04 Apr Common Appraisal Mistakes That Can Cost You
The success of an appraiser is dependent on the reputation of a competent professional. As appraisers, you need to be diligent and ensure you avoid certain appraisal violations that are quite common. At Arivs, our national appraisal management company is understanding of the mistakes that can leave you in hot water if they are not addressed. Here are common appraisal mistakes that can cost you and how our team can help you avoid them.
Scope Of Work
The USPAP has listed down several key points that appraisers often miss when generating reports. They are as follows:
- Objective, or type of value in appraisal
- Effective date
- Assignment conditions (e.g. extraordinary assumptions, jurisdictional exceptions)
Since all of these elements are the foundation of a real estate appraisal report, avoiding any of the above-mentioned factors could result in an incomplete report.
Another mistake that our national appraisal management company observes is when appraisers make unnecessary assumptions. Appraisers will typically do this regarding specific accessories in the home. Now, why is this an issue? Because, appraisers will sound the alarms on these issues without conducting a thorough investigation. Practices like these will not only hurt the integrity of an appraisal, it will also negatively reflect the appraiser’s ability to do their job.
The Perspective Value
In appraisal reports for properties, the appraiser must include the prospective value of the property. This is the value of the property at the date on which the appraisal was finished. This ensures that the client has the latest info on the appraisal value.
An Incomplete Analysis Of The Subject Property History
Appraisers can have a tendency of avoiding the inclusion of the sale trend of the property up to three years prior, to the current date of the appraisal. The information proves to be useful when an opinion of market value of the subject property is needed.
Excess Land And Surplus Land
Excess land and surplus land are often conflated as the same thing by a multitude of appraisers. The difference between the two is excess land can be sold separately, and its value needs to be reported separately. Conversely, surplus land is part of the property being appraised in the report and its value should always be included in the appraised value of the property.
Reporting Requirements For Residential Appraisals
All residential appraisals must adhere to the guidelines contained in the Unified Residential Appraisal Reports. While not all appraisal reports require these guidelines, they are only needed when working with lenders who abide by the URAR protocols.
Market Area/Inconsistencies With Time Adjustment
In residential appraisal report forms within the Market Area Description section, if you check the box that shows that property values are declining, then a negative time adjustment is required for your comparable sales. Residential appraisers are skeptical of indicating that property values are declining, as lenders and mortgage brokers are letting appraisers know that if the declining box is marked off, the loan will not get approved. The appraiser is held liable for what they write in their report and under law, they cannot be convinced by anyone telling them what to write down.
As an appraiser, if you check the box that indicates property values are on a downward trend, our national appraisal management company will recommend that you use a negative time adjustment for the competitive sales. However, if property values are increasing and if that box is checked, the appraiser should think about using a positive time adjustment for the comparable sales.
Putting Sales Along With Listings
Appraisers can wrongly place listed properties on the sales page. By doing so, it can mislead customers in their appraisal reports. The correct procedure should be to place the listed property on a separate page or in a different tab titled “listings”, which will help to avoid confusion for the parties involved.
Not Submitting Report On Time
This issue highlights the inability of the appraiser to produce and submit a report on time, causing delays in the process. When reports are generated in a timely fashion, it speaks volumes on the level of commitment from the appraiser and national appraisal management company. It’s natural to make mistakes, but appraisers need to make a concerted effort to learn from them, in hopes that it does not become a recurring issue. As the UAD/UCDP requirements take effect, the nature of the mistakes can lead to reports being rejected by the UCDP and could cost appraisers the business they have worked so hard to cultivate.
Assistance From A National Appraisal Management Company
We aren’t going through the dos and don’ts to discredit appraisers. Instead, we hope to bring awareness to the severity of these mistakes. Failure to address them could seek to hurt the reputation of the appraiser(s), especially if the mistakes are made repeatedly. When our national appraisal management company jumps in to lend a helping hand, we always strive to educate our appraisers and lenders, so that these matters don’t come up at all. To get started with service, contact us today!