Should I answer an appraiser's question?

[JD Barrera]

Hi all...  I'm in the middle of a cash-out refinance on two properties. We are in the appraisal process and the appraiser reached out to me and asked, "were the properties renovated before or after you purchased them?" 

Am I obligated to disclose this? I feel like the current value of the property should not be relevant to when the rehab occurred. These were renovated before purchase so I feel like this can only hurt my appraisal. Has anyone encountered this before? Thanks!

[Brad S.]

Appraiser here to clear that up  :P

Yes, it is relevant and No, it shouldn't affect the current value. There...all clear now, YOUR WELCOME!.  LOL

Ok, a little more detail. The relevance comes into play because we are observing the condition and quality of the Subject property. So, if I am inspecting a 50 year old house that appears to have been updated/upgraded recently, I want to know, so I can justify the current quality and condition and value it accordingly. Also. per the common lender required appraisal form (FNMA Form 1004) we are specifically asked about any updating/remodeling done to a property within the past 15 years. 

And we are required to report and analyze any prior sales of the Subject property for the past 3 years. Sometimes, there is a big discrepancy between a recent prior sale and a current value. We need to be able to justify that. Sometimes that is due to a remodel and sometime it is due to a prior distressed sale, but we need to analyze it and discuss it and make sense of it.

So, in your situation, I would tell the appraiser any info you think that would be helpful to explain why your property is worth more now. In other words, if you bought it relatively recently for a lower price, due to the seller being extra motivated, then tell the appraiser that. Maybe the Seller had to move for a job tfr or was in financial distress, or some other personal issues, etc. 

Or, if your house/s were renovated relatively recently, within the past 15 years, then it would help you for the appraiser to know that info, even if a previous owner did it. It may potentially help them classify the quality and condition higher, which may translate into a higher valuation.

But, the value shouldn't be affected based on who did the renovation, you are previous owner. But, the appraiser may also mistakenly think the renovations were done a long time ago, if you don't tell them and that might hurt the valuation.

Hope that helps.