8-10 It’s Time for Real Estate Investors to Start Talking to Their Appraisers :: The Construction Management Pro

8-10 It’s Time for Real Estate Investors to Start Talking to Their Appraisers

Real Estate Investors, especially if you are working on a short sale, need to talk to the appraiser and lenders to ensure that they receive an accurate valuation of the properties they are selling.

The lines of communication have been down for a considerable period of time, largely as the result of difficulties in interpreting the meaning of the Home Valuation Code of Conduct that was put in place by Fannie Mae and Freddie Mac to prevent builders from having an inappropriate influence on the appraisal process.

Unfortunately, with insufficient information about specific properties and the local marketplace, in a downwardly spiraling marketplace appraisers rely increasingly on short sales and foreclosures to establish value. These properties are often are comparable to because they have been neglected, not updated or otherwise run-down.

New policies from Fannie Mae and Freddie Mac attempt to correct this problem as well as other issues that have emerged in the appraisal process. In addition to providing clarification on communication and the use of distressed home sales as comparables, the guidance also bars lenders from changing appraisal reports and emphasizes the importance of selecting appraisers with appropriate knowledge and experience.

Real Estate Investors should meet with the appraiser at the property and provide direct support with whatever relevant information they can. “It can’t be said enough: communicate, communicate, communicate,” advises Martin Mitchell, vice CEO and vice president of land and business development at Mitchell & Best in Rockville, Md. Noting that “last year we were 180 degrees from here and told we couldn’t communicate. Go out and find the comps yourself; look at the multiple listing service and pull what you can from that to assist in comps.” Mithcell said during an August 4 NAHB Webinar.

“Good information that builders should provide,” said Allen Gardiner, vice president of residential for Jackson Claborn Inc., an appraisal and real estate consulting firm in the Dallas-Fort Worth area, “includes traffic, absorption rates and the sales you are making so that the appraiser can know what the demand is.”

“One of the biggest mistakes builders make is they hide data,” Gardiner said. “Provide all the relevant data, present a low-priced sale if there is one out there and let them know why the sale is low, and show how it is related to higher-priced sales.”

For more information, e-mail Steve Linville at NAHB, or call him at 800-368-5242 x8597.

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