Advice from an Appraiser

Posted on July 1, 2013 by Bethany Brannan

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The sultry combination of low inventory and low interest rates are causing bidding wars for homes at all prices in Arizona. While this could be an exciting time for REALTORS®, that excitement can be quickly subdued when an appraisal comes back significantly below the bid price. And who looks like the bad guy? The appraiser.

John Dingeman is an Arizona appraiser with Priority Appraisal, LLC who takes his job very seriously and states, “most all mortgage financial transactions are federally regulated, which means the appraisal associated with the loan is under extreme scrutiny; more so now than ever since the 2004-2006 real estate frenzy.” He also wants to remind agents that at the end of the day “an appraiser’s role is to act as a disinterested third-party in the transaction.” Based on his years of experience, Dingeman offers some guidelines for agents to consider when choosing comparable sales.

Understand What a “True” Comparable Is

The problem with choosing a price based solely on price-per-square-foot is that “it doesn’t take into account other amenities or improvements like pools, garages or other upgrades that might have been done to the home,” says Dingeman.  “You have to compare apples to apples, not apples to grapefruits; which occurs when all of the sales are lumped together.”

“Another issue where agents seem to struggle is what is actually included in the gross living area or what constitutes a bedroom,” said Dingeman. He gives the example of an attached casita with a separate entrance off of the home, “that’s not considered a bedroom or extra square footage.” Getting a better picture of what the listing is really like with regards to other similar homes will help tremendously when counseling your buyers and sellers on price, not to mention a more accurate appraisal.

Get to Know the Neighborhood

“A single sale does not make the market,” said Dingeman. “Do some research to find out if there are a lot of flips taking place in this area.” Consult with other agents for their insight; ones who may be more familiar with the area than you. “I will regularly drive through the neighborhoods, especially if I see an anomaly in the marketplace,” said Dingeman.

Pay it Forward

Dingeman also gives this suggestion to agents, “update your listing post-sale.” Appraisers do not physically inspect the interior of the comparables, so appraisers rely, in part, on the photos and remarks provided by the agents in their MLS. “Making comments in a listing post-sale can really put a property in the right perspective, not only for appraisers but other agents as well.”

“We’re in a similar market now as we were in 2005,” comments Dingeman. “This time, the lenders are taking a different approach and placing more restrictions on lending. If the house appraises for $100,000, lenders are no longer lending at 100 to 120 percent of the appraised value. But offering only equal to, or something less than.” Take time to counsel your buyers and sellers on the market, and you’ll find yourself in a better position to land the sale and make a homebuyer’s dream come true.

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Bethany Brannan

Bio:

Bethany Brannan is the communications manager for the Arizona Association of REALTORS.

5 Responses to “Advice from an Appraiser”

  1. Reyes Bojorquez says:

    I agree with John Dingeman comments I notice too many agents list properties to high but if we make low offers they get upset , I have 3 sales cancel after appraisal came lower only because seller don’t want to lower purchase price after buyer waste appraisal fees time. In my opinion I which appraisers and realtors we sure have a better communication with each other, Unfortunately they only call me when they want to ask me about a sold property that I listed, but if I live a message when i have questions the never respond to my messages.

    The other day I want to meet an appraiser on my son house since he is refinancing I was the contact person to go open the house I was 5 minutes late I mention that i which I had his # so I can let him know than he said their company don’t give their numbers to protect them from realtors he doesn’t know I was a realtor, so from now on I never will answer their messages.

  2. Gene Urban says:

    Appraisers are an important and integral part of the real estate process. They offer the checks and balances needed to maintain market stability. Listing agents and home sellers need only look back 6 or 7 years to see what happends when there is no “govenor” on the engine. Does anyone really want that again?

    • Roxanne Berry says:

      With the increase in sales and price over the last few months, I struggle when running comps as the new sales have not closed. I’m a Realtor in AZ, East Valley. How do I adjust for the increase?

  3. Ben B Walter says:

    Gene, appraisers were used as often 6/7 years ago, so what’s changed? The answer is lender’s guidelines and the underwriter’s adherence to those guidelines. These are forcing appraisers to take a more conservative approach to the process. As home values climb, and the refi market slows down, I believe we’ll see a general loosening of the lending requirements. Let’s hope it stays in check this time.

  4. Carla England says:

    From my experience, appraisers have as much difficulty coming up with a market number as agents do. I just had an FHA Flip requiring 2 appraisals, and the numbers from the appraisers were $12,000.00 apart on a $178,000.00 purchase price. That’s a pretty big margin, if you ask me!

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