As more and more appraisal reports are disputed and scrutinized, it can be incredibly frustrating for appraisers. After all, appraisers render an opinion of value, and like all opinions, they are subject to disagreement. While value reconsiderations go with the territory and are allowed under the three exceptions found in the appraiser independence requirements under the Dodd-Frank Act, there are a few do’s and don’ts to keep in mind when addressing a Reconsideration of Value (ROV).
Appraisers, unlike other parties involved, do not have a financial and/or emotional interest in the transaction. Appraisers should try to see their position with the same objectivity they use when preparing the appraisal report.
Brief responses such as, “I already used the best comps,” or, “The comps provided are no good,” do not help the reader understand the report and usually trigger an additional request. Including a few sentences on each sale goes a long way in helping the reader understand why their selections do not represent better or additional comps.
Many times, the ROV contains information from realtors. Real estate agents often see the market from a different perspective and sometimes offer information the appraiser had not previously known or considered. For example, sometimes the comparable properties another party provides seem like they’re anything but comparable (too superior, dissimilar, old, far away, etc.) However, there is often information out there an appraiser may not have known about or considered.
I once performed a forensic review of a relocation file that involved a property that sold well below the appraised values, and after nearly a year on the market. By all accounts, there was nothing unusual about the home, both appraisals were within spread, marketing efforts were thorough, yet the house could not attract a buyer. Two broker price opinions were completed in advance of the appraisal orders and it was in one of those, a critical detail was overlooked: The subject was in an empty-nester community and had a second-floor master suite. One realtor noticed this early on and as the marketing reports filtered back to the relocation management company, it was clear those prospective buyers touring the home wanted a first-floor master suite. Addressing this in the appraisal may very well have resulted in a different outcome.
This can be tough at times, especially when dealing with subjective information, but remember there are several people involved in the appraisal process who may not thoroughly understand it. For example, if the home owner doesn’t see where you addressed every single upgrade or improvement they made to their home, they may think you gave no consideration at all. Appraisers should help them understand the rationale and reasoning that quality and condition considerations account for.
Many appraisers will drag their feet when reconsidering simply because they don’t want to change their opinion. If the information provided warrants a reconsideration, then appraisers should revise their report accordingly. On the flip side of this, appraisers should never modify their report because they feel pressured to do so. Should an appraiser ever find themselves in this situation, they should stop and contact Dwellworks' Chief Review Appraiser immediately.
In a world full of emails and system notes, much can be lost in the translation. Many issues can be resolved with a simple phone call to one of our team members.
Dwellworks screens all post-delivery requests whether it’s an underwriter stipulation, correction request, or a reconsideration of value. This is due to several reasons including: compliance with independence regulations, the reasonableness of the request, and to make sure the request hasn’t already been addressed in the appraisal report. It may come as a surprise that many of the screened requests are never processed out to the appraiser. Just as surprising, roughly 24% of all value reconsideration requests result in the appraiser changing his or her opinion of value. This percentage remains constant year-over-year.
When it comes to ROV, it is also important for appraisers to keep the perspective of who their client is. Many times, we receive a revised report after someone other than Dwellworks made a request to the appraiser. Although a realtor, borrower, or seller may reach out directly and provide information that causes a reconsideration of value, any requests for changes to an appraisal should come directly from the client who ordered the appraisal. In this case, appraisers are best to refer any outside requests to their client for processing.
For information about trends in the mortgage appraisal industry, consider reading our other posts:
Three Keys Every Appraiser Should Know
What's Causing the Appraiser Shortage and What Can Be Done About It?
Why is Highest and Best Use So Important to the Appraisal Process?