Portland real estate appraisal; a brief primer

In the "go go" years, lenders had staff, or preferred appraisers who worked with the lender in establishing the value of a home.  In a good way, a lender could clue an appraiser in on specific information about a property.  In a bad way, a lender could put pressure on an appraiser to find a certain value or overlook shortcomings in the interest of future work for the appraiser from that lender.  And of course, some lenders were so anxious to make a loan, they did a "desk" appraisal, looking at statistics on a property and the neighborhood, without a property visit.  Think that system might have been abused a bit?

 Monday morning quarterbacking of the housing crisis led to an overhaul of that structure such that appraisers are now affiliated with appraisal management companies, and lenders order appraisals though those companies, with no direct link to specific appraisers.  Oh yay, another layer of middle men!  This restructuring did lead to some good separation between lender and appraiser, but it also lead to a not so good disconnect between appraisers and the areas and properties they appraise.  A lender who often works in the inner city could order an appraisal that ends up being done by an appraiser experience with in new construction subdivisions.  ack.

This history informs what we are seeing today.  Take the potential misinformation, combine it with a quickly appreciating market, where the basis of an appraisal comes from closed sale in the past.  Then, on occasion, add in an appraiser's bias about a certain area, or in one case I had, an appraiser who fancied himself a bit of an economist and was including his opinions about the regional economy when establishing a value for a property. Then, allow for good old human error here and there.

Appraisers have certain rules and regulations they work by in establishing value.  This is a good thing.  But those rules often don't quite match with how a certain marketplace establishes value. It is this disconnect that can also lead to low or "off" appraisals.  It is VERY hard for an appraiser to give much value to below grade square footage, no matter how well done it is and how much the buyer and seller like it.  That hip lofty area that serves as a great office probably doesn't count as a "room".  And the urban location, close to everything, may get a deduction based on a busy street or inconsistent uses (residential, industrial, commercial).  In addition, low housing inventory has buyers bidding up many properties well over their list, and probably over possible appraisal prices.

Don't despair.  As  real estate agents, if a low appraisal comes in, it is our job to take a good hard look at it.  We especially look for any actual errors, especially in square footage calculation.  We also look at the comparable properties used by the appraiser, and try to provide more accurate "comps".  It is possible to have an appraisal reviewed; though usually only in the case of actual errors or blatantly poor comparable properties.  We also help to avoid low appraisals in the first place.  We can provide an appraiser comps we think might be helpful.  We can also provide a list of improvements made to the property, especially those that might not be obvious.   Many appraisers will let us know if they are having trouble finding the value, a hint to provide comps.  And lastly, good old courtesy and respect can go long way toward a decent appraisal process.

Worried about how your place might appraise?  Give me a call and I'd be glad to look at some comps for you.  Contemplating home improvements?  I'd be glad to counsel you with regard to cost vs. value in our market.