How to avoid a low home appraisal
That's a bitter pill to swallow, especially if your under-appraisal is unsupported by valid comps.
Leslie Sellers, president of the Appraisal Institute in Chicago, says the root problem lies with the way AMCs are compensated.
"They are paid a fee and they make their money on the spread between what they can get paid from the bank and what they can hire an appraiser for," Sellers says. "Over a period of time, the lesser and lesser quality appraisers are the ones that end up getting all the work.
"As a result, we have appraisers who do not have competency in how to properly verify sales in declining markets and are using improper sales (comps). Many times they aren't doing fraudulent things; they just don't know what they don't know."
How can you protect yourself from short appraisals? Here are some suggestions for buyers and sellers.
If you're a buyer:
- Tell your lender to find an appraiser who comes from your county, or perhaps a neighboring county. After all, you're paying him or her.
- Request that the appraiser have a residential appraiser certification and a professional designation. Examples include the Appraisal Institute's senior residential appraiser, or SRA, or member of the Appraisal Institute, or MAI, designations.
- Meet the appraiser when he or she inspects the home and share your knowledge of recent short sales and foreclosures that might skew the comps.
"Many appraisers are just pulling up data out of MLS (Multiple Listing Service) or off the deed at the courthouse and not checking it out," Sellers says. "Most good appraisers will appreciate the information."
And yes, you can speak with your appraiser; the prohibition only applies to your lender.
If you're a seller:
- Get an appraisal before you list a home. Search for a qualified appraiser in your area on the Appraisal Institute site.
- Use the appraisal to set a realistic listing price for your home.
- Give a copy of your prelisting appraisal to the buyer's appraiser. "They won't be offended," Sellers says. "The more professional appraisers will understand that you're just trying to add more data and another perspective."
- Question a low appraisal. There's always a chance the appraiser or a supervisor will take into account new or overlooked information.