According to an opinion from the Appraisal Institute, president and acting CEO Jim Amorin claims not all appraisers are as knowledgeable as others. “The best way for consumers to combat potential problems with appraisals is to ensure the appraiser hired by their lender is highly qualified and competent” Amorin said.
Amorin noted that most lenders have appraisal appeal procedures known as “Reconsiderations of Value” that can be provided to the lender. These procedures allow buyers and sellers to provide recent and comparable sale information not otherwise considered by the appraiser. Amorin also referenced the book titled “Appraising the Appraisal: The Art of Appraisal Review,” authored by Richard C. Sorenson, which covers common errors that can occur during procedure. This includes “misuse of adjustments to comparables, disregarding special financing and concessions, and miscalculation of gross living area” according to the Appraisal Institute.
Buyers and sellers are also entitled to a copy of the appraisal report, so lenders should be prepared to provide a copy to them when requested. Based on federal regulations, lenders are required to provide copies free of charge to consumers no later than three days before their loan closes. Homebuyers can also ask lenders if their appraiser is directly engaged by the bank or if they use an appraisal management company to send them to properties for review.
It’s worth noting that just because the appraisal doesn’t match the contract price doesn’t necessarily mean the appraisal is flawed, according to Amorin. “The agreed-upon contract price may be above market value, for example. In those situations, the buyer and seller often renegotiate the contract at more favorable or balanced terms” he explained.
The full opinion from the Institute can be found here.