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Communication with stakeholders key
Appraisers can, and usually do, share their information and methods that were used in their valuation process. In the event the appraisal is not what was hoped for, being prepared to disclose this information quickly is essential for the sake of transparency.
How can appraisers communicate with all stakeholders (sellers, lenders, borrowers and brokers) in a way that will neutralize any negative sentiment as a result of a disappointing appraisal, or explain confusing or controversial information? What is the best advice an appraiser can give to assure stakeholders that the appraisal is backed by solid data?
Paul Prentice, Senior Managing Appraiser at PEMCO Limited, says, “I have always taken the stance that a non-restricted appraisal report should be written in such a fashion to where someone who has never read an appraisal report before can understand the appraisers’ methodology and how they came to their conclusions. It’s also important for a user to be able to replicate how the appraiser went about deriving their conclusions based on the commentary and analysis provided in the report. In my experience, if the report is written with these in mind the user will be less likely to have questions pertaining to the report and at the point the appraiser has done their job in providing the utmost transparency and communication.”
Prentice speaks on the importance of appraisers being in-tune to which stakeholder questions or concerns may pop up. “Some of this is learned through an appraiser’s experience in determining potential pain points for the reader or which portions of the report that might raise eyebrows, be confusing, or be challenged. If the appraiser can identify these before completing the report, it’s best to address them within the body of the report which can help to quell potential questions from the user rather than wait for questions to come back after the report is complete.”
David S. Bunton, President of the Appraisal Foundation, says many real estate professionals mistakenly believe that it’s unethical or even illegal to have much communication with the appraiser. Bunton believes that it’s important for both parties to communicate and work together.
“Appraisers welcome any information that helps them do their job,” he says. “We at the Appraisal Foundation encourage brokers to communicate with appraisers. Real estate professionals should feel empowered to supply relevant materials, including the terms of the sale, applicable comps, and any evidence of renovations that might affect the home’s value. Additional useful data could include records that categorize maintenance and upkeep done to a home, such as regular inspections or replacements of major appliances.”
Bunton warns against real estate professionals communicating with an appraiser with the intention of illegally influencing the outcome of the opinion of the valuation. Examples include: requesting that an appraiser provide a valuation close to the property’s asking price or threatening the loss of future assignments if a closing doesn’t happen as a result of the valuation.
“A broker can submit additional comparable sales through the lending institution for the appraiser to consider,” Bunton says. “A broker can request that the appraiser correct any errors in the report, or provide additional detail as to how certain conclusions were arrived at and the ultimate opinion of value. It’s the appraiser’s duty to provide credible opinions of value for homes, and any information that assists an appraiser in that objective is welcomed.”
Prentice said, “providing tangible data and analysis is very helpful. An example would be providing results from your paired sales analysis to render an adjustment for a feature. Obtaining all necessary data and interviewing pertinent parties or individuals who might have some insight on either the subject property or comparables is usually well received by a user of the report as well. This shows that you have not only relied on analysis that you as the appraiser have completed, but have also reached out to other local professionals who hopefully offer relevant information to understand that property in more detail.” Prentice underlines the importance of how to gain trust from stakeholders: “an appraiser should be open and willing to see another’s perspective and taking that into consideration provided that it’s an unbiased and relevant opinion with factual information. This can add support for the appraisers’ conclusions and generally will garner more trust and a more open mind from the reader. All in all, if the appraiser takes a proactive approach in providing as much data and analysis up front as possible and formats it in such a way to where any individual can understand the concept, a favorable result even in the face of a disappointing conclusion can be achieved.”