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Borrowers often have considerable expectations when it comes to their home’s estimated value, and navigating these can be tough for both the loan officer and the appraiser.
Experts from two appraisal management companies recently discussed how to best prepare a borrower for an appraisal the National Reverse Mortgage Lenders Association conference in San Diego.
David Bortolotto, vice president and chief appraiser at Mortgage Information Services, said prepping the borrower can be daunting, but it helps to outline the process in advance.
“Let the borrower know upfront,” he said. “Set the expectation that there’s going to be an interior and exterior inspection of all structures…and photographs of all interior rooms.”
“Probably our biggest challenge is trying to work with all the variables,” Bortolotto said. “Value is an opinion supported by market data and analysis. Having that upfront conversation with your borrowers and setting their expectation and not necessary buying into their excitement of their value, but trying to set realistic expectations, I think is extremely important.”
Mark Johnson, president of national AMC LRES, said it’s not uncommon for a borrower to be disappointed, and his company does sometimes receive a request for an appeal. He said if you want to contest an appraisal, present a solid comp that helps make your case.
“Generally speaking, there is an old appraiser maxim: They are looking for comparable data that is more recent, more similar or more approximate. If you can bring that information forward, we’re happy to consider it, we’re happy to push it back out to the appraiser.”
Johnson said only about 2-4% of LRES’ appraisals are challenged, and of those that do lead to an appeal, only about 10% result in a change in value.
Bortolotto said that when a borrower is disappointed, it might help to remind them of the appraiser’s prerogative.
“What the appraiser is trying to do is identify in their process what is the most that the buyer is willing to pay for the property and [find the axis where that meets] the least amount the seller is willing to take,” Bortolotto said. “That might be something that will be helpful to you to explain to your borrower when a value comes in perhaps lower than anticipated.”
In preparing a borrower for an appraisal, both Johnson and Bortolotto agreed that it’s beneficial to have the homeowners present during the valuation.
“They should feel free to share the updates that they’ve done,” Bortolotto said. “They should be proud of their castle and they should be more than happy to share all the updating they’ve done and all the upgrades they’ve done, but [they should] keep in mind there are limitations from a value standpoint.”
During the panel discussion, both experts discussed the evolution of the appraiser profession.
Johnson pointed out that the number of professional appraisers has dropped 17% in the last decade, and this, coupled with recent regulation, has affected turn-times.
“Before, 2.3 appraisals per day was their average, now if I hit 1.4 per day, I feel like my appraisers are producing effectively,” he added.
Bortolotto also noted that the profession is aging, quoting info from data management firm Clearbox that pinpoints the average age at 53 and the average years of experience at 21 years.
But more concerning was a reported discontent among appraisers, Bortolotto said, pointing to a Clearbox study on appraiser sentiment that revealed the majority of working appraisers were unsatisfied.
Bortolotto said the study revealed that just 27% of those surveyed said they loved it and were excited.
“Which means 70% were not sure, worried or angry, and that’s what we deal with every day as an AMC,” Bortolotto. “That’s why we try to act as that buffer between you and the appraiser and try to get the appraiser who may not be as excited or loving it to do the job and do it well.”