Appraisers Need To Live In The Neighborhood?

January 13th, 2017

Houses Neighborhood Landscape

I told a realtor once that appraisers do not appraise a home, data does. I was trying to respond to their over-hyped level of concern about where the appraiser lives or works. Realtors’ hope that the appraiser will have some sort of intimate knowledge about the subject property’s market area, only by living nearby.

It’s all about the data

Appraisers don’t need to live near the subject property to do their job well.

If the data exists, i.e. recent settled sales that make for appropriate comparables for an appraisal, then the appraisal should turn out fine. In other words, it is not about the appraiser, it is about the data!

A real world example

I recently had an expensive home I was financing and this was my exchange with the buyer’s realtor:

“If the house is worth around $2M then it will appraise that way. It is not possible for any appraiser to have vast experience in Lake Barcroft, not at that price point at least. Because there are probably all of 2 to 3 recent sales in that price range in the last several years. And unless one appraiser did all those same appraisals, no one is going to have the experience needed to appraise this expensive home. It is not possible. But appraisals are not about appraisers, they are about data. The data is either there or it isn’t. I think you being there to point out some specifics and to discuss the value of the waterfront is a good idea…but likely not necessary.”

Appraisers are not called appraisers for no reason.

They understand what different things will bring value to a home, like:

  • view
  • size
  • bedroom count
  • water frontage
  • condition
  • lot size
  • lot utility
  • and more…

Appraisal challenges

It is possible to challenge an appraisal that you think is inaccurate. But before you plan out your attack, realize that the appraiser’s job is to not miss anything. To think he or she will is usually hopeful thinking.

Most realtors think that if an appraiser doesn’t live in the area they won’t know what they are doing. Which is not necessarily true. Why? Because an appraisal consists of data gathering and is an assessment of that data.

Another example

I recently ordered a waterfront appraisal on the Eastern Shore of MD. The realtors were apoplectic that the appraiser assigned to the appraisal order had not done any recent appraisals on the water in their neighborhood. They jumped up and down and screamed. They called me multiple times a day concerned that the home would not appraise for the contract price. This was because, “the appraiser did not know the market well enough”. And…..the appraiser appraised the home at 6% over the contract price! Why? Because the data was there.

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Brian Martucci is a loan officer for Capital Bank Home Loans, a division of Capital Bank, N.A. He has been in the mortgage industry since 1986 and has served in a number of roles, including loan processor, loan officer, mortgage broker, branch manager, and vice president. Brian Martucci – NMLS# 185421. His opinions do not necessarily reflect the opinions and beliefs of Capital Bank Home Loans or Capital Bank. Capital Bank, N.A.- NMLS# 401599. Click here for the Capital Bank, N.A. “Privacy Policy”.

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