putting a large amount of emphasis on consistency. Overall, Dickson says, “A good appraisal will answer the questions before they are asked.”
Dickson covered a long list of potential issues that can occur with appraisals. Here are some highlights:
- If you have to leave the neighborhood for comps, fully explain why it was necessary.
- Don’t hide behind UAD ratings and/or stop appraising what the market actually dictates. Keep making quality adjustments within a classification and keep making condition or effective age adjustments.
- Just because the rating is the same for the view, construction quality, or condition in UAD terms, does not mean that they are the same to the market or do not require adjustment.
- The actual age of the comparable sale is the age of the property at the time of sale. It is not the actual age of the property when you do your appraisal.
- Please don’t write your appraisal report in all capital letters; it makes the report difficult to read.
Overall, this was a very interesting and informative presentation. Of course there was a great deal of information presented that I can’t hope to cover in a short article. Dickson’s discussion of adjustments alone could be the subject of a separate article. The basic message from this presentation was that if you don’t want to have your appraisals returned, you need to completely explain what you did and why you did it. If you have any doubt about how to handle any aspect of this process, seek the help and continuing education you may need.
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