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How to Handle a Low Appraisal: An Interview with David Messick of Messick and Company

By David H. Messick

Tell us a little bit about your company and its foundation.

Our company was founded in 1982 by my father Harold Messick who was the chief appraiser with a local savings and loan (1st Home Federal) and they were closing their appraisal section and offered to let him start his business in a vacant space in the bank and give us all of their appraisals etc. Now 32 years later we offer appraisals, property management and brokerage services for clients all over the US.

Can you quickly walk our viewers through the appraisal process?

The appraisal process involves several stages. The 1st step is gathering information on the property i.e. tax card, mortgage information, plats and deeds, prior mls or current mls information, property disclosure documents- when available, etc. Next the property is inspected. The property inspection allows the appraiser to take photographs, measurements, and gather details on the features of the property.

Next the market data for the property is reviewed from a variety of sources. We use Tempo/Triad MLS for most residential data and also use Costar, Karnes Research, and Loopnet for commercial data.

Next three approaches to value can be considered for every report (Sales Comparison Approach which compares other similar sold homes/commercial properties to your property, Cost Approach which shows the cost to build a reasonable substitute for the subject and then depreciating the improvements due to age/wear/tear and adding the land value for a total value VIA this approach, and finally the Income Approach which is based on the income the property is receiving or could receive if used as an investment/rental property and this income is turned into value using the "capitalization process" which uses capitalization rates from the market etc.

Finally a summay of all approaches is made and a final estimated value is projected. It is critical for property owners to have their properties in "showing condition" typically when getting an appraisal because the appraisers opinion of the condition of the home and ongoing maintenance on the date of the inspection will be reflected in the report. FNMA and all banks/mortgage companies now also REQUIRE interior photos which is good for owners and appraisers since this is "proof" of the condition/décor/maintenance of the property. Clean up and spruce up as much as you can before an appraisal or listing your home or other building as the buyers in todays market are very demanding and typically have a lot of properties to view in any market.

What is a "low appraisal" and how does it differ per house/neighborhood etc.?

A low appraisal is somewhat of a bogus term, i.e. why do you think its "low"? Did you overmortgage your property and needed more equity to refinance? Did you not look at the comps in your neighborhood before listing it too high "hoping it would appraise during a listing? In other words, if you are pro-active and consult with a legitimate real estate broker or appraiser about the "potential" comparables and value range of your property you should not "fear" a "low appraisal".

Another old wives tale is "appraisers always hit the number" etc. If I had a $1 bill for everytime I've heard this or seen it in the media, I'll be a multi-millionaire ! A lot of times the value is just "barely making" a projected sales price and the new FNMA and Frank Dodd regulations and guidelines have made appraisals VERY difficult especially with data in a given market is not perfect or is very limited. The best way to avoid a low appraisal is to educate yourself about the value of your home and ask a certified appraiser or realtor/broker before jumping in the game.

Why would someone receive a lower appraised value than assumed?

Most homeowners have a "number" in mind which is more than likely based on what they "need" in order to refinance or be able to move out to another home etc. Base you value on FACTS and not on "WHAT YOU NEED" to make a deal work and you'll always have success!

What advice do you have for someone who needs to improve their appraised value?

Check your neighborhood or market segment sales and competition to see how you measure up? Are the comps updated with renovations/ new kitchens/new flooring/ updated HVAC? Do you have these same upgrades? Do you still have that 1970's wallpaper in several rooms? This is the best way to improve your value. Kitchen and Baths are the most popular market renovations (i.e. bang for the buck) and outdoor living areas are also becoming more important for todays buyers. Also again perception by the market is important whether you are selling or having a property appraised for a mortgage etc.

Is it beneficial to enlist another appraiser to see if they list your home's value higher?

This is up to a buyer/seller/homeowner. If you do this, make sure the "other appraiser " has the same credentials of the original appraiser and experience in the market. Everyone can be a form filler but every appraisal is not equal due to the various expertise of the appraisers in the market which can vary significantly. Banks/ Mortgage companies pick appraisers for each assignment randomly now due to the new regulations which have been in effect for years. Most banks/mortgage lenders can't order a new appraisal "just because the value did not work" and most times borrowers will be required to go to a new lender and start a new loan process to get a "different" report which may or may not be warranted. Each situation is different. For example, if an FHA appraisal is done on a property for HUD, it stands as the only available appraisal for a loan until it expires in several months etc.

What are some consequences of receiving a low appraisal?

Low appraisals result in stress for mortgage brokers, property owners, buyers, and believe it or not APPRAISERS who are often seen as the "bad guy" when in fact they are the MOST regulated industry in real estate right now and have to follow strict USPAP and Ethics guidelines . Sometimes disgruntled parties turn in appraisers to the Appraisal Board if they don't like their value etc. Homeowners should know however this will go no where unless an appraiser is proven to have violated Standards of Professional Practice or Ethics. Again, its best to avoid low appraisals by educating yourself on your market or finding an appraiser or broker who is educated on your market.

What is the best way for people to reach you or your company?

People can visit us on our new website at www.messickinc.com which has information on our staff and history as well as images of some of the properties we have appraised in recent years as well as an online order form for appraisals and a contact form.

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