The struggle between appraisers and other real estate professionals can sometimes seem like a never-ending conflict. However, better communication between real estate brokers and appraisers could help to minimize problems. Both parties play key roles in the homebuying process, and it’s important for each to understand and work well with the other. Here are some insights into what appraisers do, and what you can do as a real estate broker to help foster a good appraiser-broker relationship.
What exactly do appraisers do?
Many of your North Carolina real estate clients probably have this question. And maybe even some real estate professionals do, too. The appraiser’s primary responsibility is to estimate a fair market value for a property using information about the property itself and data collected about other similar properties, called a property appraisal.
The property appraisal is a critical component to a real estate transaction because it’s used to determine how much a lender will loan to a buyer. Property appraisals also impact several other real estate practices, such as establishing a listing price, providing insurance coverage, taxation, and investment.
Common misconceptions about appraisals
People in real estate sometimes have misconceptions about what an appraisal opinion actually represents, how an appraisal is conducted, and what rights homebuyers have regarding the appraisal report. Here are three common misconceptions about appraisals that you can set straight with your clients:
Misconception #1: The assessed value equals the market value
There are some jurisdictions that support the concept of the appraisal and market values equating; however, as a general rule of thumb, that is not the case.
Misconception #2: Appraised values will increase at the same rate as increases in the local market
Price increases and decreases related to market activity will not overcompensate for a home in poor condition or exhibiting functional obsolescence.
Misconception #3: An appraisal is the same as a home inspection
Home inspections highlight structural issues, whereas an appraisal is an opinion of value. An appraisal is much broader than a home inspection. It examines external factors, such as the subject property neighborhood, comparables, government and other factors.
To help further separate myth from reality—and get localized tips for working with appraisers—consider having discussions with a few appraisers in your local area.
How to foster a good appraiser-broker relationship
The best shot of having a good relationship with an appraiser during the homebuying process is to have open communication. John Anderson with Twin Oaks Realty Inc. insists on being at a property when the appraiser arrives. “I present documents and information about the property, which might include comparable properties that were ‘pocket listings,’ those sold outside of a multiple listing service,” he said. “There is a misconception among some appraisers about the ability to communicate, but I present them with a folder of materials for them to consider.”
Open communication is the first step in smooth sailing through the appraisal process and fostering a positive appraiser-broker relationship.