Appraisals are a part of real estate investing, especially if you or your buyer needs bank financing. Appraisals can be crucial – they can easily make or break the deal.
Several years ago banks, when ordering an appraisal, could often select the appraiser they wanted to do the job. This often ensured that the appraiser knew both the customer and the market they were working in. Unfortunately, it also let a few bad apples inflate prices and be less than honest with the appraisal.
Today when a bank orders an appraisal the request goes into a pool and the next name on the list gets the job; there is really no more say in who will get the job. So while this may have cut down on fraud, it has definitely increased the chances of getting an appraiser that does not know you, what you do, their job or the market. They could even be from the next town over and never have stepped foot in your neighborhood. While many may think this will translate into a fair and honest appraisal (sometimes it does), my experience has demonstrated that the lack of local knowledge is detrimental.
So even though you have done your homework, found and developed a good real estate deal, understand that you can be left to the luck of the draw when it comes to an appraisal. There are however some things that you can and should do to help achieve a favorable outcome.
- Show Up! – It does not matter if you are buying or selling – you need to show up to the appraisal and meet the appraiser. Be nice, friendly and helpful. Build a rapport if you can, and be there to answer questions and point out the good aspects of the property. The simple act of being there can go a long way.
- Bring Some Comps – Bring what you think are the fair market comparables for your property and give them to the appraiser. Most appraisers will look up and use their own comps but there is no reason not to help them along a little. They are human, and they may honestly overlook or be unaware of a very good comp.
- Bring Repair Estimates – If the property is going to be rehabbed, bring a list of the planned repairs and their associated cost estimates. This will help the appraiser develop the after repair value.
- Bring a List of Upgrades – If the property has already been rehabbed, bring a list of the upgrades that have been done and the cost of those upgrades.
- Bring a List of Income and Expenses – If the property is an investment property, a list of potential income and expenses will help the appraiser develop an investment value. Do this even for a single family home you plan to use a rental property.
- Get the Property Looking Good – Make sure the property looks as goods as you can. If it is your property, this is an obvious step. But even if it is not your property yet, picking up some trash, for example, is not the worst thing to do and it can help.
- Schedule the Appraisal When No One is Home – If the property is an occupied rental property, try to schedule the appraisal when the tenants are away. Tenants can be loose cannons, it is best if they are not around.
Appraisals have become more of a challenge in recent years due to changes in the way they are ordered. You can, however, help to ensure a more favorable outcome for your values by following the tips listed above. Honestly, though, if your appraiser has had a bad day or just does not know what they are doing nothing will help you and you are going to have to fight that fight later on. But that is a subject for another post.
Let us know your tips of working with appraisers with your comments.