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Chrisman's Corner: The Borrower's Role in the Appraisal Process

What are top JMAC brokers telling their clients about the appraisal process? Some have created a table of helpful information that those refinancing can provide that will make things go more smoothly. Our brokers know that recent regulations have prohibited borrowers from trying to influence their appraiser, but it is important for the borrower to provide information that is important for the appraiser to consider in valuing the home. Communication is critical, as is the quality of that information.

Appraisers are primarily concerned with recent market sales, but it is important for borrowers to remember that this is only part of the valuation. Appraisers usually use three approaches in determining the value of a house. The first is the cost approach (the buyer will not pay more for a property than it would cost to build an equivalent). The second is the sales comparison approach (comparing a property's characteristics with those of comparable properties that have recently sold in similar transactions). And the third is the income approach (similar to the methods used for financial valuation, securities analysis or bond pricing).

JMAC’s brokers know that there are questions appraisers often ask homeowners. Homeowners should save information about any renovations. Borrowers should try and be specific about the upgrades and when the remodeling was done, such as upgrading the AC unit, adding insulation and painting the interior of the house. A refinancing borrower can certainly inform the appraiser of the reason why they bought the home and things about the neighborhood that may attract buyers. The other information about the neighborhood section can be utilized for further explaining any relevant changes to the neighborhood such as parks, streets, land uses, businesses, etc.

The key to this process is sharing enough facts to the appraiser so they can accurately assess the property. Once again, JMAC brokers know that the information provided is in no way intended to sway the appraiser a certain way, it’s merely informational, as this will be pertinent information the appraiser will ask the borrower whether or not it is provided upfront. Showing initiative in data gathering will aid the appraiser’s process and may even speed up their assessment which will benefit everyone involved in the transaction.