Everything is going well on your purchase, but then the appraisal comes in short of the sales price. The first reaction to a short appraisal may be to rip into the appraiser. Believe it or not, many argue with the lender. Not only does the lender not complete the appraisal, but they also cannot choose the appraiser (although lenders may have an approved appraiser list).
One thing that real estate agents, lenders, buyers, and sellers need to remember is there are strict rules when communicating with an appraiser. Breaking the rules can lead to serious trouble, so it is key to know what to do and what not to do.
Know These Appraisal Rules
There are many federal, state, and lending agency rules when it comes to communicating with an appraiser. Years ago, during the great recession, the appraisal rules changed dramatically. All of them focus on keeping appraiser independence so that no involved party may influence an appraiser’s judgment. When working with an appraiser, try to avoid:
- Discussing the property value
- Pushing the appraiser to overlook issues with the property
- Withholding payment from the appraiser or not paying on time
The Correct Way to Rebut a Short Appraisal
Carefully review the appraisal in full before making a knee jerk reaction. Then, it is a good practice to follow these steps in the appraisal rebuttal process:
- Prepare a list of discrepancies and different points of view
- State additional comparables that would have been better and may have been missed
- Provide information to show why a comparable should not be used (non-arms length transaction, distressed sale, poor condition, etc.)
- When presenting comparables, provide them in grid format
- Be professional and detailed
Remember, an appraisal is an opinion of market value. Even though most real estate professionals should be pretty close in value, there will be a difference in opinion. Plus, one person may have different data than the next. Plus, no one is perfect, and there is no one authority to state there is one true, factual value of every property.
Can the Borrower Discuss the Appraisal?
On a refinance or purchase, the borrower may be present for the appraisal inspection. Furthermore, it is alright to speak to the appraiser, to a point! Especially on a refinance, the appraiser will have questions about the property.
Topics include recent improvements, age of home appliances or other features, and other areas. Two of the most common questions by a borrower include: “When will the appraisal be completed?” and “How much is the value?”
Although, it is perfectly fine to ask about the turnaround time, do not ask about the value. As mentioned earlier in this article, no one is allowed to discuss or influence value to an appraiser.
Short VA Appraisals
When it comes to the appraisal process, VA appraisals are different. Normally, the lender goes through an appraisal management company or requests directly to the appraiser. However, when it comes to requesting a VA appraisal, lenders must go through VA.
VA lenders make a request through the VA portal and then the VA assigns the appraiser based on a rotation basis. Additionally, a VA appraiser who feels the value may be short uses a unique process called invoking the Tidewater Initiative. This procedure gives everyone 48 hours to provide the appraiser with facts to help the appraiser. When Tidewater is invoked, timeliness is key for the real estate agent.