I attended Chicago Urban League, Chicago Association of Realtors Zoom webinar today on Preparing for an Appraisal. Good questions and answers. Below is the summary. My notes, comments below that. I'll post link to video if, when they release it.
"Preparing for An Appraisal.On October 2nd from 7:00-9:00 PM, join the Chicago Urban League's House and Wealth Committee for part one of a three-part virtual series. During the event, you will gain valuable insights into the appraisal process and learn how to advocate for fair valuations.
Learn from top experts in the real estate field on how to prepare for an appraisal and advocate for your property’s value. Whether you’re a Realtor, Realist, or a homeowner, this virtual event is packed with valuable insights.
Moderated by the Chicago Association of Realtors President Elect and Chair of the Chicago Urban League’s Housing and Wealth Committee, Lutalo McGee, our esteemed panelists include,
President Sanina Jones of the Dearborn Realtist Board (DRB),
President Erika Villegas of the Chicago Association of Realtors (CAR) and
Tiffany Jimenez of the National Association of Hispanic Real Estate Professionals (NAHREP) Chicago
Tom Schurer of Real Valuation Services
This 3 part series represents a joint effort of the CUL, CAR, DRB, NAHREP, NHS, RAINBOW PUSH AND NAACP- South Side to empower real estate professionals and consumers about the appraisal process and how best to advocate for home buyers and sellers to ensure they receive a fair valuation based on industry best practices."
Mary Cummins notes and comments on the meeting.
Question: Can I advocate for my value, for what I think it's worth?
Answer: Panelists said yes. Some said you can offer comps, contract. Appraiser said "Nobody knows a home better than the homeowner. It's a matter of pride."
Question: Why do consumers think they can't talk to the appraiser?
The panelists said you can and should talk to the appraiser about your value and what you think it's worth.
I sent in this comment: "Borrower can give comps, contract, list of improvements ....but can't try to influence the value. "1090.5. (a) No person with an interest in a real estate transaction involving an appraisal shall improperly influence or attempt to improperly influence, through coercion, extortion, or bribery, the development, reporting, result, or review of a real estate appraisal sought in connection with a mortgage loan."
My comment: It's a crime and you will be denied your loan if the appraiser feels you tried to influence their value. Don't say "I need $xxx,000 to get the loan," "the house is easily worth $xxx,000." Feel free to give list of similar homes of the same size, condition which have recently sold in the same area. Don't state a dollar value for fear appraiser may think you are trying to influence.
Question: Can I ask appraiser if they know the area, are competent?
Answer: Yes, but be nice and polite.
Question: Should I communicate with the appraiser in writing or on the phone?
Answer: Put things in writing so it will be included in the work file. Send it to them before the inspection. (My comment. Be polite and factual. Don't try to influence the dollar value).
Roberto Interiano, Lender, then read my comment and others agreed.
Question: Can I order my own appraisal if it doesn't have to do with a loan?
Yes, if you just want to know the value. The bank has to order their own appraiser for their appraisal for a loan.
Question: What should I have ready for the appraisal?
If you are selling, make sure your house is in show ready condition. Have any documents ready for inspection such as the survey, list of improvements.
Question: Should I remove photos from my home?
Answer: Erika Villegas: Yes, remove religious and political items. Remove personal photos because the listing photos could end up on the internet. Remove photos of people because there have been media articles which show some didn't get the "proper value" because of photos of some people.
My comment: All real estate agents tell all sellers to remove personal items, clutter and make sure home is clean and presentable. This is especially important for listing photos, showings. There are a lot of media articles out there about people white/black washing their homes to remove any trace that the owner may be black, Latino... Some articles say the value went up because of, after white/black washing. That is probably not the cause of the value change. It's a false narrative caused by the media, politicians and others.
Lutalo McGee: What about removing personal photos?
Sanina Ellisa Jones: An appraisal is subjective. It's problematic and why appraisals come in lower in our (POC) economy, community. It's because of racism, redlining, discrimination from early 1900's. The maps said risk is equal to blacks. African Americans were marked red, hazardous. It's no longer legal but still subjectivity exists from that practice. Take down religious, political items. I shouldn't have to remove my face because the value could be lower. Homes are devalued based on who lives there. We shouldn't have to do it but we should do it for the value. Values shouldn't be based on photos.
My comment: Appraisers value the home and not the occupants. Home appraisal is a math formula. AVMs use the same formula but appraisers have all the data needed to ascertain value. We generally don't even know race, color of owner, borrower or of the comp homes that sold, are listed. It's a false narrative. That said I agree that you should remove personal items, photos, religious, political items for the listing photos, showings. Buyers want to imagine themselves in the home and not you. They want a blank slate. Homes look bigger without clutter. There are many articles about this online. Appraisers blur all photos that include people, religious items, political items, things such as gun collections, "personal" items... Even if you don't remove your photos, items, we will blur them.
Her definition of redlining is also incorrect. 70% property in HOLC map area D or red were owned by white people. While blacks, Latinos ... lived there whites owned most of the property. Whites were the main ones who had to pay higher interest rates to get the loans. Race wasn't included in all maps. Race was one of many, many factors included in the maps. We use all those same factors today except race. The factors i.e. property age, condition, value, predicted depreciation, income of residents, location near hazardous sites, freeways...are still used today. If you removed race from those maps, they were still just as accurate for risk. Race had NOTHING TO DO with the value or risk. 1935 HOLC program brought lots of money to those areas. Before this there were no loans or they were small and super expensive. Most areas in D zones are now totally refurbished and many are affluent areas. The HOLC program money actually helped. There is a lot of research which proves this but everyone likes to repeat the false stories. I remember when I first heard about redlining around 1983. I also believed that false shit until I did some research and educated myself. Here's an article I wrote about redlining citing the research.
https://mary--cummins.blogspot.com/2021/05/redlining-in-home-loan-financing-mary.html
Lutalo: Should people put an appraisal pkg together?
Sanina: The listing agent advocates for the home value. Have a CMA, floor plan, survey, size, neighborhood details, upgrades, remodel, energy features to show appraiser how listing agent determined the list price.
My comment: The listing agent should already have a property package. Appraisers are open to receiving data. A list of similar sold, listed comparables is good. List of improvements, floor plan if available, survey, energy features... A list of maintenance items is fine but appraisers assume properties are maintained. Maintaining your property doesn't give you extra value.
Appraiser Tom Schurer: Tell the appraiser if there are multiple offers. Let the appraiser know what's happening in the community, developments.
Lutalo McGee: What about new rehabs in area where there aren't any new rehabs sold.
Schurer: You make time adjustments on closed sales, use pending sales.
Lutalo: What do appraisers look at when determining value? What should homeowners do to their homes to prepare?
Schurer: Paint it. It gives a good clean feel. Kitchen, baths drive home values, school district, neighborhood. Nice curb appeal.
My comment: If your home desperately needs a paint job, do it. Just don't expect 100% return on investment. Appraisers look mainly at location, size, bed/bath count, kitchen/bath condition in that order. Don't add a new kitchen/bath for an appraisal. You won't get 100% return on investment in terms of value. It's good to do it anyway if most homes have renovated kitchens, baths and you can enjoy it while you live there.
Question: What if appraiser asks for Tidewater?
Answer: Schurer: It means the appraiser needs help. They can't get value needed. They ask agent for help. Reconsideration Of Value ROV process. The new program looks good. Should be done by end of October and we can talk about it.
My comment: Tidewater: If the VA appraiser believes that the actual home value will be lower than the listing price, they will invoke tidewater. This is simply a heads up that gives the listing agent 48 hours to support the listing price. The agent will then provide similar sold comparables which support the list or contract price. I've found most of the time someone enlists Tidewater, contract/list price was over market value.
Question: How do we navigate AI.
Answer: Schurer: AI will change our world and real estate. RE is a people business. We laughed at early AVM like Zillow. It's real good these days. My future will be reconciling data sets, not giving opinion of value. I will just say why a dataset is wrong for the value of a home (how would he know if he didn't appraise it?) We will still need our smart human brains. Play along. Don't be afraid.
My comment: AI, AVMs are only as good as the data they have. GIGO, Garbage In Garbage Out. AVMs only work with newer, median size, median priced homes in average to good C3 condition. They don't work on older custom homes in fair/vastly improved condition with no view/views on irregular lots... We will still need appraisers for those types of homes.
CEO Urban League Karen Freeman Wilson: We need to know historical context, how the past affects the present. We need to know how to eliminate barriers to home ownership.
My comment: Totally agree.
The next webinar in the series will be with appraiser Chris Posey. Posey will teach us how to read an appraisal report and spot red flags. My coment: Chris Posey is very experienced and knowledgeable. He'll be giving great advice.
Other questions:
"Nina Huggar 05:21 PM
As a homeowner who wants to sale the property to someone I know, is it customary to reach out to the appraiser to come apprise the house myself? (A realtor won’t be utilized for this sale) My thought is, this will provide an accurate number to the buyer. Thoughts?
Cecelia Marlow 05:24 PM
When we talk about appeals, how do we delicately engage the appraiser such that we are not calling into question their competency, yet adding value to the subject property that may come in lower than expected?
Anonymous Attendee 05:25 PM
Is it okay or acceptable for your real estate agent to recommend a praiser?"
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Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.
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