I have received many questions regarding the new appraisal guidelines that have recently come about due to the COVID-19 virus. Specifically, lenders are ordering more and more drive-by and desktop appraisals to prevent appraisers entering peoples’
Now, what does this mean for you? As a real estate professional or seller this means you will need to be even more vigilant when it comes to the appraisal process. If you discover that your buyer’s bank has ordered a drive-by or desktop appraisal,
there are a few things you can do to make sure the details of your listing or home are not overlooked.
First, I highly recommend to listing agents and sellers to state as much information about the property in their MLS listings. State the exact age of the roof, exact age of the kitchens and bathrooms, and exact age of updates that have been completed
on the property (do not just say “recently updated” or “new”). It is here that I recommend stating any updates or renovations you would want the appraiser to take note of, (additions, built-ins, quartz counters, double paned windows, solar panels, etc.).
Second, I recommend having a PDF or Word document prepared of all the updates and renovations with the year they were completed ready to email to the appraiser when they call you for information regarding your listing or home. The reason I recommend
emailing this list is because things can get lost in text messages. Appraisers receive many text messages all day long from unknown numbers and texts easily get lost in the shuffle of the day. Emails are easily marked and placed into the appraisal reports
Work File (or storage center) in the report. *As a side-note, for those of you who do not know, appraisers are required to save all information they gather regarding the subject property into their reports Work File.
Third, MLS has an attachment feature in which listing agents can attach files to their listing. Using this feature, I would recommend attaching your list of updates/renovations with their dates, a previous appraiser
hand measured floor plan that shows the actual sq ft of living area, seller disclosures, and a survey of the property, if available.
Additionally, when the appraiser calls you for clarification or more information about your listing ask them for their email address and email them all of the above-mentioned documents before they start their research. This way you are ensuring
that the appraiser is using the most accurate information regarding the subject property when searching for comparable properties.
In my office, we have always prided ourselves on being proactive by making sure we get in touch with the listing agents and confirm any information we see in their MLS listings. This also gives them a chance to provide us with any new information
or comparables they feel are a good representation of the subject property.
In summary, the above advice is to encourage you to be proactive, to ensure a smooth appraisal transaction, and that the property will sell for the most the market will bear.
Stay safe out there!
Kelly Kellogg, The Appraisal Expert!
The Appraisal Expert
Cert Res RD2727
If you are a Realtor, investor, buyer, or seller you may be asking yourself, what is “bracketing”? When developing a sales comparison analysis, “bracketing” refers to selecting comparable properties with features that are inferior, similar, and
superior to the subject’s features. Most lenders require that appraiser’s “bracket” the comparables included in the appraisal analysis. Realtors are encouraged to bracket their comparables when developing their Comparative Market Analysis’ (CMA). Features
in an appraisal or CMA that are bracketed may include, living area, amenities (i.e. pools and garages), updates, condition, lot size, view and location, just to name a few.
Most lenders require that the appraiser “bracket” the market value in an appraisal. Meaning, that the opinion of market value stated in the appraisal must be “bracketed” by the sales prices and the adjusted sales prices of the comparables.
For example, if an opinion of market value stated in an appraisal is $300,000, then the appraiser should include comparables with sales prices that are below, similar to, and above the market value stated in the appraisal, which means that the comparables
sales prices should range below, similar to, or above $300,000 value.
Adjusted Sales Prices
The sales prices of the three comparable sales listed above are $321,000, $315,000, and $282,000. Additionally, their adjusted sales prices are $300,500, $301,000, and $302,600.
In this example one can see that the market value of $300,000 is indeed “bracketed” by the sales prices of the comparables which range from $282,000 to $321,000. Also, the market value of the $300,000 is “bracketed” by the adjusted sales prices
of the comparables which range from $300,500 to $302,600.
To summarize, the opinion of market value should fall or be “bracketed” within the price range of the comparables. Contrary to popular belief, appraisers do not “average” the adjusted sales prices of the comparables. Appraisers use a weighted sales
Another example is appraisers’ “bracket” the living areas of the comparable sales. If the subject is 2,000sqft, then an appraiser may include a comparable with square footage that is smaller than the subject, perhaps 1,800sqft, square footage that
is similar to the subject, perhaps 2,100sfqt, and square footage that is larger than the subject, perhaps 2,300sqft.
Another item that appraisers’ “bracket” is the lot size of the subject. The appraiser may include a comparable with a smaller parcel size, a similar parcel size, and a larger parcel size than the subject. Ideally the comparables lot sizes would
be smaller, similar, and larger than the subjects lot size. Always keep in mind that “comparable” homes must be utilized. In other words, a comparable is what a prospective buyer of a subject property would consider when looking at similar homes.
As we already learned, “bracketing” is not required; however, most lenders require that the appraiser use this technique in their appraisal reports. This ensures that the appraiser is providing a fair valuation analysis by selecting comparables
that “bracket” the subject. My advice to the rest of the real estate community is, try implementing this on your next CMA and see how much closer your analysis is to the appraised value.
By: Kelly Kellogg, The Appraisal Expert!
Appraisal Experts, Inc. Cert Res RD2727