August 11, 2015 by Jeff Lowen
In the context of a real estate transaction, do you know when the appraisal happens? Are appraisals only for a sale or a refinance? When are they good or bad? Is the process that goes on behind the scenes hurting or helping you? All valid questions. Here, I’m going to address that last one. The behind the scenes appraisal process that the real estate industry currently has in place that most homebuyers and sellers don’t even realize!
When I sold my first home as a Realtor, way back in the mesozoic era; as the listing agent, I received a call from the appraiser. He was hired by the lender, paid for by the buyer, and although I thought this was a little odd, I went with it. I was thinking, “why’d he call me? The home inspector didn’t…”
So I met him at the property because he had no other way in – I guess I was the doorman. He commenced to his gig and I thought I’d read a good book while he did so, but then he started sharing all kinds of cool stuff about my listing. Asking me why we sold it for such a low price, and that he had no problem with the value whatsoever, and even in ‘as-is’ condition, this property is worth WAY more! …I guess he didn’t know we still had some negotiating to do!
I was ecstatic! The appraisal obstacle solved. Then I got to thinking… The buyers haven’t turned in their home inspection repair requests yet. “Why would they even want anything repaired when they’re getting such a great deal?” I thought. Of course, I shared this with the Sellers. They thought the same thing and we talked about how we could get the buyers to pay more for this undervalued contract we were in the middle of. All those repairs the buyers thought they were getting – Now, the sellers were in stonewall mode!
…What’s wrong with this? If you hired a CPA to do your taxes and later found out she shared them with your ex-husband, just ’cause he asked; how would you feel about that? What about if you found out the bank shared your credit card number with all the neighborhood teenagers? Du-nuh-nuh nuhn ta-da… CHARRRRGE IT!
When you pay for sensitive information, do you believe only you should have the right to the dissemination of it? I do.
Our industry is built on the handling of sensitive data and protecting it. So why then, did the appraiser feel he could share all this with me? Why was I even there? Why wasn’t the buyer’s representative on site protecting this information? Why didn’t the appraiser have a lockbox key or code so they don’t have to rely on an agent to get in the house? Why did the appraiser feel he could regurgitate sensitive information. Did he even feel it was sensitive? Does anyone else see the impact of this on the negotiations during the transaction??
When I talk to other agents, I get varied comments like, “This is the way it’s been done, it’ll always be done, don’t upset the apple cart…” all the way to, “I agree 100% and I do this to prevent it…” Is this a hole in the industry’s process whereby fuels more legislation to put more regulation on things that have nothing to do with addressing the problem? I understand where this comes from. The listing agent’s info is all over the property, not the buyers’. Easily accessed by the appraiser. So when he or she needs access, who ya gonna call? Now, of course the appraiser should keep his comments to himself, but c’mon… If I’m following you around and asking questions, what’cha gonna do? Loose lips sink ships, eh?
As buyer agents sworn to protect our clients’ best interests, how do we prevent this? How can we demand that the listing agent not be present at the appraisal? How do we press the “Mute” button on an otherwise chatty appraiser? A roll of duct tape? Do we write something in the contract? Such as…
“Buyer and Seller agree that Seller and/or Seller’s agent will not be present at time of the appraisal; and if it should be proven that any verbal or electronic communication occurred between Appraiser and Seller and/or Seller’s agent, Seller and Seller’s agent agree to pay for a new appraisal, pay an additional 3% in buyer closing costs, and a one week all expense paid trip to Disneyworld for the Buyer’s family…” Or something like that.
I’m no attorney, but that has some teeth, doesn’t it? Whatever precautions you take, this is definitely something that needs addressing! And, as a Buyer and Buyer’s agent, you should be aware that there is a possibility if and when the Seller finds out that you’re buying their home for $1,000s of dollars less than what it appraised for; someone’s not gonna be happy. Especially if there’s still some bargaining to do.
That is what upsets the apple cart!
Note: Of course, I would be remiss if I didn’t say this may be a hypothetical scenario and although there are no names to change to protect the innocent, I just might have more experience with this subject than this disclaimer lets on. 🙂 And, this doesn’t happen in every transaction. Or does it?
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