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How to Handle a Low Appraisal: An Interview with Kelley S. Hopkins of Aztec Appraisal Services

Tell us a little bit about your company and its foundation.

Appraising is a second career for me. My previous jobs had been in human services, doing case work and directing various programs. After a number of years I was burning out and my sister, who was an appraiser in central New York, suggested that I might like appraising. I resisted for a while but then one day when I was back in NY visiting family, she said "Come on" and took me out on the road with her to do an inspection. It was interesting and didn't feel like work and I thought, "Hmm, maybe I could do this." Of course the inspections are just one small part of an appraisal, but as I learned more about it I found that the work really suited me. Every day is different, even though the process is always the same. I meet a lot of different people, see a lot of different houses and towns, and get to solve some interesting appraisal challenges.

I did my training in New York with my sister and it took me about three years to become licensed. After I completed the required coursework, I spent 3-5 days every week in NY doing appraisals and then the rest of the week in Massachusetts where I lived and still worked on a part-time basis at my human service job. I received my license from New York State which has reciprocity with Massachusetts, and so I was able to also get my license in Massachusetts. I immediately started my own business (Aztec Appraisal Services) in Massachusetts and was very fortunate to have started just as the market was taking off on the first of several "up" cycles that have occurred in my tenure as an appraiser.

What are some of the services your company provides?

I am a certified residential appraiser which means that I can appraise any type of residential property up to and including four units. (single, two, three and four family homes, condominiums, mobile homes). My appraisals are used for purchases, refinance, tax abatement, divorces, estate settlement, PMI elimination, employee relocation and For Sale By Owners looking to set a fair market price. I also do appraisal reviews.

I am certified as an FHA appraiser and recently became an Accredited Green Appraiser in recognition of the increasing number of high performance ("green") homes and their growing influence on the housing market.

Can you quickly walk our viewers through the appraisal process?

There are a number of steps to completing an appraisal and the purpose of the appraisal will dictate the scope of work for each assignment, but typically it boils down to inspecting the property, research (assessor data, sales and listing history, zoning compliance, market trends), selecting and inspecting comparable sales, adjusting those sales where they differ from the subject property and finally, reconciling the final value.

An appraisal inspection is not as thorough as a home inspection, but I do walk through the entire house (including the basement), poke my head in the attic, and turn on water, lights and heat to be sure they are on and operational. An appraisal inspection will focus on the overall quality and condition of the subject as well as identifying those amenities which may add value to the property: garages, fireplaces, decks, sheds, porches, central air, finished basements, etc. I will ask the property owner about recent improvements, be on the lookout for any evidence of failed systems, leaks or deferred maintenance, take photos of the interior and exterior, and measure the house. The information gleaned from the inspection, taken together with information I have researched (permit histories, site size, zoning, ownership history) provides the basis of comparison to the comparable sales.

A comparable sale is ideally a property which has sold recently (the more recent the better, but usually not older than 12 months), shares similar finished living area, design, utility, age, quality, condition, room count, neighborhood (or from a competing neighborhood) and amenities. You always want to compare "apples to apples" when you can, but it's very rare to find an identical property that just happens to sell at the right time, so usually adjustments must be made to bring it more in line with the subject. A simple example would be if the subject has a two car garage but the comparable sale has no garage. An adjustment would be added to the sale price of the comp to reflect the market value of having a two car garage. (If the comp had the garage and the subject did not, then the adjustment would be subtracted from the comp's sale price.) Adjustments may be made for differences in any or all of the characteristics above if the market warrants it.

For the sales comparison analysis the best, most similar and hopefully most recent sales are used. They need to be "arms length sales" which means that they have been exposed to the open market for a reasonable amount of time and that neither the buyer nor the seller is acting under any kind of duress or pressure to buy or sell. This would typically exclude sales between friends and relatives, foreclosures, relocation sales and short sales. Once the adjustments have been applied to the comparable sales, the appraiser reconciles the adjusted values to determine the subject's market value.

What is a "low appraisal" and how does it differ per house/neighborhood etc.?

I have to take exception to the term "low appraisal" because it implies that there is a correct value that the appraiser is supposed to "hit." A homeowner /buyer/seller usually has a value in mind that they hope for, or need, in order to make their deal work. I have been in that position when purchasing my own home. But the value of a property is dependent upon what's happening in the market and by the sale prices of those comparables that I discussed above.

Why would someone receive a lower appraised value than assumed?

The reason that appraisers are engaged to determine value is that appraisers are supposed to be objective about the property and the appraisal process. It's very difficult for homeowners/buyer/sellers to be objective. Sometimes they may expect more value in something that is very sentimental or meaningful to them, but doesn't really have a quantifiable market value. It may be an over-improvement (like a commercial grade garage that is as large as the house itself), or a home remodel that dad did by himself but which isn't up to current market expectations, or a hand painted mural in the dining room by an artist friend who may be a good artist but isn't famous enough to warrant a bump in the home's value. Sometimes a homeowner will see that the house across the street sold for $400,000 and expect that theirs will too. But they ignore the fact that theirs is a 30 yr old, 1000 sq ft ranch and the one across the street is a 5 yr old 3000 sq ft colonial. (Remember "apples to apples.")

This is not to say that sometimes a house might be worth more than the appraisal would indicate. There are three primary reasons why this might happen. First, the appraiser was not familiar with the market. Since the last mortgage meltdown there have been a number of regulatory changes which have made it much less likely that your house in Easthampton will be appraised by someone from Boston, but it could still happen. There isn't anything illegal about it, but that appraiser needs to do due diligence and be sure that s/he learns all they need to learn about the Easthampton market before completing an appraisal there. Second, and more likely, is that the appraiser didn't know everything s/he needed to know about the house. Did the lender order a "drive-by appraisal," where the appraiser does not do an interior inspection of the property but just looks at it from the street? If so, then s/he might not know about the kitchen remodel you just finished, or the new addition off the back that added a bedroom and bath. If a "drive by" appraisal was done, you could ask the lender to have the appraiser come back and inspect the interior. The third reason might be that the subject property is very unique in some way and in a market with absolutely no recent sales which could possibly be considered as purchase alternatives to the subject. Those are the really challenging assignments. In those cases the appraiser may have to extend the search for sales to several towns or even the whole county and may have to go back beyond 12 months for closed sales. (It is important to know that these cases are very rare and not what I am assuming you are talking about when you ask about a low appraisal.)

What advice do you have for someone who needs to improve their appraised value?

If you're worried about it, the time to improve your appraisal value is before the appraisal is done. Bring in a friend or someone who can be objective about the property and have them look at it through the eyes of a prospective buyer. Is there anything that's broken, especially worn, or dirty? Is the yard cluttered with junk? When was the last time you painted-- are there any rooms or the exterior that need a fresh coat? Are there any odors in the house (mold, mildew, animals, smoke)?

I don't do a white glove test on my inspections and I expect that the homes I enter are lived in and will look like they are. A little clutter and less than perfect housekeeping aren't going to hurt you. But if there is an obvious sense of neglect or it has been a very long time since anything of significance was updated, then you might take a hit on the adjustment for condition.

If you're looking for a bigger bang for your buck and want to increase your home's value, the best things you can do are update the kitchen and baths, add a bath, or add some additional living space (finish the attic, convert the breezeway, put on an addition or, to a lesser extent, finish the basement). Whatever you do, be sure to get a permit for the work. Replace things when you need to (furnace, hot water heater, roof) but replacing them just to replace them won't necessarily bump up your value. Keep up with regular maintenance. Energy and high performance are becoming more and more important so getting an energy audit and making the recommended updates is a good idea too. Depending upon your market, we're not necessarily at a point yet where this will have a specific market value, but that day is coming and in the meantime you can benefit from some savings on your own energy costs. It's important to remember that you will not get a dollar for dollar increase in your value for any improvements that you may make, but those I mention above (kitchen, baths, adding living space) are among the best in returns.

Is it beneficial to enlist another appraiser to see if they list your home's value higher?

Not really. Among those regulatory changes I mentioned earlier is one that attempts to limit the influence a lender has on the outcome of the appraisal process by putting restrictions on who orders the appraisal. This also pretty much ensures that a lender can't use an appraisal that is just handed to them (especially by an interested party such as the homeowner). The best thing to do is to be sure that the appraiser had all of the information that they needed to have. Check the appraisal for accuracy (are the measurements correct? the number of bathrooms and garage stalls? Did the appraiser note the shed and the fireplace and the enclosed porch? These may have differing value depending on your market, but should be noted at least.) Was the appraiser aware of recent improvements, did the appraiser inspect your entire house? There might have been a sale that the appraiser wasn't aware of for some reason. Ask your realtor to see if the appraiser missed any relevant sales (once again, "apples to apples") and don't be afraid to ask the lender to ask the appraiser to consider them. Sometimes the appraiser will have considered a sale but decided it wasn't a good enough comp. But sometimes there will be a sale that was overlooked and if it's a good one, most appraisers will be happy to reconsider their results.

One other thing that most people aren't aware of is that, in situations where a bank is involved, the appraiser's client is almost always the bank and the appraiser is not allowed to discuss the appraisal with anyone but the client. Once I leave your house after my inspection, I can't tell you anything about the appraisal-- not even what the final value is. If you have questions about your appraisal you need to direct them to your lender, who will direct them the appraiser. Depending on the purpose of the appraisal, if it's not bank- involved and you hire the appraiser yourself, then you are the client and you are free to speak to the appraiser directly.

What are some consequences of receiving a low appraisal?

Again I have to take issue with the term "low appraisal." A lower than expected value can have some consequences depending on the purpose of the appraisal. If you are selling or buying a house and the value comes in lower than the list or offer price then you can always re-negotiate the price. You might choose to meet the sale price anyway (that's up to you) but make a larger down payment and borrow less. A seller may decide to take the house off the market until values increase or s/he makes improvements which will help improve the value. An appraisal is an objective opinion of value. Ideally we help people to reach a fair accommodation in their dealings, but ultimately it's up to the parties involved in a transaction to decide what they want to do.

What is the best way for people to reach you or your company?

Because I spend so much time on the road, email is really the best way to get me. I can check email from the road and can respond throughout the day or night without worrying that I'll interrupt you at dinner or when you're putting your kids to bed. My email is . You can also visit my website at If you're old fashioned and want to hear an actual voice, feel free to call me at 413-527-8619.

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