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[Sounding Bored] Appraisers Make Mistakes

Sounding Bored is my semi-regular column on the state of the appraisal profession. I explore how to get an appraiser to re-consider the error of his or her ways.

Appraisers are human, well most of the time. One of the rights of passage for a real estate broker is to deal with the fact that on occasion, the appraiser is going to disagree with the sales price of the transaction.

A wise appraiser once told me: Everyone in the sales transaction is smarter than the appraiser because they already know the number. The real estate listing broker and selling broker, the mortgage broker, the lender and of course the buyer and seller all know the number. The appraiser is the last one to the party.

But sometimes it happens and when its does, life can be difficult for the appraiser. The buyer and seller threaten to sue, the mortgage broker may never use the appraiser again, same goes for the lender. The real estate brokers may never refer the appraiser their clients again.

So why would an appraiser want to go through this? Because its their responsibility, their job as an appraiser to estimate the value of the collateral (in a mortgage appraisal assignment).

Appraisers aren’t perfect, but they have everything to gain by being thorough, accurate, and honest. Encouraging an appraiser to engage in illegal activity in this era of widespread mortgage fraud could lead to a sanction against you and even to criminal prosecution for you and the appraiser. No transaction is worth that.

But what if the appraiser meant well, but either made an error or just didn’t understand the market?

The NAR in the latest issue of REALTOR Magazine [1] provides the best way for a real estate broker to handle the situation and understand the appraiser’s position. Actually, the method they present is respectful to the appraiser and the process should only be engaged if the broker truly believes a mistake was made.

You never want to demand or coerce an appraiser to revise the appraisal. There must be a reason for the appraiser to reconsider an opinion of value other than “This is what we need to get the deal through.”

I have to say that I was impressed by their tact.