Predicting the date of recovery is as difficult as determining the track and strength of a hurricane. Our guesses are just that. Recovery will happen when it is good and ready, and not when the experts say it will.
Appraiser Michael Coyle responded to a “Home Economics” article on the difficulties surrounding home appraisals. He said he was surprised that none of the experts I interviewed mentioned “the easiest way to sidestep and possibly eliminate appraisal issues.”
His recommendation is to have “a pre-listing appraisal of the home.” This gives the seller and agent “an unbiased opinion of value for the property.” It also allows them to see how a buyer’s appraiser may react to the property once under contract.
“They can use the appraisal to adjust their expectations and, perhaps, their pricing strategy,” Coyle says.
“Getting an appraisal prior to listing is kind of like knowing what the other team’s offense might be like before stepping on the field,” he said. “A relatively small investment in an appraisal can save thousands of dollars and countless hours of time and hassle.”
As it happens, some acquaintances of mine who are listing their historic house for sale were urged by one of the potential listing agents to have it appraised before the agent would determine the asking price.
In their case, I thought it was a good idea since they have owned the house for more than four decades and had bought it as a shell. It is, I think, more of a peace-of-mind situation than anything else. Their house is one of a kind, and it certainly is worth more than they paid for it. (Though it could also have stood as a shell for those 40 years and still have been worth more.)
More important, however, is that sometimes a seller really needs to have a number against which to judge whether a listing agent’s suggested price is realistic. I’m not recommending pre-appraisals in general—just case-by-case. This is along the same lines as pre-inspections of houses before they go on the market. Some agents approve of the idea, others don’t.
Wes Costello, of a mortgage company in Mount Laurel, N.J., believes that the prime issue in faulty purchase appraisals is “how lenders are failing to provide proper direction and leadership in home valuation.”
“It is the lender’s responsibility to ensure that the appraiser has the relevant experience and knowledge for the market, location, and type of property being valued,” Costello says. But instead of developing an effective appraisal program, he said, lenders “outsource the work to appraisal-management companies, who have a different set of priorities.”
He said he doubted that many lenders had read the “Interagency Appraisal and Evaluation Guidelines” issued in December, which state that when outsourcing to an appraisal-management company, “the reduced operation control over outsourced activities poses additional risk.”
Costello is licensed as a real estate agent in Pennsylvania, is certified by both New Jersey and Pennsylvania as a residential appraiser, and “sets appraisal policy for an area lender.” He believes “lenders creating programs which fulfill their responsibilities is a necessary part of the solution.”
The Dodd-Frank Wall Street Reform and Consumer Protection Act “doesn’t mandate that lenders use appraisal-management companies,” Costello said. “In fact, the five federal banking agencies say that is a riskier practice.”
©2011 The Philadelphia Inquirer