How to Argue with your Appraiser

You finally received that appraisal report you ordered and guess what, the value isn't what you expected it would be.  It's higher or it's lower and you just can't believe that the appraiser could conclude a figure so far from your expectations. This "value shock" happens regularly and appraisers often hear words of disbelief from their clients and others who receive copies of their reports.  Appraisers are, however, generally prepared to defend their value opinions to their clients. 

Most people think that the appraisal that they hold in their hands is the entirely of the appraiser's efforts, but in most instances it is only the final product.  You may be surprised to find out that when you question an appraiser about his report that he also has a work file.  While you see five comparable sales adjusted in the sales approach grid in the report, the appraiser may have reviewed twenty-five sales and after review he only selected the five you are seeing because he concluded that they were the most comparable of the group.  Before you wander into a dispute, your opinion versus the appraiser's opinion, make sure that you have done your homework.

When looking for comparable sales, appraisers look for properties that have sold within the same subdivision.  The best comparable sales were constructed by the same builder around the same time, they have similar size and the elusive guarantee of accuracy is the sale of a "model match" or the exact same home within the same subdivision.  Of course this kind of search works well in a city with many "tract" homes, but in the country you don't have the luxury of being able to compared "cloned" homes to one another.  You have to look at location, age, construction quality, size and amenities. 

If you look at the report you received and its adjustment grid in the sales approach, you will see which items the appraiser considered similar, they will have small or no adjustments, and dissimilar items will have adjustments. 

Appraisers try to use the best available data sources to find comparable sales.  Does that mean that they are the best sales?  They are the best that the appraiser could find based on his data sources.  Can better comparable sales be found?  There are times when you may find information on one or more sales that simply were not available to the appraiser.  Will the appraiser consider these sales?  Generally appraisers keep an open mind, and most will consider new sales information, even if it leads them to change their value opinion.  The information really has to be compelling, and there is no guarantee that an appraiser will change an opinion, it is usually stated in their report that their opinion was formed based on the information that he or she had when they completed it.

Clients can also provide information to an appraiser on rental information that may be different from that which was used in their report, for income producing properties this may make a significant difference in the value that was concluded. 

If you want to have your appraiser consider information that you believe is superior to that which was used in the report, it's better to keep your conversation low key.  Making threats, demands or claiming that there are errors in the report is generally not going to help if you are trying to get the report changed.  I have found that many appraisers are responsive to changes when they find that better information is available and it proves that a higher or lower value conclusion is appropriate.

As a consumer of appraisal reports, one has to consider the fact that a report is one individual's opinion of value.  While it costs money, you may have a better result by simply having "another set of eyes" look at a property, and offer the new appraiser the information that you have at the beginning of the process.  An appraiser can't claim that the data wasn't available to him if you supply it at the beginning.  Even banks will consider letting another appraiser complete a report when new information has been discovered.

Update 2014: The time of “value shock” is gone, which is a nice thing for both homeowners and real estate appraisers since there is nothing worse for an appraiser than telling an owner that their home is worth only 50% of their loan value.  While there are many problems in the economy and the real property markets remaining housing prices in Las Vegas are not as bad as they were. 

Being prepared and making your case before the report is completed is the best way to avert appraisal problems.  After completion appraisers are less likely to change their opinion. 

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website. 

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