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First Western Trust Greenwood Village Mortgage - Appraisal process

Better Understanding the Appraisal Process

These days, more than ever, appraisals can make or break a transaction, or lead to frustration for the parties involved, if not fully understood. Emotional reactions to this objective process can be difficult to avoid, especially if the value conclusion or delivery timelines are not as expected. And while it will never be a “perfect” process, there are three aspects which can help one navigate through conflicts, if better understood by sellers, buyers, and Realtors alike:

• Measurements of square footage can be one of the most frustrating causes of a dispute, as many homes will have multiple measurements taken before the listing (county records and professional services), and these measurements can often conflict with an appraiser’s measurements. For most loan programs, starting in 2022, appraisers will now be required to follow federal ANSI standards (which can be found online), however most counties and others are not used to doing it this way. Knowing the differences can help set the stage for a faster resolution, if there is a discrepancy.

• Most appraisers, especially when inspecting unique or rural properties, will visit a home without completing any pre-emptive research, such as pulling comps, checking county records, or reviewing permit records. As such, it’s not uncommon for an appraiser to visit a property one day, and not have the report completed or delivered for several days afterwards. This is because a bulk of the appraisal process takes place outside of the home, and unless the county record and MLS data is extremely recent and reliable, an appraiser won’t be able to curate the best data without knowing the property inside and out. As such, a lengthy delivery timeline is often a sign of thoroughness – not of laziness.

• Opinions of value differ, sometimes wildly, between an appraiser’s report and that of a buyer, seller, or realtor. However, similar to what makes a “good movie,” or a “great song,” the latter group tends to be more nuanced and subjective than an appraiser’s purely objective stance (in principle). For instance, most Colorado buyers/sellers will agree that there is value in having a south-facing driveway, to reduce shoveling in the winter. But, to an appraiser, there is no way to quantify this in terms of value, and no place on the appraisal to indicate such a feature. Comparable sale data is one of the appraiser’s only tools to derive a value, and sometimes there is just a lack of good data, especially in a rapidly appreciating market.

Understanding these, and other aspects of the appraisal process can help us understand the results better, and hopefully soften the impact of a low value or disappointing report. Either way, at the very least, it can help shed some light on this nerve-racking and often-misunderstood practice; one that is integral to most real estate transactions.

7200+ Transactions & $1.85B personally originated since 2001.

Justin Crowley
Sr. Mortgage Loan Originator NMLS # 378544
First Western Trust – NMLS# 477166 – Equal Housing Lender

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