How to Make Sure Your Clients' Properties Appraise

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I had a great meeting with the guys from Zillow, who spent three hours in my office recently. They've got some great things going on, so if you're interested in what's going on and how Zillow is changing the industry, please give me a call and let's go out for a cup of coffee.

Today though, I wanted to talk about why we are paid so much: we are paid not to sell real estate, but to solve problems. How many times do you have problems with a transaction? I've closed on 107 homes this year and I've got 68 pending transactions right now, and I'd say 15 to 20 of them have some problems that we're going to have to work through.

One of the main problems I'm seeing is what to do when an appraisal comes in low. Why are they coming in low? I've actually been a licensed appraiser for 20 years, and I know that appraisers are overworked, tired, may not be familiar with the market, and for the most part have never sold real estate. It's one of my pet peeves; I think New York State should require you to sell real estate for several years to be an appraiser, just to understand how the interaction of buyers and sellers happens.

Look at my career - in the early 90s, I started off working as an appraiser, and within a month of starting, I was out telling banks what a house was worth. I had no clue what I was doing then! Luckily I do now, but oftentimes that's the case; they're overworked and not familiar with an area. When the market starts to improve, they're looking at sales from six to 12 months ago, and it's very difficult. With the banking meltdown, appraisers have become risk averse in my opinion.

They look at comparables in a development and they're reluctant to value homes at the highest price in the development. They like to bracket homes. Just recently I saw a deal that was $10,000 over the list price with $10,000 in concessions. That's a really hard deal for an appraiser to appraise. Generally, if you can, do not structure deals over the list price; it defies logic. Unless you have multiple offers in the first week and you can show the appraiser that the price is bid up, you're going to have problems.

So the question then becomes: How do you get your homes to appraise? When I used to be an appraiser, Realtors would bring me comparables. In the back of my mind, I wondered what they were worried about. "Why is this home not going to appraise?" So you want to be careful when providing comparables to appraisers because it can make them wonder what's wrong with the property. My suggestion is to make the process as easy for them as possible - get them the contract as quickly as possible, send them the comparables if they want them, and get them in the house as soon as possible. Remember, they're overworked. Be proactive and use your CMA.

If I can ever help you with anything in your career, give me a call on my direct line!