Here are a few things that really scare appraisers.
1. Unusual Properties.
Unusual properties include those with acreages, odd structures (e.g. a round house), multiple dwellings on one lot, adverse influences such as a nearby freeway, easements that clearly affect value, income properties (two to four units), over-improvements, unfinished structures, significant deferred maintenance, and unclear zoning.
Even if we offer significantly more money for these appraisals, we still have enormous difficulty getting appraisers to accept them because appraisers can often appraise 3 or 4 more typical properties in the same time it takes them to appraise one unusual property.
This is why we often need very long turn-times for some unusual properties, as it takes us forever just to get the appraisals accepted. This is also why agents should warn clients about very high appraisal fees for these properties too (high fees are the only way to get the properties appraised).
2. Zealous/Vindictive Reviewers.
I knew an excellent appraiser who was kicked off the eligible list of a major lender because he failed to disclose the presence of some train tracks behind the back fence of a home. The tracks were no longer in use and impossible to see from the backyard, but that made no difference to the zealous reviewer – who seemed to delight in the fact that she could finally exercise “her power.”
Such reviewers are far more common than most people realize, and appraisers know that. Hence, they need to be ultra-careful to avoid disciplinary action or getting kicked off lender-lists.
3. Conditions & Explanations.
When borrowers or agents ask appraisers to go the extra mile and/or to push values to the top end of the value range for a given area, they are asking them to take a significant risk in many cases.
This is because if the appraiser pushes the value too far, she can be disciplined or see her appraisal sliced to ribbons as a result of a review (harming her reputation).
More often than not though, the appraiser will just end up with numerous conditions, explanations and/or requests for additional comps. This is a process that can take hours, and for which there is no additional compensation – making it both very painful and costly for appraisers.
4. A Major Market Correction.
We once had an appraisal come in ridiculously low on a Berkley, CA property – killing our deal. He told our Appraisal Manager that he came in so low because he thought the market was overvalued and that he was sure a correction was coming.
This was a few years ago and he was ridiculously wrong (and we made sure he received no more of our orders), but he feared the correction so much because he lived through the 2008 correction. And, he had seen how lenders often unjustifiably went after appraisers as scapegoats after values plummeted and homes went into foreclosures.
That fear will remain in every appraiser who lived through the 2008 meltdown.
5. A Messy House.
First impressions are everything – even for appraisers, and especially for underwriters and reviewers who are reviewing appraisals. Hence, even if a house is very nice, people will assume the worst if the photos of the home don’t reflect it in the best possible light. Appraisers will be reluctant to correlate to the top of the value if a home is messy, and reviewers will be more likely to suspect the value is being pushed if a house does not look its best. A really messy home can also foster health and safety concerns.
6. Angry clients who don’t understand it is all about guidelines.
I can’t tell you how many calls and emails I have received from livid borrowers and agents over the years – who were irate because “the stupid, piece-of-sh** appraiser came in so far under value… and doesn’t know sh** about appraising…” And then, upon digging into the appraisal, I would find that the appraiser had done nothing wrong and was just completely constrained by “appraisal guidelines.”
And then I would have to explain to the angry client that we can’t use the comp with a 50% larger dwelling, the comp on the other side of the freeway, the comp that is on an acre (when ours is on 1/4 acre), the comp with a three-bridge Bay view when ours has none, the comp on the cul de sac when ours is on a busy thoroughfare, etc.
As a reminder for everyone, here is my blog where I set out some basic appraisal guidelines: Comparable Sales Appraisers Can and Cannot Use.
Founder/Broker | JVM Lending
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