6 Things Every Real Estate Agent Should Know About Appraisals


Appraisers and real estate agents have a love/hate relationship. Of course, we love them when the home value appraises at or above our client’s sales price, and not so much when it doesn’t.

Am I right?

Or am I right?

For some agents as well as homeowners, appraisals are a bit of a mystery. How exactly did the appraiser get to that number anyway?

This week on The Walkthrough™, we talk to an appraiser who dispels some of the myths about  how appraisers assess home value and reveals exactly what he looks for when coming up with that magical number.

Jamie Owen of Aspen Appraisals in Cleveland, Ohio, has been a licensed appraiser for 20-plus years and has done more than 8,000 residential appraisals. He shares six things that you should know about the appraisal process.

1. Market value is not “black and white”

In fact, Owen says, “Market value is not just what two people are willing to buy and sell a house for. It’s a lot more complicated than that.”

Oftentimes, especially in the current market, people have been willing to spend more than the actual value of a home. Owen says that his job is to support his opinion of value purely based on facts and market data. And sometimes, that means a higher price tag but a lower value.

2. Appraisers make time adjustments

Lenders always prefer to see the most recent comparable home sales. However, Fannie Mae and Freddie Mac will accept comps as far as a year back for the first three homes in the appraisal report. If there’s a really great comp, Owen says he will even go back a couple of years to make a time adjustment, but in the past couple of years, the adjustments have been so large that banks have, at times, questioned the values.

“We have to be able to support our work because if I had not made those adjustments, my opinion of value would’ve been lower than the market really was at that time. But it does require a lot of explaining. I think the banks are used to it now after two years of this rapid appreciation,” says Owen.

3.  Appraisers want to talk to you

Owen says not only does he love hearing from real estate agents, but he also occasionally calls listing agents to learn more about a sale. Offering information that is not included in the MLS can help appraisers understand more about the property and its sales price. For example, if a nearby property sold quickly and for less money due to a divorce, appraisers will take that into consideration when determining the value of the property they’re appraising.

4.  Quality and condition count

Amenities like countertops, flooring, and new kitchen cabinets are important, but Owen says their quality and condition are even more important.

“What’s the flooring, and what’s the condition of all of that, too? I’ve seen some homes with new kitchens but they just weren’t done well, and that can make a difference. Just the quality of the work may make a difference, so we take all that into consideration.”

Appraisers use UAD (Uniform Appraisal Dataset) codes to grade the condition of the home. These are a standard set of definitions and responses that appraisers use in their reports.

5.  Some aspects of a home don’t add value

The foundation and the roof are items that must be functional. Owen says that if you just spent thousands of dollars replacing a roof, don’t expect to get that money back. The same is true for a home’s foundation.

“Foundations are even worse than roofs,” says Owen, “because if you’ve got a foundation that needs to be torn out and replaced, there’s really little, if any, value for that, just because the buyers expect a home to have a foundation that’s working. So, you could drop $30,000, $40,000, or more rebuilding a wall in the basement and get zero return.”

6. Appraisals are subjective

Owen points out that even with a grading system, each appraiser may see things differently than the next. One person’s idea of an updated kitchen may be freshly-painted kitchen cabinets with granite countertops, while another may feel that granite countertops are outdated based on market trends in which quartz countertops are more popular.

Location is another area where subjectivity comes into play, says Owen.

“There’s an area outside of Cleveland, and it’s a very high-density neighborhood, and a lot of appraisers – in fact, me too for a long time – I was calling that ‘suburban’ thinking, ‘Well, that’s a suburban area for Cleveland.’ But the truth is it’s urban. Density-wise, it’s urban. You go one mile into where everyone’s calling that neighborhood urban and it’s urban. But we get in our mind, well, it’s suburban because it’s a suburban part of Cleveland. But in reality, when you look at the density, it’s urban. So, things like that can be a little bit subjective.”

In conclusion, Owen says to keep in mind that one sale does not make the market value. Comparable sales are the biggest factors appraisers use to support their findings, and even those are not set in stone. But, being proactive as an agent by sharing as much information upfront as possible will help to avoid a dispute later, and in the long run, will make the process much smoother for all parties involved.

Listen to Jamie Owen’s appearance on The Walkthrough™ below.

Header Image Source: (Annie Spratt / Unsplash)



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Mike McNamara

Mike McNamara

A Las Vegas Realtor since 2008. Mike has a wide range of knowledge around all things Las Vegas.

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