How many times has a slipshod appraisal killed your deal?
Property appraisers were once considered artisans — specialists in a local market with intimate knowledge of comparable properties and enduring trends. Today, the lending industry, claiming the authority, has farmed-out this service to anonymous appraisal management companies (AMC) by federal directive.
However, dear reader, you need to know AMCs only pay enough to hire part-time novices with little but the well-known and publically available real estate web sites as a resource for their appraisals. A drive-by appraisal might be more enlightening (and accurate).
Since the mandate that all appraisals be handled by an AMC, more deals are dying due to knee-jerk appraisals coming in lower than the contracted price. In a March 2012 first tuesday poll, 94% of respondents (nearly 350 votes) said AMCs were a detriment to the California real estate industry.
As deals continue to die on the lender’s desk after a bad appraisal, some agents are getting aggressive with their recourse. Rather than rolling over, proactive agents send a rebuttal letter to the lender arguing for an additional appraisal from a more qualified local appraiser – i.e., one well-versed in the nuances of the local community.
A solid rebuttal letter:
- is written by the buyer with the help of an experienced agent;
- focuses on hard facts rather than emotions;
- includes professional opinions and recent comps to rebut the previous appraisal; and
- is professionally bound and sent to all parties to the transaction.
Though chances are somewhat slim the lender will oblige, the goodwill you’ll build with your client will be worth it.
first tuesday insight
Of course drafting a rebuttal letter is a sound practice when an experienced agent deems it necessary. The proliferation of incompetent appraisers working today is an undeniable fact.
However, talk of rebutting low appraisals during a momentum market is worrisome.
Any agent worth their salt knows the fair market value (FMV) of a listing in their farm community. If the appraisal comes in low after an offer has been accepted, the first question asked, if not earlier, ought to be, is this a fair price?
As markets heat up, buyers tend to use their emotions when making an offer — a respectable buyer’s agent will know when to apply the breaks, thus avoiding running past the point of no return only to lose the deal because the buyer was permitted to get snared in the excitement.
Draft a rebuttal letter if you like, but don’t do it to prolong the madness of a bidding war in this mini-bubble. Listing prices will fall soon enough, in spite of popular opinion to the contrary.
Re: “A second chance for rejected borrowers — the rebuttal letter” from the Wall Street Journal