Residential appraisers will often—if not just about always—have their work reviewed by another appraiser. Usually, this is a routine procedure that the original appraiser barely notices. Sometimes, the review appraiser will come back with requests for extra information, or doubts, that the original appraiser might find annoying. To be sure, the reviewer’s questions might sometimes seem nit-picky, and answering them can distract from other work. However, the issues the reviewer raises almost always turn out to be legitimate.
We asked review appraiser Doug Nakashima (Glenview, Illinois) for advice on how to make reviews as painless as possible if you’re the one being reviewed.
Remember that reviewers are on your side
Nakashima’s main takeaway is, it’s nothing personal. Review questions are part of any appraiser’s life, and the process will go much easier if you keep in mind that the reviewer wants to make you look good.
“I correspond with appraisers across the county on a daily basis,” he reports. “It is way too common for appraisers to become offended, disrespectful, and argumentative when their reports are questioned.”
“Reviewers are actually on your side,” he continues, “and we want to work with you to make sure that your reports are USPAP compliant and meet the requirements of the lender. We want to uphold the profession of appraising. We are on the same team, so we reviewers will try to extend grace to you.”
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Look out for these common points of contention
According to Nakashima, the most common bones of contention, on an appraisal review, are matters of accuracy, consistency, and logic—and the inclusion of all required elements. Neighborhood characteristics, market conditions and trends, subject site and the subject’s physical characteristics and well as comparable data will be verified. In addition to USPAP and accepted appraisal methodology, each lender has specific requirements—which must be reviewed and accepted by appraisers when they take the assignment. These lender requirements must be present in each report that is delivered to the lender.
“The number one mistake is that the appraiser did not include the lender’s specific report requirements,” Nakashima confirms. “Often, the appraiser will not read the lender’s requirements—and if those requirements are not in the report, it cannot be delivered, or the lender will send it back.
“To avoid this, in the case of the company I work for, the appraiser will receive a revision request from the reviewer before the appraisal goes to the lender. This brings the reviewer grief in the form of complaints concerning the fee amount being too low, or the report taking too much of the appraiser’s time to complete, or the reviewer’s contribution to the decline of the appraisal profession, or ‘The last reviewer let it go so why don’t you let it go?’ or ‘I’ve been doing this 25 years and you are the first one to ask me this,’ and so on.”
Nakashima points out several “honorable mention mistakes,” as well. One of the most common is a lack of explanation as to how the value was reached or a very general reconciliation comment that could be used for every report, such as “All comps were given equal weight.” This is especially troubling when the adjusted value range has a spread of more than 30 percent, he says.
“Searches for comps based upon a price range rather than the subject’s characteristics is another problem,” he says. “This results in missed comps which would have been supportive and the inclusion of comps that provide poor support for the subject. Some appraisals miss the subject’s three-year sale/transfer history or 12-month listing history comments, or prior service comments.”
Avoid future revision requests
“You can’t avoid the report being reviewed but you can avoid revision requests,” he says. “Check your report for the common mistakes. Review the specific lender requirements and make sure you covered all the bases. When you can’t meet a requirement, include a comment that explains why not.”
“The reviewer is not trying to ‘stick it to you’ or question your worth as an appraiser,” he adds. I hope the appraiser has all the needed elements in the report the first time it’s sent in. If that’s the case, they will not see the report again. Also, please know that what we ask for is usually what is laid out in the requirements when the appraisal order is accepted. We try not to request an item not actually required by the assignment. It is not our personal opinion that is weighted the most.
“If you must detour from the stated order requirements, please just include a comment to explain what you did or didn’t do, and why. We are on the same side; we are both trying to consistently deliver a quality product, well supported, that meets the needs of all involved parties.”
Join us on Wednesday, August 19 for a live Pro-Series webinar, “Appraisal Review in the Real World: What a Bank Reviewer Wishes You Knew.” In this training session, you’ll learn real-life information related to a risk management-based viewpoint of appraisal reviews for lending purposes and why your underwriters ask what they do.
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Article written by Joseph Dobrian. Joseph Dobrian has been writing about commercial and residential real estate, and real estate-related finance, for more than 30 years. His byline has appeared in The Wall Street Journal, The New York Times, The New Yorker, Real Estate Forum, Journal of Property Management, and many other publications. He is also a noted novelist, essayist, and translator. His website is www.josephdobrian.com, and he can be contacted at firstname.lastname@example.org.