This post is part three of a 12-part series we recently launched called The Loan Officer’s Guide to Appraisals. In case you missed part one on the Final Inspection process, go back and read it here. And last time, we discussed all kinds of unique homes, and gave tips on how to make lending on atypical homes a little bit easier. You can read that post here. In this blog post, we’re going to talk about…talking. Communicating. With your client, a Realtor, and *gasp* even the appraiser! Don’t worry, it can be done, and it can be helpful!
Here we’ll discuss communication between three sets of parties. The Realtor & Appraiser, the Loan Officer & Appraiser; and the Loan Officer & Client.
Communication between a Realtor and an Appraiser
If you’re a Realtor, you’re definitely going to want to read this. But, if you’re a loan officer, you speak with Realtors daily, and knowing what they can and cannot do or say will help you out also!
A couple of years ago, I wrote about this topic at length here. If you’d like to go back and read the entire post, please do so. Some of that information bears repeating here. And here’s the main point: Realtors need to talk with Appraisers!
In a 2015 Realtor Magazine article written by David Bunton of The Appraisal Foundation, Mr. Bunton writes that “we…encourage brokers to actively communicate with appraisers in a professional and productive manner. Real estate professionals should feel empowered to supply relevant materials, including the terms of the sale, applicable comparable sales, and any evidence of notable renovations done to a home that might affect its value.”
So as a Realtor, getting information to the appraiser about recent updates or changes to your listed home is extremely important. In the last 15 years, what repairs have been made to the home? What about updates, remodeling, or additions? The appraiser will need to know all of this information, so if you can provide a list to the appraiser, that will save a bunch of time. I would highly encourage all Realtors to include this information in your listings, but if that’s not an option, you can always get a list together and leave it on the counter. Just remember to include the following:
- List of repairs, updates, remodeling, or additions.
- Date each was completed (ballpark estimates are ok).
- Cost of each (again, ballpark is just fine).
Additionally, Realtors should know that it is 110% ok to share with the appraiser how you priced your home. Some appraisers may shy away from looking at the information you provide, but it never hurts to try. What sales did you use? Equally important is what sales did you not use? If the home next door was trashed on the inside, and that’s why it sold so low, then let the appraiser know. Maybe you used a home that sold a year ago, but it was practically identical to your listing. Make sure the appraiser knows these things!
Just remember to keep it professional, and don’t pressure the appraiser. Again, Bunton states, “… real estate professionals are legally barred from any communication with an appraiser that is intended to unduly influence the outcome of the appraisal. While it might be obvious that coercing an appraiser is off-limits, it is always a good idea for agents and brokers to make sure an appraiser or regulator couldn’t interpret their communications as an attempt to improperly influence an appraisal. An example of improper communication would be asking an appraiser to provide a valuation that matches the asking price of a particular home. Another example could be telling an appraiser he or she will not receive future assignments if the appraisal does not facilitate a transaction.”
Communication between a Loan Officer and an Appraiser
Now, I know I spent a bunch of time talking about what a Realtor can say to the appraiser, but really, most of that information also applies to loan officers, with one major exception: providing sales.
Most loan officers aren’t going to be supplying sales to the appraiser, and that’s fine. It would be very tough to prove that the loan officer wasn’t trying to influence the appraiser. But when it comes to a refinance appraisal, they might have some insider knowledge that would be helpful to pass along to the appraiser. Let’s look at a few of those now:
Repairs, whether ongoing, recently completed, or planned (in the case of a subject-to completion appraisal) can have a huge impact on the appraisal. So if you know the borrower just renovated their master bathroom, or maybe recently added on a 1,000 square foot addition that hasn’t hit the public record yet, let the appraiser know. And, if the borrowers are planning a renovation or remodel, and the appraisal is to be completed subject-to those changes, make sure the appraiser has all the information he or she needs to complete the report.
Land size seems to be another area of concern when we are discussing communication between a financial institution and an appraiser. Our office has completed way too many appraisals where we thought it was going to be a cut and dried Ranch-style home on five acres, when it turns out, the borrowers also own the adjacent 20 acres and want that appraised as well. Or maybe they just surveyed and split off 10 acres from their 30 acre farm and I’m only to appraise the house and 20 acres. This is good information to tell the appraiser.
Finally, if you have any helpful documents given to you by your borrower client, pass those along to the appraiser. Perhaps you have a copy of that survey which was just completed. Or tax records, legal descriptions, contracts, or plans. All of these documents will help the appraiser, and will streamline the process, allowing the appraiser to complete their report quicker and easier.
Communication between a Loan Officer and your Client
So far we’ve discussed what can be said between a Realtor and appraiser, as well as a loan officer and an appraiser. Lastly, I want to touch on what kinds of conversations you as a loan officer can and should be having with your borrower in order to help the loan process move forward as easily as possible.
For your reference, I’ve listed five questions that you can ask your clients before the appraisal is completed on their home. This can apply to borrowers refinancing their mortgage, or those applying for a new home loan.
- What improvements have you made in the last 10 years to your home?
- Are you currently in the process of updating or remodeling your home?
- How much land do you have? Is it all on one parcel, or multiple parcels?
- Will all areas of your home be accessible to the appraiser for inspection and photographs? This includes all rooms and buildings, crawl spaces and attics.
- Is there anything unique about the property i.e. multiple houses on site, unique style, large land size, etc?
Homeowners typically don’t know what they’re supposed to tell their loan officer. They don’t think through the ramifications of having the appraiser come in the middle of a complete kitchen remodel, for instance. And that’s ok! This is where you as a professional come in and help them understand what the appraiser will be looking for. Instead of waiting on them to tell you what’s going on, you can be proactive and ask them these questions. Because if you ask these simple questions before the appraisal is assigned, it will save a ton of time and frustration on all sides of the transaction. These answers will help the appraiser know what they’re getting into, and will also help you decide if proceeding with an appraisal is the best option.
In any relationship or transaction, communication is key. The better the communication is, the better relationship will be, or the transaction will go. Following these tips may not cover every single issue that comes up, but it will help to open up the lines of communication between all parties, so that the entire process of lending and appraising is a smooth one.
If you have any other specific questions about what you can and can’t say to an appraiser, or how best to communicate with your client, send us an email to firstname.lastname@example.org.
Committed to helping you understand your home’s market value,
Ryan Bays, SRA, AI-RRS