Communicating with agents, clients during the appraisal process

Communicating with real estate agents means smooth sailing for appraisers.

Communicating with real estate agents means smooth sailing for appraisers.

It may be rare that a professional home appraiser's valuation of a property matches the homeowner's estimation, but this could be changing despite a hot housing market. Recent data compiled by Quicken Loans suggested the gap between the average homeowner's estimated value and an appraiser's valuation is narrowing. According to the data, professional valuations of a home were about 2 percent lower than the owner's estimate, a difference that is much lower than in recent years.

"Professional valuations of a home were about 2 percent lower than the owner's estimate."

The Quicken study suggests that while differences persist, the relationship between appraisers and homeowners (and their agents) is generally improving. With that in mind, it's a good idea to examine how to foster better communication and understanding with all parties involved in the process of buying or selling a home. While the restrictions of these relationships may be limited by time or regulatory constraints, there are still several great ways to foster mutual understanding of the appraiser's role in the transaction.

Regulations to know
At the 2013 Realtors Conference and Expo in San Francisco, a panel of real estate agents and appraisers discussed issues facing their respective professions. Even two years later, their insights are still relevant to the real estate industry. One of the panel's main discussion points was communication between the two groups in the process of finalizing a transaction. This topic has become especially important, yet increasingly uncertain, with the enactment of several new regulations. Some of the most important new rules are contained within the Dodd-Frank Reform Act, signed into law in 2010.

While Dodd-Frank implemented many new policies and rules regarding the proceedings of a real estate transaction, it created a number of common misconceptions, according to a guide by the American Society of Appraisers. As noted in the text of the act itself, agents, clients or anyone "with an interest in a real estate transaction" are not prohibited from asking an appraiser to do any of the following:

  • Consider additional information about the property being appraised, or consider data surrounding any other comparable properties.
  • Correct any errors in the details of the report.

Again, either of the above are perfectly acceptable for real estate agents, or the homeowner themselves, to ask of an appraiser. The ASA noted that agents may even provide a copy of the sales contract for purchase transactions. The ASA also encourages loan underwriters to stay in touch with appraisers throughout the process, at least within the bounds of the Uniform Standards of Professional Appraisal Practice.

"This would eliminate much of the confusion and promote efficient time usage in the appraisal process by reducing the amount of information and questions passed through AMCs to either the underwriter or the appraiser," the ASA wrote in its guide to regulatory compliance. "A more efficient process would benefit the consumer."

Real estate agent
Real estate agents, appraisers and homeowners should all work together to make the process smooth for everyone.

Agents and appraisers
According to John Anderson of Twin Oaks Realty Inc., in Crystal, Minn., "80 to 90 percent" of real estate agents he surveyed said the appraisal process was the biggest challenge in closing a deal. He also noted that appraisals were becoming harder to manage lately thanks to new, strict regulations regarding the proceedings. Anderson took these concerns into consideration and created a brief guide on how real estate agents can foster a better relationship with the appraiser in a home sale in the interest of everyone involved. He discussed these points at the 2013 Realtors Conference.

Primarily, agents need to come prepared to an appraisal inspection with documents about the property, including comparable sales listings and pendings deemed meaningful. While the valuation expert may use all, some or none of these in the final report.  These comps can still be helpful to an appraiser as data worthy of  consideration or at least indicate neighborhood trends. Vic Knight, an appraiser from the Raleigh, N.C., area, noted in the Realtors Conference panel that time is of the essence when communicating with valuation experts. After the appraisal inspection has been done and the report completed, agents may only ask for clarification or correction of errors. All other requests must come from the client .

While communication between appraisers, agents and owners can be a confusing minefield to navigate, understanding the basics has the potential to improve the experience for everyone involved.