July 25, 2024 – Data is crucial in the appraisal process. Clear, concise, and verifiable data ensures accurate appraisal reports.
Where do appraisers obtain this data? They rely on the multiple listing service (MLS). The MLS is typically the only source in states with non-disclosure laws, where sales prices aren’t included in the public record. Even in disclosure states, the MLS is generally the most accurate source.
But what happens when data is missing or inaccurate?
Today’s significant topic among appraisers is the potential communication gap between agents and appraisers due to the proposed settlement between the National Association of REALTORS® and class-action plaintiffs representing sellers in residential transactions. Below are some bullet points for the things you should know.
- Practice Changes and Communication:
- Upcoming practice changes will prohibit offers of compensation on MLSs.
- It’s crucial for brokers, agents, and appraisers to maintain open communication.
- Importance of Data:
- Data is vital for accurate appraisal reports.
- Clear, concise, and verifiable data is essential.
- Data Sources for Appraisers:
- Appraisers rely on the multiple listing service (MLS) for data.
- In non-disclosure states, MLS is often the only data source.
- In disclosure states, MLS remains the most accurate source.
- Impact of Inaccurate or Missing Data:
- Inaccurate or missing data can complicate the appraisal process.
- The proposed settlement between the National Association of REALTORS® and class-action plaintiffs may lead to a communication gap between agents and appraisers.
- New Practice Changes:
- MLS participants will be prohibited from using MLS to communicate offers of compensation for buyers’ representatives starting August 17.
- This change raises questions about how appraisers account for compensation in valuations.
- Appraisers need details of transactions, including compensation, for accurate comparisons.
- Communication During Appraisals:
- Compensation on the subject property will be available through the sales contract.
- Appraisers will need to ask brokers and agents about compensation for comparables.
- It’s essential to respond quickly to appraisers’ questions.
- Permissible Communication:
- Agents and appraisers can communicate during the appraisal process under Fannie Mae’s Appraisal Independence requirements.
- They can discuss many aspects of the process except the property’s value.
- Data Accuracy for Comparable Properties:
- Appraisers need detailed information about comparable properties, including:
- Exterior buildings (e.g., casita, pool house, converted garage, ADU).
- Rooms in each area with labeled photos.
- Enclosed patios with labeled photos.
- Laundry rooms with labeled photos.
- Sides and rear of the house with photos.
- Appraisers need detailed information about comparable properties, including:
- Helpful Data:
- Additional data and “appraiser packets” aid in the appraisal process.
- Photos and labeled descriptions help determine factors influencing sales prices.
- MLS Data and Mortgage Lending:
- Accurate MLS data is crucial for the mortgage lending system.
- Analyzing closed sales data is essential for future home sales.
- Third-Party Review:
- Third parties may review and challenge appraisal reports.
- Clear and accurate data helps appraisers explain contributory factors to lenders, ensuring a smoother process.
- Further Information:
- Refer to NAR’s Residential Appraisal Process—FAQs for Agents for more details.
