Apple Appraisal Blog

“Red Flags” have been around for a long time. As long as there have been appraisals, there have been red flags. A “Red Flag” is something in an appraisal that is likely to cause problems for an underwriter or Review Appraiser. Apple Appraisal has compiled this list from various sources and our extensive appraisal and appraisal review experience throughout California. Apple Appraisal, Inc. has been a leader in valuations in California for more than a decade. Staff is always happy to answer questions or help out. Contact us at (925) 313-5900 or www.goapple.com.

Inaccurate or insufficient property descriptions.

This can typically include:
a. Over-reliance on boilerplate
b. Insufficient discussion of recent upgrades, repairs, etc.
c. Incorrect zoning
d. Incorrect neighborhood boundaries

e. Incorrect description of the comparables as they relate to the subject.

Use of dated comparable sales in a declining market. Dated sales can be relevant to the subject, as long as any potential time adjustments are recognized.

Use of distant comparable to support a value. In many areas, even a short distance can result in large swings in value. Look for comparables located across major boundaries.

Use of all larger or superior comparables and adjusting them down to the subject. “Bracketing” is a well tested technique that helps to prevent inflation of values.

Use of “Non-MLS” data. The Multiple Listing Service is critical to the quality of an appraisal. Many times, Appraisers will put “MLS” as a data source, but will not actually use it. Always look for the actual MLS listing number over the comparables.

Wide adjusted value ranges of the comparables. When properly adjusted, the comparables will have a narrow adjusted value range of less than 5%.

Use of dis-similar sales when other more similar sales are available. Net adjustment should be less than 15% and gross adjustments should be less than 25%.

Even in some of the most complex appraisals, it always boils down to the same thing. The Appraiser must use the most recent, the most similar and the most proximate sales. Above all, the appraisal must make sense and the Appraiser should never ask the reader to “Take a leap of faith”. If a review of an appraisal shows any “Symptoms” like those above, the appraised value could be in jeopardy.

What to do if there is a problem with an appraisal. Try and address the problems at the loan originator’s office before it gets to review. If you spot something that makes you say “HHhmmmm”….ask the LO to send it back to the Appraiser for clarification or corrections.

Oh, NO!! My value got cut…I need a rebuttal!

Not to fear. There are ways that an Appraiser can help the process:

1. Be polite and professional. There is never a personal reason that a Reviewer has to question an appraisal. The review is never a personal attack. The rebuttal should not be either.

2. Address ALL of the issues in the review. Not just selected parts.

3. Acknowledge and correct problems and errors in an appraisal with a revised version of the appraisal and a cover letter stating what was changed.

4. Bring more information to the table, such as gridded comparables or other data that helps support the appraised value.

5. Don’t “Re-Hash” the issues the Reviewer dis-agrees with. Restating what was already said in the appraisal will not help the Reviewer.

6. Take the time to communicate in a grammatically correct way. If the Appraiser can’t communicate effectively, the rebuttal process could be jeopardized.

7. Do not create more issues by creating more “Red Flags”. If one of the issues in the review is the use of non-MLS sales, then don’t add more non-MLS sales in a rebuttal.

8. Be direct, concise and efficient. How long an Appraiser has been doing appraisals and other background information is usually not relevant to the matter at hand.

Contrary to popular belief among Appraisers and Loan Originators, Reviewers do not cut values to satisfy quotas, for entertainment value, for revenge, to get business away from an Appraiser or to discredit them or for any other reason except that there is a breach in the quality of the appraisal.

Reviewers apply the same principles of valuation in a review, as is done in an appraisal. If the Appraisal has good methodology and sound conclusions that do not raise “Red Flags”, the appraisal will more than likely get through a review with no major issues.

Apple Appraisal, Inc. is a proven company with an excellent reputation among lenders for quality and the solidity of their appraised values and reviewed values. Apple Appraisal, Inc. provides a high level of personal customer service in the execution of our sound methodologies.

Always feel free to contact us with comments or questions. (925) 313-5900 or www.goapple.com