It’s always the right time to have the “Appraisal Talk” with your clients and especially the Realtors® involved in your transactions. For far too long it has been a common practice for Realtors® to blame lenders for low appraisal values. If you haven’t learned to have the “Appraisal Talk” with your Realtors®, now is the time to learn and practice this valuable tool.
First and foremost you need to call both Realtors® the day you order the appraisal or the day you are sending the file in to processing for the appraisal to be ordered, and pick up the phone and call both Realtors®! The conversation can be short and sweet, as long as you cover these basic points:
- Lenders are prohibited by law from speaking directly to appraisers about property values!
- A property is worth what someone will pay cash for or; what and independent appraisal says the financeable value is!
- Realtors® are responsible to justify their prices with closed similar comparable properties in close proximity to the subject property with similar quality and style.
- If the appraiser who inspects the property has value issues with the property, it is the Realtor® who is responsible to connect with the appraiser and justify value.
- While appraisals can be reviewed or challenged, this is done through the independent appraisal management company at their discretion. The lender has no part in the determination of a property’s value!
- Some loan programs have different property requirements as to function and condition. Be sure to cover any of these issues during your first conversation with the Realtors®
- Different types of appraisals also have different turn times. Be sure to cover the current turn times with your Realtors® as well as your client.
- Different property types may require re-inspection to show that the property is complete and all required work has met said specifications. Addition inspections cost money! Sometimes these costs can’t be passed along to the customer and if they can, it may trigger a waiting period for re-disclosure, which may result in an additional time delay!
Being clear and up front with your clients and those agents involved in your transactions when it comes to appraisals is critical! In many parts of the country inventory is tight and demand has caused multiple offer situations and people offering significantly more than asking price. When this happens, buyers, sellers, and their Realtors® need to understand that it isn’t a lender’s obligation to lend on what the customer wants to pay for the home. As it has always been, the value of the property is either the contract price or the appraised value, whichever is lower!
You also may have to take into consideration the type of sale, the type of property, restrictive covenants, and if the property is an arm’s length transaction. If not, you may have another series of issues to deal with. Getting the real story on the table early leads to smoother transactions! We don’t need surprises! So pick up the phone as soon as you receive the contract of sale and have “The Appraisal Talk” with both agents so you are all on the same page and on your way to a smooth and hassle free transaction!
Questions or comments: Mike@IMTcoaching.com or visit us online at http://imtcoaching.com