A Loos Blog

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I am often asked by brokers what appraisers need to disclose in the appraisal regarding the subject property.  Disclosure requirements for the appraiser are similar to that for brokers; all relevant information that is known to the appraiser must be disclosed.  Brokers must disclose this information to the buyers and sellers, and appraisers must disclose this information to the lender.   

In deciding whether a particular item in a home is important, I often ask myself if I were lending the money on this home, would I want to know about this item.  Most often the answer is yes, and the item and its affect on value must be discussed in the appraisal.

For example; say the home has a worn our roof that needs to be replaced.  The buyer knows about the roof and will perform the repairs at the buyers expense. The listing or selling agent might ask if the appraiser must mention the old roof in the appraisal since the buyer knows about the condition and will make repairs. 

This is a reasonable question and comes up often regarding condition items in the home.  In this example, if the old roof is still in place when the appraiser visits the home, then the old roof and its affect on value must be discussed in the appraisal. 

There are several alternate options.  If the lender approves, the home can be appraised as if the roof were repaired, but the fact the old roof is still in place must be discussed.  However, it is sometimes difficult to have the lender accept previously unknown condition items in the middle of a loan transaction. 

The easy solution is to have the roof repaired prior to the appraisal being performed.  This is becoming common practice; in this market it is much easier to market a home and get a loan if all repairs have been completed.  I always discuss condition issues with listing and selling agents, and often with the home owner and buyer.  This helps me work through the issues and offer solutions that are in compliance with appraisal regulation.

One final item; there is a persistent rumor that appraiser can not talk to the lenders or agents.  This is not true.  Once the appraiser is hired, the appraiser can discuss any relevant information about the physical property.  And, this is a great time for the appraiser to offer solutions to challenges such as the one discussed above.