If you’re new to home buying, you might be asking yourself—what’s an appraiser? An appraiser is a finance professional whose job is to assess the value of the home you want to buy. The whole point of home appraisals is to make sure that the seller’s price accurately reflects the property’s value. Naturally, a property's value depend on several factors such as its condition, location, size, etc. Listing agents question appraisers (if they're ethical), because they know that the art of appraising is highly subjective.
Home appraisals are important because the price of the home you’re interested in is going to be decided by this one person. And yet, the high demand for homes in recent years has made it so that more and more inexperienced appraisers flood the mortgage market.
This isn’t a knock against appraisers—I was an appraiser myself before becoming a mortgage broker. Appraisers are an essential part of the mortgage process, but in recent days, I’ve had issues with inexperienced appraisers. That’s because the art of appraising is very subjective.
When the appraiser comes over to the house, they walk through the home with a sketch board and make a layout. Then they take only exterior measurements and make sure that everything is up to code. They look for anything that can affect the value of the home (or take away from it).
Once the appraiser completes these measurements, they have a list of properties to compare pricing. Here’s where things can get tricky. Maybe the properties the appraiser is using aren’t good comparables, even though the properties are just down the street from each other. For those of you who are new to mortgage industry terms, a comparable is a home that’s similar in location, size, and layout. Comparables are used to gauge how much a home should be worth by comparing it to the value of a home in the same area that has similar characteristics. But here’s the thing—property values can change dramatically if you so much as cross a street. This is why listing agents question appraisers (or should, anyways).
Think of Miami, for example—property values are much higher near the beach than near properties that are located further inland). Property values can also be impacted by county lines, school districts, and any other number of reasons.
One of the main issues I’ve had has been receiving appraisals with incorrect values. Lots of times, an appraiser has used a comparable that shouldn’t have been used—it wasn’t even in the same subject’s community.
Going off of that, it’s important that you know that your only defense against a possible mistake by an inexperienced appraiser is to have a good listing agent. It’s the listing agent’s responsibility to make sure that they question the appraiser if they feel that something is off about how the appraiser is making their decision.
Why is this so important? Because it saves time and energy. If you have to fight over the results of an appraisal, this can cause days of back and forth rebuttals. This is bad, because rate locks are shorter than they used to be. Rate locks being shorter means that you could lose a low mortgage rate. This in turn, causes unnecessary rate extensions, which us brokers usually end up covering for our clients. All in all, incorrect appraisal can and should be avoided.
Remember that you are completely within your rights to ask your appraiser questions. Whether it's about their work or how long they’ve been in their field.
In the end, the appraisal is done at the appraiser’s discretion. The hope is that the appraiser will be more logical than emotional. Listing agents question appraisers so that they can act as a voice of reason and give some inside perspective.