Appraisal Form "GOTCHA" Traps

Editor’s Note: Author Beverly Bayer, SRA says that lenders, fed up with shoddy appraisals, are laying traps for unsuspecting appraisers. Fannie Mae has said as much, indicating that one of goals with the new forms is to make appraisers more accountable for their work. In this story, Bayer exposes several “gotcha” traps designed to snare the careless.

Appraisal Form “GOTCHA” Traps (from an appraiser who knows)

by Beverly A. Bayer, SRA

Falling home prices in combination with years of increasingly risky loan products leave many experts predicting a major jump in foreclosures. Although loan brokers push appraisers for inflated values and misrepresentations of the properties being appraised, it is our appraiser necks that are on the line. I sure wouldn’t want a questionable appraisal sitting in the file when a loan goes bad.

For their part, lenders are tired of appraisers slapping together reports with limited research and analysis. The following “gotcha” traps are their deliberate attempt to catch the most lazy and dishonest among us. Don’t get caught up along with them! Here are a few “Bayer” traps that I have learned to steer clear of.

Common Gotcha Traps
If you are doing a refinance and miss reporting a listing for sale of the property and manage to arrive at a value significantly above the recent list price- Gotcha!

With a purchase, the report is asking you to discuss the marketing of the subject property and to address such things as how long the property was listed, pricing and price changes. If the contract price is higher than the last list price, you will need to discuss why that happened or- Gotcha!

Contract: For a purchase, the Fannie Mae/Freddie Mac form expects the appraiser to review the purchase contract. One good reason is to make sure the seller is actually the seller and/or the borrower actually owns the property being refinanced (what a concept).

With a property flip the seller might have recently purchased the property with the transfer not yet recorded in your public data source (hence the request for the date). Checking to see if the names match up should protect you against a Gotcha but only if you do a good job reporting inconsistent findings to the lender.

Appraisers, who read the purchase contracts will discover the sales concessions, etc. and will have the opportunity to address their affect on value. An appraiser who claims to have read the contract but missed the concessions- Gotcha!

Site: “Specific zoning classification/zoning description”
Now with two spaces, putting a generic zoning such as single family is not good enough. If you put R1 in the first space and single family in the second, and you are in my town where R1 zoning is a single family zone of one acre and larger lots- Gotcha!

Appraisers who do not have access to zoning or do not check are not going to know if the improvements conform to the zoning. And without knowing, how do you address highest and best use? Gotcha!

Sales Comparison Section: # of comparable properties currently listed for sale/price range and # of sales over the past 12 months and price range. For appraisers who do not have access to the local Multiple Listing Service (MLS) or do not search it but who put information in this section, if a reviewer checks the data and it does not agree with your input- Gotcha!

Prior sales of the subject property/comps with dates and sources: If you report a source and claim no prior sales (for example) and there is one– Gotcha!

Cost Approach: By listing a cost service/quality rating and effective date of the cost data, a reviewer can duplicate your work. If the reported source quoted is not used and your figures are not what they should be- Gotcha!

Marshall & Swift does not put out a monthly cost update; by listing a date that does not agree with actual update dates- Gotcha!

Imagine a comparable listed in MLS as having a full kitchen remodel plus a 300 square foot family room addition: now imagine if the appraiser lists it as “average,” missing the extra square footage but cites MLS as a source- Gotcha!

Big Daddy Gotcha
The biggest Gotcha is Certification #25: “Any intentional or negligent misrepresentation(s) contained in this appraisal report may result in civil liabilities and/or criminal penalties including, but not limited to, fine or imprisonment or both under provisions of Title 18, United States Code, Section 1001, et seq., or similar state laws.”

Often it seems that all anyone cares about in our appraisals is the valuation number. To determine the risk of making a loan against a property, underwriters should be reviewing what we report about the subject property as well- its neighborhood and market conditions. What a concept.

About the Author
Beverly A. Bayer, SRA is a residential real estate appraiser in Moreno Valley, California and has been appraising 29 years. She is currently working on an e-book called Practical Residential Appraising.  She can be reached at

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