You Don’t Need to Live Close-by to Appraise a Home, Just Know the Market

April 16th, 2014

I recently had an appraisal come in recently for a loan application and it was slightly below the contract price. The listing agent complained that the problem was that the appraiser came from a great distance and must not have known the local market. When an appraiser calls to schedule an appraisal inspection the realtor always asks them, “Where are you coming from?” The realtor is trying to surmise if they are local or not, but what is local? It is a funny question to me because unless the appraiser is coming from drastically far away, it really does not matter.

There is an appraiser named Jay that has been appraising the Washington, DC area for almost three decades who is very popular with realtors. Everyone loves Jay because he always seems to “make the deal work” and appraise the home for the contract price. Whether or not that is true is another thing, but perception is reality. Back when we were allowed to choose our own appraisers, I had some tough conversations with Jay where we disagreed on the value of the home, and he was going to come in lower than the contract price. However, through the disagreement, I realized Jay knew what he was talking about and is one of the best appraisers I had ever seen. The listing agent on the subject property that recently came in low said he only uses a certain lender because they have Jay on their appraisal panel! Wow.

How We Got Into The Position Of Not Picking Our Own Appraisers.

What realtors may not know about Jay is that he lives in Clarksburg, MD, about 48 minutes from the subject property of the recent low appraisal in Washington, DC whose appraisal came in low. The appraiser for this subject property came from Gainesville, VA, which is also 48 minutes away. That is right, somehow Jay is automatically assumed to be a better appraiser than the appraiser from Gainesville, VA; however, the distance they are traveling is equal.

When I shared this with Jay he got a good laugh. He said an appraiser has to have the “competency” to know the market, which is in the USPAP guidelines. USPAP is short for Uniform Standards of Professional Appraisal Practice. The “competency rule” disclosure requirement requires the appraiser to disclose a lack of knowledge and/or experience at whatever point in the appraisal process that it becomes apparent to the appraiser that his or her lack of knowledge and experience will prevent an accurate appraisal.

RELEVANT ARTICLE ON APPRAISAL CHALLENGES

Jay says that instead of asking where an appraiser is coming from realtors should ask, “How many appraisals you have done in our market in the last 6-12 months?”

I agree that knowing the market is important and that knowing which side of a highway, park, or metro stop is more desirable is important, but everyone needs to realize you don’t need to live right in the middle of an area to know that sort of data. I am sure there are limits to this theory, but we need to realize if one appraiser can live 48 minutes away from a property and be the listing agent’s favorite appraiser, then so can another, and another, and another.

I once told a realtor we tried to use local appraisers only (again, what is the definition of “local”?) and he was ecstatic. This realtor said, “Great, you mean like from the same county, can it be the exact same neighborhood? That would be best!” Sure, try telling my appraiser friend Jay, who knows the Washington, DC market best, that he is going to be limited to Clarksburg, MD because realtors assume he can only know the market in which he lives. Jay won’t be happy.

I am not sure where the geographic breaking point is in this theory. There may be a point where someone lives too far away from a market to know it well. However, I feel like people should not put so much stock into where the appraiser eats his cereal in the morning and lays his head at night.

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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