Can Real Estate Agents Talk To Home Appraisers During A Purchase Appraisal? In short, they absolutely can!
HVCC was retired yet the policies it set in motion remain in motion. Now, Dodd-Frank’s Appraiser-Independence Legislation is the rule of the day and there is a lot of confusion out there between both Home Appraisers and Real Estate Agents on communication! I just had an Agent this week contact me complaining about an Appraiser that came in short on an appraisal because the Appraiser didn’t understand the home on the river had 2 boat slips instead of just 1. This Agent didn’t understand that he could have spoken with the appraiser at the beginning to clear all facts up about this property.
The November 8, 2010 article in Live Valuation Magazine written by Larry Disney, Change to Appraisal and Appraiser Regulation Has Arrived – Are You Ready? sheds some light on this topic. The language in the new Dodd-Frank legislation appears to help the communication process between Agents and Appraisers and Sellers and Borrowers. For example, in this article, Mr. Disney states,
“The above language is not meant to imply that mortgage lenders, mortgage brokers, mortgage bankers, real estate brokers, appraisal management companies, employees of appraisal management companies, consumers, or any other person with an interest in a real estate transaction cannot ask an appraiser to consider additional information, including comparable sales; provide further detail, substantiation, or explanation for an opinion of value; and correct errors in the appraisal report.“
It sounds to me like Agents can communicate with home Home Appraisers.
I asked two (2) nationally known Home Appraisers these questions below:
At what point can the RE Agent talk to the appraiser regarding the purchase appraisal?
*When the initial appraisal inspection is setup?
*After the appraiser has inspected the property?
*If only at the initial setup, then can that agent provide their comps / support then to avoid an appeal later?
*What’s your policy or understanding on this?
*Was I wrong in what I’ve told this agent that asked me below:
I as an appraiser have always considered there to be 3 Real Estate Professionals in the deal: Listing Agent, Selling Agent and Appraiser. To avoid appeals, I ask for the Agent’s comps at the time I set the inspection up. Some Agents are offended that I do this because they take it as if I’m questioning them. I’m not questioning, just trying to give them their opportunity to “talk” to the appraiser before I go out for the inspection and avoid an appeal later. I think you should be proactive with Appraisers and take as much control of your deals as possible……and that’s done initially when the appraiser calls to set up the appraisal inspection. It’s a myth that Agents can’t talk to Appraisers, it’s just that the communication must take place before the appraiser inspection and not after the inspection.
Their two (2) responses I received are below:
In summary, one Appraiser stated that there has been a lot over reaction and that they try to talk to the Agents of most deals. If a value issue arises, the appraiser said he contacts them for their data, which could be before or after the inspection, without letting on that there is a value issue.
Washington State Appraiser, Dave Towne, Said:
“I’m with you on this. I sometimes will ask agents for their ‘cma’, saying “I want to be sure I understand how you priced this property at the time of listing. I want to be sure I don’t miss any properties that you may have considered.” I do this when I determine the price is too high based on comps I pre-research prior to inspecting.
Often, they don’t even have those in their file, and just provide listings at inspection time that support the price, but that are not necessarily comps from our perspective.
An appraiser has to be careful about accepting carte blanche properties provided by someone financially connected to the deal. But I don’t think trying to understand the preliminary pricing process is out of line. However, after the inspection and the report is complete/submitted, that’s not the time to complain – especially if the agent was uncooperative at the start.
We are supposed to ‘verify’ every sale. That involves communication with the players involved prior to report completion. Unfortunately agents sometimes have an adversarial attitude, and appraisers don’t do an effective job discussing this. I think you do, based on your info.
And anyone connected to the assignment can discuss aspects of the property with the appraiser in advance of report submittal, as long as there is no attempt to influence the value.”
What does the Home Appraiser’s Client Instructions Say About This Topic – The AMC’s or Appraisal Management Companies?
I reviewed three (3) recent appraisal orders for home purchases. These Appraisal Orders were 8 pages, 3 pages and 4 pages in length. None of these orders stated the Appraiser couldn’t communicate with the Agent. Two sets of the instructions read,
“Purchases require that you review the sales contract and state in report that contract was reviewed. Obtain contract from Agent/Contract or Contact AMC for help. Contract must be fully executed.” Fully executed means the contract must have ALL signatures or you the Agent hold up the deal!
“For Purchase transactions, if AMC does not provide you with the sales contract governing the transaction, you must contact us or the borrower/REALTOR to obtain it.”
Conclusion. It appears from ALL sources reviewed that Agents can communicate with Appraisers during a purchase transaction. My advice as a Home Appraiser is to provide the Appraiser with a list of relevant features, upgrades, your Sketch showing your measurements and a list of your supportable comps used to market the property. By providing your comps up front, you are avoiding an appeal after the appraisal is completed, which will also help speed the closing process.
Why Did I just state, “your Sketch showing your measurements”? Because in the month of May in my market, one deal did not appraise and another deal was very, very close simply because the Agents either did not measure the homes, simply copied a previous incorrect MLS listing or measured them incorrectly per the National “ANSI” Standards. The MLS Listings were incorrect by 173sf and 215sf. The 173sf error was in a market where homes were selling in the $121/sf range. If you have your own sketch, you can be sure that your listing is the right size, priced properly and be less questionable in terms of the appraisal.
Bill Cobb is Greater Baton Rouge’s Home Appraiser frequently called upon by banks, homeowners, and savvy real estate investors to assess property values. A home appraiser with 20 years experience, Bill Cobb brings a wealth of knowledge to the table as a home appraiser.
Bill’s company, Accurate Valuations Group, serves Greater Baton Rouge (East Baton Rouge Parish, West Baton Rouge Parish, Western Livingston Parish and Northern Ascension Parish).