Reconsiderations of value can be one of the most difficult requests for appraisers to address and often for the borrower to prepare. Borrowers, agents and loan officers do not always completely understand appraisal standards, methodology, or the appraisal process. While this lack of understanding can be frustrating for us as appraisers, we can provide a valuable service during the reconsideration process, while also limiting perceived callus and exposure to complaints.
Peter Christensen and George Dell recently collaborated on a podcast on the topic of Racial Bias in appraising. George is one of the top CE instructors in the country and Peter is one of the most widely respected speakers on appraisal liability issues in our industry.
Peter made a very interesting observation about minute 40 in the video. He was speaking about his analysis of the actual complaints made to HUD alleging Racial Bias. Peter noted that every complaint he was able to analyze was submitted following the return of a Reconsideration of Value request where the Borrower/Buyer felt disrespected in the response to the ROV they prepared. This observation is consistent with the bias complaints we have heard publicly and have fielded at Class Valuation.
The ROV team at Class processes dozens of ROVs every day, and we know that a very busy appraiser will spend more time answering those requests responding to these requests than they generally care to. With that said, in reviewing responses to ROV requests, we often find that appraisers answer questions in a short, efficient way that can easily be perceived as curt and dismissive. We have to remember, the borrower may have spent a dozen hours on Redfin or Realtor.com, talking to neighbors, and exploring other methods trying to identify the sales that were suggested. When the appraiser’s response does not show respect to the effort that the borrower put into preparing the ROV, it will likely be perceived as dismissive.
It is important to remember that the Borrower/Buyer has every right to submit an ROV (Dodd Frank permits the Borrower/Buyer to request clarification, correction or consideration of additional data). It is our duty as appraisers to take their concerns seriously and review the request with an open mind—even if we believe the suggested sales are the furthest thing from a comparable. Also, part of our duty in being unbiased with respect to assignment results includes being open to the fact that we all make mistakes and on occasion will miss an important sale and could be providing an unreliable (or not credible) value as a result.
Once you’ve openly and honestly reviewed the report, if you still believe your value is reliable, a few extra sentences in your response, written with a kind and generous tone, could be priceless in terms of preventing a complaint, protecting your license from sanction reputation from a social tarnish that could be tough to erase.
When ROV sales are rejected, it is most often because of the lack of similarity of the improvements or the proximity to the subject (or even both). The following are a few real examples of curt and dismissive replies to ROVs that could have very easily been more gracious with a small rewrite and could be more professional by reliance on data, analysis, and with reference to the fundamental principles of comparability.
Original ROV Response 1:
xx Worthington Rd, xx Hunters Glen, xx Hunters Glen, and xx Barton Ln were not included as they are located over 5 miles from the subject in different market areas.
Recommended Improved ROV Response 1:
xx Worthington Rd, xx Hunters Glen, xx Hunters Glen, and xx Barton Ln were not included as they are located over 5 miles from the subject in different market areas. While the appraisal does include sales as far as 5 miles distant from the subject, those sales are in areas that generate pricing competitive to the subject and that the typical buyer would consider if they were in the market for a property like the subject. The neighborhoods where the suggested sales are located (north of XX Blvd.) generate sales prices X to Y percent higher than the subject’s neighborhood. With adjustment for the superior location those sales would support the existing opinion of value.
Original ROV Response 2:
The subject property is a semi-detached dwelling and sales provided, xx Sycamore, xx Sycamore, xx N Broad and x N Broad are not comparable and were not considered as they are all detached dwellings. The employment of random sales to justify or support a certain sale price is not considered an acceptable appraisal technique.
Recommended Improved ROV Response 2:
The subject property is a semi-detached dwelling. All of the suggested sales are fully detached dwellings (no shared wall). Fully detached properties have greater appeal in this market due to the lack of a shared wall and so command higher prices in the market, all other things being equal. The market supports an adjustment of $X,000 for the difference between attached and detached dwellings. With proper adjustments the 4 suggested sales would support the appraiser’s existing opinion of value.
Remember, borrowers/buyers generally do not often understand the many nuances that go into determining value, which a seasoned appraiser will take years to get familiar with. A good rule-of-thumb for your response to an ROV would be something akin to what you would provide to a well-meaning but new appraiser trainee that you are mentoring; be kind and educational.
While the appraiser and the borrower/buyer may not always agree on the derived value, the best way to maintain good standing in our profession is to always be data-based in our analysis, provide ample supporting data and insights to our conclusions, and remember to communicate with our clients and borrowers in a professional and generous manner.
