Every appraiser, whether new to the profession or an experienced veteran, wants to please their client and acquire repeat business. But, at what cost?
Typically when an appraisal request arrives, a value for the subject is supplied. This is either in the form of a contract price for a property being sold or an estimated value for a re-finance. The appraisal assignment begins with the underlying question who dictates the value, the client or the market.
The market determines the value. Appraisers estimate value based on analysis of the market data. How an appraiser conducts the data search undeniably affects the subject's valuation. Market data should be scanned for the most recent sales of properties that are the most similar to the subject in size, style, condition, and utility. Often this research will confirm the value estimate provided by the client, but frequently it will not.
When good comparables fail to support the value needed, some appraisers choose the "low road" and look for sales data that will provide the support needed. Utilizing available market data appraisers will always have the ability to locate sales (not comparables) that confirm a higher value for the subject than is properly supportable. However, demonstrated appraisal skill comes from knowing how to use the sales data effectively and accurately so that true comparable properties are identified and used to provide a supportable and defensible estimate of value.
Yes, sometimes it hurts financially to do the right thing and produce a valuation that is lower than was expected. Clients may throw a tantrum and claim your services will not be used in the future. But your reputation and integrity stay intact. Often, the client gains respect for your professional actions and opinions. They learn that your assessments are justifiable and sound and applauded by underwriting.
In the short run you may be anxious to please your clients or gain new ones. However, appraisers should certainly be aware that the state of Georgia is on the warpath. Its goal is to prosecute unscrupulous appraisers. Take some time to review the growing list of appraisers whose licenses have been pulled by the Appraisers Board. This action of inflating values could not only result in the loss of your appraiser's classification, but jail time as well! So don't get caught up in the rush to make a deal to benefit the mortgage broker or loan officer or whoever your client might be. Deal or No Deal? Perhaps a better question is License or No License?
Next issue - Tips for spotting mortgage fraud and flips.