02/08/2024
Many parallels can be drawn between the current state of the industries for Realtors and Appraisers. Both professions have been "vilified, sensationalized, and misrepresented" in the media by those who know little about the essential services we provide.
Real estate appraisers are well trained and highly skilled, and we are an ethical bunch who cares about doing the right thing. The appraiser is the only party in a real estate transaction who does not have a financial stake in whether the loan closes or not – let that sink in. Appraisers are independent, and that is a very important factor when considering what may be the largest purchase of your life. Remove the appraiser from the equation, and the buyer has forfeited that protection.
The internet and valuation models, like Zillow and Collateral Underwriter, can be tools, but they are not a replacement for the essential services provided by a professional real estate appraiser. When a lender offers an appraisal waiver, AVM (automated valuation), or ‘value acceptance + PDR,’ those are not appraisals; they are the lender rubberstamping a purchase so they can close the deal as quickly as possible. They do not have your best interest in mind; if they did they would order an appraisal. A PDR is a ‘property data collector’ - a person who walks through a house collecting data – they are not trained and licensed appraisers, and should not be mistaken for such. They are not even professional home inspectors. Many appraisers are of the belief that these alternative products are completely undermining the appraisal profession, and are hurting the public at large. Some believe this is another housing crisis/collapse in the making (similar to 2008). Oftentimes, buyers overpay for a house when they don’t know the true value of it before the purchase. They don’t know what they don’t know, and they may not realize what is happening when the lender steers them toward the alternatives to an actual appraisal – until it is too late.
NAR CEO Nykia Wright could not have been more correct when she said, “A real estate transaction is not a simple click and purchase – like buying a plane ticket online.” It is an important financial transaction that will affect you and your family for years to come, and it should be treated as such – by getting a professional appraisal prior to purchase. The cost of an appraisal is far outweighed by the potential of over paying for a house by possibly tens of thousands of dollars. Typically, the appraisal does confirm that the contract price is within the value range, and the transaction closes smoothly. However, if the appraised value is lower than the contract price, do not immediately assume the appraisal is wrong and try to get a ‘reconsideration of value’ - so you can get the keys to the house. Take a minute to consider that the appraiser may be right, and you may be over paying. Talk with your Realtor to weigh your many options.
If you are on the selling side, and an appointment is being made for an ‘inspection,’ I encourage you to find out if the person is a licensed/certified appraiser, or a property data collector, and if it is a PDR, alert the buyer’s agent right away before agreeing to a scheduled appointment. Don't allow them to do automatic scheduling through ShowingTime. If you are the buyer’s agent, I encourage you to speak with your buyer, and contact the lender to demand an actual appraisal by a licensed professional appraiser - that is keeping your client’s best interest in mind.
