How do I know my client has received a good appraisal?
This is a great question. I appreciate working with attorneys who ask this question because it’s an indication that they have their clients’ best interest at heart. Those are the attorneys I want to work with.
The question comes from the lack of understanding for the appraisal process. It’s not the attorneys fault as it’s not their area of expertise. In my opinion, it’s the fault of the appraisal industry due to our not educating our clients on what they should look for and expect from their appraisal / appraiser.
To answer the question, I’ve identified below a number of things an attorney can look for to at least identify whether the proper (required) work may have been done by the appraiser.
1. Is the report easy to follow and understand?
Is it reported in a logical format? Is it filled with a lot of industry jargon or acronyms, or is it stated in simple English? Are the conclusions and comments logical?
If the attorney can’t understand the report then chances are, their client won’t either. In this case, the attorney will take more of their time to explain it to their client or request the time of the appraiser to do so.
2. Has the proper analysis been performed and included?
“I’m not an appraiser so I don’t know if it has or hasn’t!” Not a problem. There are a number of quick things you can scan for…
Check for sections which describe the market, market conditions, subject and comparable description and comparison. Is there a section where the adjustments are described in some detail and what those adjustments are based on? Any adjustments MUST BE SUPPORTED. If the appraiser can’t support it then the adjustment shouldn’t be made.
Are there any graphs or charts in the appraisal demonstrating things like market direction, value changes over time, inventory levels, etc? If so, then they’ve probably done the required work to complete the report properly. If not, probably not.
Look for numbers and percentages describing the changes. If they don’t exist in the report, chances are the analysis wasn’t performed.
3. Are the appraiser’s adjustments and conclusions logical and supported? Does the appraiser even provide any logical explanation for them?
You would be surprised how many appraisals I’ve reviewed that provide no explanation for how the adjustments or conclusions are determined. If you have any question as to whether they’re logical or supported, ask the appraiser to provide this information. While it’s not required to provide the supporting data in the report, it IS required to have the supporting data in the appraiser’s work file. Ask them to include it or provide it on the side. If they don’t, they probably haven’t performed the necessary work. Find another appraiser as you’re not getting your monies worth, regardless of the fee, and the final conclusions should be seriously questioned. Your client will appreciate your looking out for them and you will avoid embarrassment with your client, an opposing attorney or the judge if challenged.
Look for contradictions. If the report says the market is increasing then why are there no adjustments for time? If the report says the subject property has an exceptional view then why is there no value given for this? It should be explained in the report. If one section says the market conditions are increasing and another says they’re stable, why the contradiction?
4. Is the report filled with boiler plate and “motherhood and apple pie”?
Again, it doesn’t take an appraiser to figure this out quickly. Scan through the report to see if market data specific to the subject property’s market is identified. Look for identification of the subject market area boundaries, characteristics and amenities.
For example, I recently reviewed an appraisal for an attorney client. The report was 46 pages long, filled with boiler plate and “motherhood and apple pie” and very little relevant information. The market analysis consisted of commentary on the State of California, how many ports, roadways it had; the current population, etc. My guess is it was a copy and paste from some site like Wikipedia. The most specific the report got in analyzing the local market was similar general comments on Orange County, its population and a general comment that values were “increasing”. Nothing about HOW MUCH they were increasing or over what period of time; nothing about the subject neighborhood and its value trends. This was a clear indication that no analysis was performed which was further indicated by the fact that there was no adjustment for time, even though comps as old as 15 months were used in a market where values have increased by an average of 21% in the previous 12 months alone. (Is your home worth the same as it was in mid 2012?). It was a report where the client was about to lose a lot of money due to this lack of analysis.
If you find any of the above issues indicated while looking at an appraisal, discuss it with the appraiser. Ask them for the supporting data from their work file. If they’re unable or unwilling to provide it ask for your money back and get a good appraiser to do a thorough job. It may cost a few dollars up front but may save your client thousands or 10’s of thousands due to an incorrect appraisal. It may also save them additional attorney, appraiser and court fees if challenged. Do you think your client will then appreciate and refer you to their relatives and friends?
If your red flags are waving after scanning the report for these items you may also consider having another appraiser you trust review the appraisal. For a few extra dollars it may save your client thousands and yourself a whole lot of embarrassment.
At Sand Castle Appraisals, we specialize in divorce, estate and bankruptcy appraisals in the Southern California Market. If you have any questions or are in need of an appraisal, please visit us at http://www.SandCastleAppraisals.com, email us at SandCastleAppraisals@cox.net or call us at 949-643-3360.
You can also visit and sign up for our blog at:
We’re always happy to help.
Sand Castle Appraisals, Inc.