Saturday, January 28, 2023 | The Latest Buzz for the Appraisal Industry

When in Doubt, Give the Homeowner a Shout

Last October, I left my office to perform an exterior inspection for an appraisal in Mauldin, South Carolina. COVID-19 Exterior Assignments and Desktop Assignments were then the norm. The subject appeared to be a normal ranch house and had no signs of updates from the exterior. I had a former sale from six months prior in MLS, which also showed an interior without updates. I deemed this secondary information – along with all tax records and CRS data – to be valid. I determined that I had enough information to form a credible result for my reconciled value. I headed back to the office.

A day after the submission, I received a phone call from the homeowner. The non-professional language that met my ears (and this is coming from a former U.S. Marine) and volume of his voice (which could rival a Boeing 747 taking off from the tarmac) led me to quickly gather that he was a little perturbed. It turned out that the house’s interior had been completely remodeled in the six months after the sale, which increased my reconciled value dramatically.

Unfortunately, I’ve experienced a few situations similar to this during my career:

  • A luxury “barndominium” that looked like a storage building from the outside.
  • A converted two-car garage turned media room, increasing the GLA of the subject.
  • A historical burial site in the woods behind the improvements (This one actually didn’t add value; I’ve seen Poltergeist.)

Fast forward to today, and we’ve all heard the news. In late October, the FHFA announced that desktop appraisals are here to stay. With more access to relevant data, desktop and exterior appraisals can now be weighted more than they were in the past. COVID-19 provided the appraisal industry a mandatory test market for these assignments, and it seems that GSEs and lenders are now considering these types of reports credible.

However, it’s important to keep in mind that desktops and exteriors are only as accurate as the data that is collected and analyzed. Secondary data such as MLS Listings, Tax Records, and CRS Records that are months (or even years) old on the effective date of an appraisal can be compiled to form an accurate portrayal of the quality and condition of what’s contained within four walls. Although, they are simply no match for primary data – current photos, interviews with homeowners, and interviews with real estate agents. This data is minutes old and forms a truly accurate opinion of quality and condition of the subject. When gathering data to form an opinion of quality and condition of a subject property in the age of desktops and exteriors, remember this rule:

“When In Doubt, Give the Homeowner a Shout.” (That’s not really a rule. I completely made it up, but it rhymed.)

Looking back to the example from October 2020, my biggest mistake in the case of the foul-mouthed, bullhorn mentioned above was that I never contacted the homeowner to ask about improvements relative to my secondary data. The lender actually requested that I not contact the homeowner at the time of the assignment. If I had contacted him, I would have quickly realized that my data was misleading, and a full inspection and 1004 would be needed. This would have saved time, money, and the two Advil I had to take after my slightly unpleasant conversation with Gilbert Gottfried. With desktops and exteriors in full swing, it’s a mistake I won’t let happen again.

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Jeff Bradford

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