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“Appraisal Shock” is when you find out that appraised value is lower than you expected. My advice on how to handle appraisal shock is the same as my advice on what to do after any appraisal is completed. First things first, ask for a copy of the appraisal and read the report. The appraisal is filled with information about the home and the neighborhood and can tell you a lot about what is usually the largest single investment for most people.

Appraisals and appraisal orders involve people and people can make mistakes. So to start with check the basic information.

Is the house in the pictures the property that is being appraised?
Is the address reported the right property?
Is the lot or land size in the appraisal the same as what you expected?
Is the house size or living area the same as you thought?
Is the number of bedrooms and baths what you expected?

The number one cause of appraisal shock is differences in the size of a house and the second most common problem is differences in the size of the lot, both of which can be simple mistakes.

Most residential appraisals rely on comparing recent sales to the property being appraised. These sales should be in the neighborhood or nearby and similar in lot size, living area, room count, design, and quality.

When reading the appraisal check that the sales price, date of sale and other basic information about sales is the same as found in the MLS. Ask yourself if these sales are really similar to the property being appraised. If you are not sure, check the MLS and the public records for sales that you may be a better comparison.

If there is a problem with the appraisal prepare a letter asking the lender to review the appraisal and have the appraiser explain why any problems. The letter should include a list of any problems with the basic information and with the sales used, if any. Provide copies of the MLS sheets with the details of any sales you believe are better and ask that they be considered.

The lender will contact the appraiser to have your questions answered. A reputable appraiser will correct any problems and explain why there may be a difference. If in the end you believe the appraisal has not been done correctly ask the lender if a new appraisal can be ordered or what else can be done.

The sub-prime mortgage meltdown has brought lots of new rules that affect the way we buy or refinance real estate. One of the changes is an increased focus on appraisal quality. Gone are the days when just about any appraisal with 3 sales in the last year or so was a good enough. To prepare an appraisal that will past the new underwriting guidelines an appraiser must be more than just licensed, they need to be well trained, experienced and know the market. At a minimum appraisal reports now include information about the total number of sales, absorption rates, listing and sales price trends, average days on market and other statistical data that reflects the activity over the past 12 months. While appraisals still include at least 3 sales, the new rules require at least two must be within the past 90 days and more often than not appraisals may have to include as many as six comparables to be acceptable.

The new challenges are complicated by the HVCC. Because HVCC has promoted the selection of the lowest fee and fastest turn time many of the best appraisers have left the business or have quit working with lenders. As a result, when the appraiser assigned to do your appraisal calls it is someone you have never heard of. Often these are newly certified appraisers or appraisers from different markets.

So if you end up in this situation these are some tips to help you avoid appraiser shock?

1. Meet the appraiser at the property and be sure the person inspecting the property is the appraiser assigned to do the appraisal.

2. Bring a list of features of the home including any updating or special amenities.

3. Bring a floor plan of the property if you have one.

4. Bring copies of the contract, the legal description or survey and the home inspection.

5. Bring copies of any MLS sheets for recently closed sales that are comparable and support the value.

Yes it is the appraiser’s job to find all the things listed above but remember it is the agent’s job to do whatever it takes to get the deal closed and closed on time. Remember there is a difference between providing information and improperly influencing the appraiser. Don’t bring just the highest sales; bring sales that are really comparable.