The appraisal is an important part of many real estate transactions, but it can also be one of the least familiar steps for buyers and sellers. With changes underway in appraisal reporting, this is a good time to understand what might look different and what questions to ask.
This week, I’m highlighting information from the National Association of Realtors to help buyers and sellers better understand the appraisal process, what Realtors can do to assist, and what to know if concerns come up along the way.
Those questions are especially timely because many appraisal reports are changing. Beginning Nov. 2, Fannie Mae and Freddie Mac will require a new appraisal reporting format known as UAD 3.6 for reports submitted through their appraisal data system. Some lenders might begin using the new format before that date.
How does this change affect buyers and sellers?
One of the biggest differences might simply be time. The new reporting format requires appraisers to document more detailed information about a property, including rooms, levels, improvements, amenities, site characteristics and other features.
That means an appraiser might spend longer at the property than buyers or sellers have experienced in the past. A longer visit does not necessarily mean something is wrong. It might just mean the appraiser needs to collect more information.
There might also be additional time needed after the property visit. The appraisal still moves through lender review, underwriting and other steps before the process is complete. Buyers should talk with their lender early about expected timing so they know what to anticipate.
How can your Realtor help?
Remember that your Realtor does not determine the appraised value, but they still play an important role. Before or during the appraisal, a Realtor can provide factual, supportable information that might not be available to the appraiser. This can include comparable sales, documented improvements to the property, energy efficiency features, a recent survey or information about renovation work.
This type of information can be really helpful when a property has features or updates that are not obvious from public records alone. The goal is not to influence the appraiser toward a particular number. Realtors must respect the appraiser’s independence and cannot pressure, coerce or offer incentives for a specific value.
For buyers and sellers, that distinction matters. Your Realtor can help make sure useful facts and documentation are available while allowing the appraiser to independently analyze the property and market.
What if something in the appraisal does not look right?
An appraisal is not necessarily the end of the conversation if there appears to be an error or missing information.
After receiving the report, a borrower might be able to request a reconsideration of value through the lender before closing. This process is intended for substantive issues, such as a recent comparable sale that was omitted, an important property feature that was missed or an error in a calculation.
A reconsideration cannot be requested simply because the appraised value doesn’t support the contract price.
This is another place where your Realtor can help. They can review the report with you, help identify information that might need a closer look and assist you in understanding the appropriate next steps through your lender.
These changes to the appraisal reporting might make the process look a little different, but the goal still remains the same: accurate information, clear communication and an independent valuation based on the property and the market.
Buyers and sellers do not have to become appraisal experts, but they should feel comfortable asking questions and understanding what’s happening throughout the transaction.
A local Realtor can help you prepare for the appraisal, communicate with the other professionals involved and make sure you have the information you need along the way. When everyone understands their role and the process is supported by accurate information, there’s a better chance of avoiding surprises and keeping the transaction moving forward.
For additional guidance, the National Association of Realtors has also provided an “Effective Communication for Accurate Appraisals” handout with more information for consumers and Realtors, available at www.gcar.net/news.
Greater Chattanooga Realtors is the voice of real estate in greater Chattanooga. A regional organization with nearly 3,000 members, Greater Chattanooga Realtors is one of some 1,200 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors serves Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. For more information, visit www.gcar.net or call 423 698-8001.