LaPlante Appraisals' Blog

I just want to put it out there, no one is perfect. 

As a homeowner, agent or borrower, sometimes you may disagree with sales used  and/or opinion of value in an appraisal report. Each individual party is looking at different aspects of the transaction and represents different interests. Most agents have tried at least once, to send in a Reconsideration of Value (ROV). Agents have a variety of experiences with these, some good, some bad. We'd like focus on what makes a good ROV. 

Fist off, the point of an ROV is to provide ADDITIONAL information that was not included in the original report--most commonly: improvements and/or sales/listings. 

When submitting a ROV, please considered reviewing the report beforehand. Many times we received a ROV with sales that are already included in the report. Most lenders will review the submitted ROV to make sure this is not the case. However, we do understand as the seller, you do not get a copy of the appraisal report unless the buyer provides you with it. Sometimes an agent or seller will complain the appraiser "rejected" the ROV. As appraisers we are required to review ONE ROV per assignment if asked. If your ROV was not addressed, it was likely turned down by the underwriter or lender--not the appraiser. 

Most of the time the appraiser and the agent/borrowers are looking at the same information sources. However there are times, that due to how things are labeled or listed in the MLS listing site, they did not get pulled in the appraiser's initial research. Therefore there are times that additional sales do make it into the report and values can change. But sometimes the additional sale(s) do solidify the original opinion of market value. 

One of the most common challenges we find in the Maricopa County is real estate agents listing the GLA including the guest house square footage. For example, let's say an appraiser is pulling sales with a square footage between 3,600sf and 4,200sf. Take a look at the MLS listing below: 



One would assume the GLA doesn't include the guest house, however upon further research (calling the agent, assessor records, sketch, etc.) it is determined the comparable is actually only 4,072sf and the guest house is 409sf. Therefore this could potentially be a comparable, however was missed in the appraiser's research of 3,600sf and 4,200sf due to the agent including the guest house in the GLA. See Monsoon/Assessor image below. 



Another thing to remember: although you think a sale is comparable, doesn't mean it is. Appraisers go through a lot of training and classes, analyzing data differently than some real estate agents. Just because you think it's comparable doesn't mean it is in the appraiser's mind. If you happen to have any further questions about how we analyze data and determine market trends, we would be happy to sit down and talk to you about it. Reach out to us here. We are passionate about appraisals and analyzing data to create the most credible and supported report. 

Just know, even if the appraiser does not make changes to the value, you have a right to ask and pay for another appraisal. Yes it will cost you, and could potentially delay closing, but there is a chance another appraiser determines a different opinion of market value.  You have choices. 

Just remember...no one is perfect. 
 

The average person doesn't fully understand what is in an appraisal or what goes into creating a appraisal report. We are going to break down the appraisal process in order to better educate the general public. 

Last month we discussed why you need an appraisal. If you haven't read it yet, check it out below.

After a bank orders an appraisal, the order is sent to a certified/licensed appraiser who will analyze the market, record and report characteristics and data from the site visit. Then the appraiser writes a report for the lender (or client) to fully understand the property's condition and market trends. Most the time, lenders and underwriters reviewing an appraisal aren't even in the same state as the subject property. Therefore lenders rely heavily on the appraiser to paint a overall picture of the property, its neighborhood and the condition it is in. 

Steps to creating an Appraisal: 

1. The first step is to pull public data for the subject. This is where an appraiser will "look up the property" to get an idea of the size, condition and location. This is an appraiser's initial insight into the complexity of the property. Luckily, here in Phoenix Arizona, Maricopa County does a great job providing sketches, and most of the time, accurate data. 
2. Next the appraiser schedules a time to go to the property to collect first hand data, such as gross living area (the size), physical characteristics, and confirm any data that was initially pull from public data sites. Occasionally, there are minor additions or changes that were made to the building plans that are not recorded with the City or County. This is why measuring the subject (via technology such as a laser, phone technology, or a wheel tape measurer) is so important. The appraiser needs to confirm the data found on public data sites were correct. While on the site visit, the appraiser records details about deferred maintenance, updates and improvements made, additions and/or discrepancies. 
3. After the appraisal site visit, the appraiser imports all the data collected into a software for report writing. This step can be the most tedious, depending what was discovered at the time of the site visit. Sometimes additional research needs to be conducted if, for example, an appraiser finds out there is a Casita/ADU/Guest House on the property. Or there are solar panels or an addition to the main dwelling that were not recorded on public data sites. The appraiser then goes into investigator mode calling the appropriate authorities to determine if such discrepancies are legal, allowed, and/or permitted. 
4. Next is data analysis. Appraisers do not just "come up with a value" or "pull adjustments out of thin air." We are required to analyze the market through various different methods for the purpose of determining what the average buyer is willing to pay for an amenity or additional bathroom/bedroom. There are many different methods, as stated above, however it really depends on the amount of data available to the appraiser. In some rural areas, there is less public data available to an appraiser. Or if the market is slower and there are limited sales and listings available, this can sometimes limit the data pool that an appraiser is analyzing. Therefore, this step is also very time consuming and tedious. 

5. Next, report writing. This is one of the last steps in the appraisal process. After the data is analyzed, facts have been checked and confirmed with city professionals and ordinances, the appraiser can start writing. Remember, the appraiser is writing a report to articulate clearly the location, characteristics, condition, amenities and any marketability challenges the subject may have. 

Overall the appraisal process can take 7-15 hours, maybe more from start to finish. It is more than a site visit, sometimes that's the easiest part of the entire process! There is a large amount of research, analysis and investigating required to report accurate and credible results for the reader. As an owner or seller, you may just see the site visit and the end result, but know the appraiser is spending a significant amount of time in their office writing up the appraisal report. 
 

Many people we interact with do not fully understand what an Appraisal is. The audience of this blog is for the public--those who are not familiar with the ins and outs of the appraisal process.

First off, houses are expensive, and the average person doesn't have $400,000 to $1,500,000 of liquidated cash to buy a home. That is where a loan and the bank come into play. Money is borrowed in order to make the purchase. If a person was to lend a friend a large sum of money, they would want to make sure the person is able to pay it back. The person would not want to lend more money than what the item is worth. Let's say if for any reason, the person wasn't able to pay the loan back, the loan originator would not want to lose more than what the item was worth.

This is how the bank sees the loan and home buying process. A bank will lend you money to make your purchase, however they want to know they aren't lending more than what the home is worth. This is where the appraiser comes in. Appraisers are to appraise a house as a non-biased opinion (not working for the owner nor the bank) in order for the lender to make an educated decision on how much money they will lend a borrower. 

If for any reason the borrowers passed away suddenly, the bank would repossess the property. In this case, the bank wants the home to sell as fast as possible so they can get their money back. If they can't sell it due to deferred maintenance and major deficiencies, then the bank is losing money.  This is why banks require certain repairs be made and rely on a detailed appraisal report. Yes, you own the home, but not free and clear since you are borrowing their money. Borrowing money from the bank allows them to dictate your terms. 

This is something we get push back on, as appraisers, often from the borrowers. "This is my home, and I don't want flooring in the home" or I don't mind a broken window" or "I can manage that leak in the roof-it's not that bad." While this might be the case, if you are trying to refinance or pull money out and need help form the bank, then they have the right to set terms that repairs need to be made before they lend you money.

As appraisers, we are determined to provide credible, detailed reports for our client in order to help them make the best decision possible. Whether that is:

*Loaning money
*Deciding if it makes sense to invest $50,000 in upgrades in order to sell the home for a higher price
*What the fair market value is verses the value at the date of death, in order to determine capital gains and losses, or even
*What a fair buy-out price is for a set of partners separating a portfolio or real property 

Real Property ownership is a very important and a valued part of the American lifestyle. We, at LaPlante Appraisals, take our work seriously and have pride in the results we produce. Don't forget to come back next month, the next blog will be about the appraisal process (inspection & report writing).