Albert Einstein once said, “Nothing happens until something moves.” Well, in the real estate industry you could say, “Nothing happens until an appraisal is done”. With most real estate transactions today, all parties involved are in a holding pattern until an appraiser looks at the property and puts a number on what they think it’s worth. This holding pattern stands true whether it’s a first time homeowner buying a single family home in the suburbs, Donald Trump wanting to build a 200 million dollar skyscraper in the city, or anyone in between. Nothing happens in real estate until the appraisal report is signed and an opinion of the property’s value is provided.
With that level of responsibility you would assume the appraisal industry would have an excellent relationship with the lending community; however, anyone working in the industry knows that appraisers are often seen as a necessary evil by most lenders. In turn, most appraisers believe lenders to be money-hungry deal makers that don’t understand an appraiser’s profession or the independence required to act prudently. The disconnects don’t stop there, as even from within the lending community you have a variety of opinions on the appraiser’s job within the transaction. Some lenders are under the impression that an appraiser’s job is “to get the deal done”, and, on the reverse, I’ve been told by some lenders that “they want an appraiser that everyone in production hates” as their job is to prevent risky situations. I personally lean towards the middle of the road, as an appraiser’s job is to be unbiased and completely independent of the transaction but simultaneously realistic and practical.
This post is designed to help mortgage lenders understand what appraisers go through and what they wish you knew about the industry.
What Every Appraiser Wishes Lenders Knew – Residential Edition
- The appraisal never goes away – Similar to the way a lender gets a repurchase request years later, once an appraisal is signed and delivered it never goes away and there’s no safe harbor. I haven’t personally done an appraisal in years, and I still get requests from time to time on appraisals that I did years ago asking for clarification. Unlike a repurchase request – which lenders get for deficiencies on loan and can be resolved with money – one bad appraisal can get an appraiser blacklisted for life. The worst part is most of the time it simply comes down to a difference of opinion, and the appraiser may never get a chance to defend their work. Appraisers are keenly aware that the appraisals they complete never go away and consider this when making their decision on a particular property.
- Appraising is a full-time profession – An average realtor will close 1-2 deals a year, an average appraiser will do 1-2 appraisals per day. Most appraisers have been in the business for 20+ years and want to stay in it for a very long time. They are trained to be very careful when it comes to what they will and won’t do when it comes to value, property condition, and selection of comparables. One deal or favor is very often one too much. What most Realtors don’t understand is that an appraiser’s job is to be completely unbiased about the transaction. Appraisers want to dig up everything they can on a property – both good and bad) – so that the lender (client) can make an intelligent decision about the property. The appraiser doesn’t approve or disapprove the loan but rather reports what they find.
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