Should I be present during the appraisal?

Question

Hello BP,

I have heard some investors mention they try to be present when the appraiser shows up at a home they have recently rehabbed and are selling, to make good with the appraiser and discuss all the improvements and added value to the home while the appraiser walks through...I have never personally done this but I have an appraisal scheduled on one of my properties for sale this week, and wanted to get some input from BP members on whether this is a good move and a potential benefit to the appraisal value, or just Busch league.  Looking forward to hearing your response!

Dustin

Steve R. · Answer

As an appraiser, I actually like the property owner to be there during my walkthroughs.  I focus mainly on commercial properties, so take this as my opinion only, however it is so much easier to have someone knowledgeable about the property to be there to answer questions immediately as they come up during my inspection.  I appreciate any and all information that the property owner provides, and it makes my job much easier, especially if its an area that I am less familiar with.

I will say this, I verify every piece of information that is provided, and I usually ask questions I already know the answer to just to see how truthful the property owner is being with me.  So for me to actually consider any information that is provided, please tell the truth.  Just my two cents.

J Scott · Answer

This was probably one of the most controversial articles I've ever written, but I stand behind it 100% and it's worked for me (and many others I know):

Controlling (And Conquering) Your Appraisals

Bill Gulley · Answer

I wasn't present at 95+% of my appraisals. I feel the time for comments is after the appraisal is done. I'd not say it's a bad idea to be there, on the contrary.

Yes, more laws, you can't be seen as attempting to influence an appraiser, so watch what you say and how you say it. Some don't want anyone there, some don't care, most won't want to spend time listening to your justifications of comps or values. It's important to build relationships with these folks, just do it tactfully and professionally.

If I were showing up to do an appraisal and the owner or Realtor was there I'm not sure my first thought wouldn't be to be on guard as to attempts to influence me as I'd realize they have a vested interest in the value, I'd think meeting someone I didn't know, that would be a natural thought, initially.

I'd think too that if you give comps to them they better be good ones, if they aren't it's a reflection on you. They will appreciate good comps as well as any additional information. I wouldn't hand them materials before shaking hands, I'd see how receptive they might be and go get them if they would like to see them.

No one likes someone looking over their shoulder while they work. Being available is one thing, following them might be another. :)

Brett K. · Answer

As a residential appraiser I usually don't mind if someone is there or not. Unless it's an owner who seems desperate.  I don't worry about it as much these days but that was usually a tip-off that the sales price was 'padded' and it used to trigger additional phone calls on my part to see if that was the case.

I just read J Scotts' blog post and I think its good advice.  If I were dealt with this way I'd appreciate it and I'd be inclined to view his properties favorably now and in the future because I've been told by his actions that he's a professional in it for the long haul and not someone winging it who may have left faulty wiring in the walls.

Most experienced appraisers want your deal to work.  Where I've run into problems is when I feel like the work is shoddy compared to what's expected in a neighborhood.  Problems arise when the appraiser doesn't think the work is up to snuff or that it's too good (an 'over improvement' in appraiser parlance) for an area.

John Moore · Answer

I believe you have received good information.  We are always present when the Appraiser does his walk through.  We provide pictures of what it looked like prior and after.  We provide a list of repairs we have done to the house (without cost) as well as comps.  We have found this works well for us as they realize we did extensive cosmetic work and have put a lot of improvements into the property.  With the hidden message that we should be compensated for the impovement.  We also provide "comps" that we based our selling price on.  We feel this puts us into a position that the Appraser realizes that we have done our homework and based our price on  a realistic approach.  On our last appraisal we furnished a CD of before and after and we feel this helped all parties, to the transaction.  It is far better to get the number you want and avoid challanging.  Food for thought.

Justin B. · Answer

Well, it can never hurt.  I would say on refi's for buy and hold it's probably not that important, but on a flip it could definitely help.

If you aren't there then he/she may or may not see everything you've done or know what was pre-existing or not.  I think if you are looking for the best value because you put a lot of $ into improvements (a flip), then I think it's best to be honest with the appraiser when he/she shows up and tell them that you'd just like to run through all the improvements you've done.  NEVER try and impose what you think the value is (sine 99% of all appraisers will take offense), just tell him/her what you've improved and what you spent on it and let them do their job.  Also keep in mind that appraiser work on fixed price.  they get $X regardless how much time they spend on your appraisal.  I'd say keep any listing of improvements you've done to 15 minutes in person and perhaps even have a print out of what you've done and what it cost you so they can continue to review in the comfort of their own office.  As long as you keep their time as your priority, they will be sure to give your improvements the appropriate attention.

Roy N. · Answer

We are "fix and hold" investors who undertake deep energy efficiency renovations on our properties.

I like to be present at the appraisal to inform the appraiser about all the "behind the scenes" improvements we have made to the property.  I'm not sure if it has any real benefit to the resultant value attributed to our properties as most lenders - and appraisers - fail to give sufficient weight to the benefit of improving a properties energy efficiency.

Duncan Taylor · Answer

Okay, I'm willing to learn.

Show me the language in the SAFE Act you claim prohibits me from giving a list of improvements or comps to an appraiser. Please show me the language saying I will pay a hefty fine or go to jail if I decide to ask the appraiser to justify their appraisal.

While we are waiting for Willard to find the legislative language let me explain what I have given every single appraiser who has EVER appraised a property I owned regardless of whether it was a refinance, a sale or just for the internal partners.

In every case I have prepared a binder detailing every repair, no matter how small, every improvement and remodel, comps from the area and the list of upcoming maintenance items.

Some love it, some ignored it but when anyone had a question about their appraisal it was an incredibly valuable tool.

I will continue to provide this unless at some unlikely point it really does end up being prohibited by law.

To the OP question. I don't attend the appraisals.

Duncan Taylor · Answer

The only influence that is illegal is that through extortion and bribery. Pointing out the improvements and asking them if they noticed something and yes even providing them comps isn't illegal influence, not even in MO as you can see below.

Justin Polston · Answer

@Dustin Faeth

It's up to you on this. It just depends on how costly your time is or if the home has recently undergone rehabilitation. Nothing going on that morning? Then I suggest show up. If not for the sake of networking and learning (if you're not an appraiser yourself) beyond anything else.

If you're busy and you're making money at an actual 9-5 or are cooking up other deals, then I would make one suggestion in lieu of your time and attendance (only if you've done extensive work to the property).

Leave a list of things that can't be obviously known that were done to the property. Specific examples are work done to kitchens, baths, and exterior biggies like roofs or invisibles like wiring or other obvious things.

My reasoning for suggesting this: I was at an appraisal this summer on behalf of a client to open the door, but I stuck around. The appraiser was more talkative than you might think, and he asked a few questions that he would not have otherwise known that directly affected his appraisal price (he could have called for these I suppose, but would you trust someone to do that in today's time?).

Was the bathroom recently (within a year) rehabbed, or just remodeled?

Are the kitchen cabinets new, or just refinished?

"What's the difference?" was my response, and he went on to explain there are a few quarks beyond comparing one house to another and these answers can be tipping points.

All in all, the house appraised for $100 more than purchase price, and in most deals, that seems to be the case (most deals!). It may not make a difference if you are present, but...it might! And what do you have to lose?

Should I be present during the appraisal?

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