Appraisal Scoop

How to Prepare for an Appraisal

For homeowners, a real estate appraisal is the linchpin to buying or selling their home. It allows the property transactions to occur among the buyer, seller, real estate agent and mortgage lender.

Before an appraiser arrives, there are a few things you should know. By law, an appraiser must be state licensed to perform appraisals prepared for federally related transactions. Also by law, you are entitled to receive a copy of the completed appraisal report from your lender.

To facilitate the appraisal process, it's beneficial to have these documents ready for the appraiser:

• A plot plan or survey of the house and land (if readily available) 
• Information on the latest purchase of the property in the last three years
• Written property agreements, such as a maintenance agreement for a shared driveway
• List of personal property to be sold with the home
• Title policy that describes encroachments or easements
• Most recent real estate tax bill and or legal description of the property
• Home inspection reports, or other recent reports for termites, EIFS (synthetic stucco) wall systems, septic systems and wells
• Brag sheet that lists major home improvements and upgrades, the date of their installation and their cost (for example, the addition of central air conditioning or roof repairs) and permit confirmation (if available)
• A copy of the current listing agreement and broker's data sheet and Purchase Agreement if a sale is "pending".
• Information on "Homeowners Associations" or condominium covenants and fees.
• A list of "Proposed" improvements if the property is to be appraised "As Complete".

Once your appraiser has arrived, you do not need to accompany him or her along on the entire site inspection, but you should be available to answer questions about your property and be willing to point out any home improvements.

Click HERE for our video on How To Prepare for Your Appraisal Inspection.

Here are some other suggestions:

• Accessibility: Make sure that all areas of the home are accessible, especially to the attic and crawl space
• Housekeeping: Appraisers see hundreds of homes a year and will look past most clutter, but they're human beings too! A good impression can translate into a higher home value
• Maintenance: Repair minor things like leaky faucets, missing door handles and trim
• FHA/VA Inspection Items: If your borrower is applying for an FHA/VA loan, be sure to ask your appraiser if there are specific things that should be done before they come. Some items they may recommend might be: Install smoke detectors on all levels (especially near bedrooms); install handrails on all stairways; remove peeling paint and repaint the effected area; provide inspection access to the attic and crawl

Author: Brian J. Davis, RAA - Brian Davis & Associates - Brian has over 22 years of appraisal experience in Central, IL and hosts the Appraisal Scoop blog and the WinTOTAL Users Group an email forum for appraisers

E&O Insurance for Appraisers - How Much Is Enough?

Question on the WinTOTAL Users Group: Your comment got me to thinking. I am currently insured at $1M. I do appraisals from $64k to $3.3M+ as I am in SW Florida. In this year I have done 19 assignments that exceed $1M.  What level of insurance would be necessary. I feel my personal assets need insuring for less than $500k.  Would more insurance be a waste or should I increase my levels?

Response: I think that's a question best put to one's E&O insurance provider, but I also believe that each of us needs to get a feel for exactly what our "risks" might be.  We also need to be aware that E&O insurance does NOT protect or cover appraisers that are guilty of negligence or fraud.

Even if one does an appraisal on a home that is valued at $1M, what are the chances (risks) that the appraiser will be sued for the full value of the home?  Is it more likely that they will be sued for "damages" that are substantially less?

What exactly DO appraisers typically get sued for?

Real estate appraiser claims are unexpected and can happen to most any organization. Most real estate appraiser's professional liability claims are triggered by a transaction that results in a valuation that is less than the appraised value.

The following example is representative of a typical appraiser's claim:

An insured real estate appraiser appraised a property for a lender, and the lender provided a mortgage to the buyer. Subsequently, the buyer defaulted on the mortgage and the lender foreclosed. The lender recovered less than the original loan amount, which was also significantly less than the appraised value. The lender brought a claim against the appraiser claiming the appraisal was negligently completed.

A number of other claim examples are noted below . . . .

Inflated Property Appraisals Targeted

Real estate division chief plans crackdown

According to John Rebchook, Rocky Mountain News - September 27, 2006 - Erin Toll's top priority as the new director of the Division of Real Estate for Colorado is to shut down appraisers who are artificially inflating home values, contributing to the state's escalating foreclosure crisis.

Toll plans to go after "bad actor" appraisers as aggressively as she went after title insurers making kickbacks when she was a deputy insurance commissioner.

She agrees with many in the real estate industry who believe inflated appraisals are contributing to rising foreclosures in Colorado and nationwide.

Toll, an attorney, said she expects to unveil an investigation next month of an appraiser she said has inflated the value of homes by as much as $100,000.

Click here for the complete article - Inflated property appraisals targeted

Looking For A Better Clipboard? - ClipMate™ Clipboard Extender for Windows

Thanks to Gary Snowdon, ASA's blog Appraisal Matters for this great tip:

"One of my favorite software tools for writing commercial appraisal reports is ClipMate.  ClipMate™ is a clipboard extender for Windows.

• You can keep unlimited collections of clips sorted into folders. 
• You can specify how long each folder retains clips.
• You can keep frequently used statements or spreadsheet formulas in one folder saved permanently,
• or store clips specific to one document in another folder temporarily.
• It can float on your screen, be expanded to examine clips, or reside in your taskbar.
• There are tools included to clean up formatting when you copy html-coded text and paste it into a document.

This is a very worthwhile program with too many features to list to list here. See the Thornsoft website for a full description, Flash demos, and additional screen shots.

The Battle Between Appraisers and Everyone Else

"Appraisers serve a valuable purpose within the real estate transaction. They protect the lenders from lending too much money and they protect buyers from paying too much for a home."

"Allegedly…"

"Look, here’s the thing- an appraisal is one person’s opinion. Get three appraisals and get three different values. An appraisal is supposed to tell you the highest price a home will bring in the open market- it’s market value."

Is that TRUE???  That's the way that the  "The Battle Between Appraisers and Everyone Else"  article from  BlueRoof.com's blog starts out.

I think most appraisers would question the premise that a typical market value appraisal is supposed to tell you the highest price a home will bring in the open market!

Read on . . .