G u E S T C O L u M N I S T
By VIC KNIGHT
CERTIFIED GENERAL APPRAISER
VICE-CHAIR NC REAL ESTATE COMMISSION
Can I Talk to the Real Estate Appraiser?
AppRAiSER iNdEpENdENCE iS ThE LAw uNdER
dOdd-fRANk (wALL STREET REfORM ANd CONSuMER
pROTECTiON ACT), ANd ThERE ARE CERTAiN CiRCuMSTANCES whERE A BROkER CAN CONTACT & TALk TO
NAR conducted a survey in September 2012 and found that
11% of REALTORS® had a contract canceled because the
appraised value was lower than the contract sales price, 9%
reported a delay in the scheduled closing and 15% indicated
the purchase price was renegotiated at closing due to the
appraised value being lower than the original contract sales
“The requirements of subsection (b) shall not be construed
as prohibiting a mortgage lender, mortgage broker, mortgage
banker, real estate broker, appraisal management company,
employee of an appraisal management company, consumer, or
any other person with an interest in a real estate transaction
from asking an appraiser to undertake 1 or more of the
(1) Consider additional, appropriate property information,
including the consideration of additional comparable
properties to make or support an appraisal.
(2) Provide further detail, substantiation, or explanation for
Although showings are rising, contracts
are being written, and purchase prices
appear to be increasing, appraised
values sometimes do not match the
contract price. You have a good offer
on your listing and believe you have
provided the seller with competent
information from your CMA, which
properly prices the property to sell at
the most probable sales price for the
subject property in the current market. Then, the appraisal comes back
lower than the original contract price.
You have been told that you cannot
talk to the appraiser under any circumstances because it is against the law.
Well, that is simply not true. There is no
prohibition against real estate brokers contacting
appraisers about a mortgage loan appraisal when they have
the appraiser’s value conclusion.
(3) Correct errors in the appraisal
Although this language does
address the issues that brokers can
ask an appraiser to consider, note
that it does not allow a full blown
“conversation” or “discussion”
with the appraiser. The implication
is that the flow of information is
essentially one-way, from the broker
to the appraiser. A broker can NOT
anticipate there will be any substantial “conversation” or “discussion”
about the appraisal or its
Dodd-Frank does not provide for any other
Brokers are allowed to contact appraisers and provide additional property information, including a copy of the sales
contract for purchase transactions. Brokers may not intimidate
or bribe an appraiser and an appraiser may not disclose confidential information about the appraisal or the appraisal assignment at any time. The language of Dodd-Frank is specifically
form of communication between the broker and the
Appraisers Are Subject to Increased Regulation
The housing market is certainly complex and so is the
appraisal process. The national housing market downturn
brought numerous regulatory changes to the real estate
industry, including the entire appraisal process and those
who provide appraisal services. The Dodd-Frank Wall Street
Reform and Consumer Protection Act was signed into law
by President Obama in 2010.
Dodd-Frank “sunsetted” the
Home Valuation Code of
Conduct (HVCC) and required
the Federal Reserve to amend
the appraisal independence
rules. The interim final rule
became effective April 1, 2011
and applies to all consumer
credit transactions secured by
a consumer’s principal dwelling. Fannie Mae and Freddie
Mac servicing guidelines now
reflect this rule. In addition,
state laws and regulations
require appraisers to comply
with the Uniform Standards of
Professional Appraisal Practice
Dodd-Frank contains provisions about the function and
regulation of appraisal management companies (AMCs).
AMCs remove the administrative processes of appraisal management from the lender’s control. For a fee, the AMC recruits
appraisers, contracts with them
to perform appraisals, manages
the appraisal process, pays the
appraisers and reviews their
work. The regulations prevent
mortgage brokers or real estate
agents from selecting or paying
an appraiser if the appraiser’s
report will be used for lending
purposes. Based on DoddFrank, AMCs have sometimes
instructed appraisers to significantly limit their interaction
with interested parties to the
transaction. This has caused
much of the confusion on what
type of contact and talk can be
10 Tips Brokers Can Utilize to Help the Appraisal Process:
w Don’t put restrictions on the appraiser in making an appointment to inspect
the property. If your MLS utilizes an appointment system, use it. You will be
notified of the appraiser’s site inspection.
w If an appraiser calls, be responsive and provide as much information as needed. Return the call promptly even if your listing has closed. You are the expert
source of info on your listing, and the appraiser may not be aware of the hidden
features or upgrades.
w Be as descriptive as possible in MLS about your listing. Include ample photos
w Don’t use or reference tax records as your “source” of information. Do the
proper leg-work on your listing; it builds significant long-term credibility among
your peers and local appraisers.
w Distinguish “Above-Grade” Living Area from “Below-Grade” Living Area in
your MLS, particularly the quality of finish in “Below-Grade” Living Area, Attics,
Bonus Rooms, Decks, Porches, etc.
w Provide an “Appraisers Package” in advance and have it available at the
property when the appraiser is inspecting the property, or meet the appraiser
at the property so you can answer any questions, inform them of the unique
features of the property or neighborhood, and allow the appraiser the space
and time to complete their inspection (Appraisers Package could include: Plats,
Surveys, Deeds, Covenants, HOA Documents, Floor Plans, Specifications,
Inspection Reports, neighborhood details, recent similar quality comparables,
detailed list & dates of upgrades and remodels, photos, etc).
w Provide a fully executed copy of the purchase contract, including all addenda.
w Explain to the seller or buyer that the role of the appraiser is not to confirm
the sales price but to provide the lender an independent opinion of the value
of the underlying collateral. Provide the seller or buyer a copy of the brochure
developed by The Appraisal Foundation entitled “A Guide to Understanding a
Residential Appraisal,” available for download at http://www.realtor.org/appraisal/aguide-to-understanding-a-residential-appraisal – 2013-03-28.
w REALTORS® and consumers can be present during the appraisal inspection.
Make sure all parties allow the appraiser the space and time to complete their
w Make sure the property condition (inside and outside) is the best possible for
the appraisal inspection, and inform the seller that interior and exterior photos
will be taken by the appraiser.
(continued on page 10)
INSIGHT May 2013 9
For many years the National Association of REALTORS®
has spoken out for an “independent appraisal process” for
licensed and certified appraisal professionals. In 2012 NAR
adopted the “Responsible Valuation Policy” outlining NAR’s
position on valuing and pricing property. This NAR Policy
can be found at http://www.realtor.org/appraisal/responsible-valuation-policy.
What Can Appraisers Discuss After the Report Has
Been Sent to the Lender/Client?
Once an appraisal assignment is completed and sent to the client, the Uniform Standards of Professional Appraisal Practice
(USPAP) prohibit an appraiser from discussing the results
of the report with anyone other than the client who ordered
the appraisal, or parties designated by the client. In order to
ask an appraiser to correct errors in the appraisal report, a
broker must use the client, typically the lender, as an intermediary. The client may choose to provide additional data to
the appraiser for consideration. The language from USPAP’s
There are many things brokers
and sellers can do to put the
property that is the subject of
the appraisal in the best position
possible for the most favorable
appraised value outcome.
“An appraiser must not disclose 1) confidential information; or
2) assignment [appraisal] results to anyone other than:
w persons specifically authorized by the client;
w state appraiser regulatory agencies;
w third parties as may be authorized by due process of law; or
w a duly authorized professional peer review committee except
when such disclosure to a committee would violate applicable
What Can Brokers Do to Help the Process?
First, recognize that the appraiser’s function is to develop an
independent and impartial opinion of the value of the property for the lender (the appraiser’s client) to determine what
the value of the underlying collateral is for the lender to base
their financial lending decision on.
There are many things brokers and sellers can do to put the
property that is the subject of the appraisal in the best position possible for the most favorable appraised value outcome.
The most important is providing as much accurate, current
and detailed information on the subject property as possible.
Most of that information can easily be provided through the
local MLS, which is not only beneficial to the appraiser of the
subject property, but equally beneficial when the appraiser
uses that same information as a future comparable. Potential
homebuyers also benefit from the information during their
search process. This is the first opportunity for the listing
broker to provide accurate, current and detailed information about the subject property as well as the broker’s unique
knowledge of the local real estate market through supporting
information and documentation on the subject property.
An example would be when the subject property has extensive “energy efficiency” amenities, “green” or other similar
“high-performance” characteristics. It would be appropriate that the lender is informed, in advance, that a properly
qualified appraiser who is proficient in appraising “green”
properties should be selected. Some MLS systems provide for
energy efficiency details and certifications that can be incorporated directly into the listing information as an integral part of
the listing data. Take advantage of this feature.
Another thing brokers can do easily to help the overall
appraisal process is to incorporate as many photographs as
the local MLS system will allow. Include not only a front
photo, but also a rear photo and possibly a street or other
neighborhood amenity photo, in addition to photos of all
the major rooms and all the special features of the property.
According to NAR, those listings with more detailed photos
of the property sell much more quickly than those which have
few or no photographs. An accurate, detailed MLS listing
is vital to all interested parties, including the appraiser. The
more details the better.
NOTE: As of March 1, 2013 there were 3,498 licensed and
certified appraisers in North Carolina.
NOTE: The Appraisal Subcommittee (ASC) of Congress has
been charged with implementing the Consumer Financial
Protection Bureau (CFPB), which gives consumers an information resource to help complainants determine the appropriate
legal authority to receive their complaint involving allegations
of non-compliance with USPAP or appraisal independence
requirements. Access the Hotline at http://refermyappraisalcomplaint.asc.gov/ or by calling toll free (877) 739-0096. v