Appraisal Report Writing

We've pretty much covered just about every aspect of the real estate appraisal business, and the appraisal process itself. Now we'll talk about writing up the appraisal report after leaving the job site. Don't hand the client a checklist style appraisal report at the site. You have to think about what you're going to write in your report, before you mail it out to your client. In my opinion, any appraiser that gives a brief checklist style report to their clients, gives a black eye to the whole profession. Appraisers who give their clients a brief, meaningless checklist report should be embarrassed!

An "A to Z Appraiser" provides a written appraisal report that's informative and useful to their clients. Your written report has to have narrative comments to assist the client and explain everything in an easy to understand fashion. That's why the checklist style reports are such a joke. Checklist style reports don't tell the client anything about the house! A narrative report will educate the client about the subject property in a manner that is easy for an average person to understand. Also, remember not to use construction jargon terms or have comments that only a professional in the industry will be able to understand. When writing your reports you have to think about what you want to say and think about the person who will be reading it.

I'll use an analogy from high school that you probably can relate to. Do you remember when you were in school and you were given a homework assignment to do a written report? Well, you didn't give the teacher your report at the end of the class did you? You had to go home and think about what you were going to write so that it would be a quality homework assignment. (Or at least you should have). If you shouldn't cut corners for a written report for school, then you shouldn't cut corners for a written report for an appraisal client.

A very important point to remember is this: What you put in the written report is what you will be held accountable for!!!!  This simply means, that I don't care how many times you told the client over the phone that the railroad tracks in the guy's back yard have a negative impact on market value. If you don't put it in the written report, then you have no defense when you get an angry client calling you up 10 months later about not being able to sleep because the trains pass by his house every night at 3:00 in the morning and toot their horns! You won't even remember the house, let alone the locational problems of it 10 months earlier.

In appraisal reports, you're required to disclose everything that you know which has an affect on the market value of the subject property. Everything must be disclosed in a way that can't be misinterpreted or twisted around. You should always have a notepad at the job site and you should be taking field notes throughout the appraisal. Don't make the mistake of leaving anything to memory. You'll find out the hard way that when you get back to your office to write the report up, you'll have forgotten a lot. Moreover, you won't remember some of the details clearly. This is even more true when you start to get really busy and you sometimes have to do two appraisal inspections in one day. You'll have a hard time remembering if a problem condition was in the first or second house you inspected that day. That is, unless you have very detailed notes from the job site.

Organize your notes and your appraisal so that you don't forget to include anything in the written report. Make sure you take your time at the job site and in writing the report so you don't leave anything out. When you take field notes and write your report make sure to include anything the client mentioned that concerned them or that they had questions about. When the client is concerned about a particular aspect of the house or condo, then it's an indication that this is an item they'll expect to see in the report. The client will also become angry if they buy the house and discover that you improperly evaluated the item. For example, let's say the client asks a few questions about any possible easements in the front yard. Well, you better make sure you evaluate the deed and all other pertinent documents at town hall to try to figure out if there's an easement. On top of that, make sure your conclusions are put in the written report. If you don't, the client may buy the house and discover you missed this item during your appraisal and didn't mention it in your report. When this happens, then at the very least, you'll have a dissatisfied client who won't recommend you.

I'm not trying to scare you. I'm just telling you the facts. Cover Your Assets in all of your written reports. You basically try to CYA on all appraisals due to the possibility of unreasonable clients. While taking the appraisal courses one of my instructors told me about a very good commercial appraiser who was threatened with a lawsuit by an unreasonable client. Apparently there were many loan foreclosures on properties taken back by this particular mortgage lender. The lender was threatening to sue many of the appraisers they had hired for the original market value estimates. This lender was claiming that these appraisers over estimated the market value at the time of the original appraisal reports. Many of these appraisers gave in to that type of threat. They just had their E and O insurance carrier payoff the lender to get rid of the matter rather than spend a lot of money on legal fees defending themselves. This particular appraiser knew he was right and simply told the lender that he was going to fight them in court. This appraiser also didn't want a "black mark" on his record for something that he didn't do wrong.

I take my hat off to that appraiser for having the guts and determination to stand up for what he knew was right. Coincidentally, the lender dropped the lawsuit because they had no case against the appraiser. Do you believe that! Some people (like that client) have no concept of logic and they can be so unreasonable. An unreasonable client, such as the one in this case, will rationalize their actions by saying to themselves:  "Well, let's sue everybody in sight and see who breaks under the pressure and pays us a few bucks for nothing."

If something isn't visible or accessible and/or can't be accurately evaluated, then tell the client that, and tell them to have it checked out further if any doubts exist. If you haven't been able to evaluate some aspect of the appraisal report to the point where you feel comfortable in telling them it's a thorough and complete report, then tell the client that. Ask the client for more time to check things out further before you complete your report.

Be very careful about giving cost estimates for repairs. You might end up paying the difference between what you quoted the client and what they ended up paying for the work. Tell the client to call a contractor and get estimates on their own. Otherwise, make sure you know what the costs will be and leave some margin for error. Be very careful about recommending any contractors. If you do, make sure they're very honest. If the client uses anyone that you recommend and the client ends up in court with that person, then your client might become angry with you. They could become angry with you for referring the contractor who didn't do a good job.

Don't let the war stories scare you, just be aware it can happen to anyone. It's just part of normal, everyday business problems to deal with in any business. You get paid more because a lot of knowledge is required to be a skilled appraiser. As a result, there's more liability. Look at the liability doctors have to assume in their profession. That's why they get paid so much.

Any areas of the house that are inaccessible due to furniture, personal belongings, finished areas, etc. should be stated in your report. This way the client will have a written record that you don't have a magic wand, X‑ray vision, or a crystal ball.

Any areas of the house that are inaccessible or not visible due to furniture, personal belongings, finished areas, etc. should be stated in your written report. This doesn't mean that you have to take out a ruler and write the exact location of every piece of furniture, carpeting, wall covering, picture, etc. Just use your common sense and mention anything that's hidden but would normally be accessible and visible during a typical appraisal assignment. For example, some of the inaccessible areas that should be mentioned would include:  a finished basement or attic, a garage that's filled with storage items, a locked room, etc. Also, anything you couldn't evaluate properly during your field work should be stated in your report. This way the client will have a written record that you don't have a magic wand, X-ray vision, or a crystal ball (which some people might be surprised to find out).

If you think it sounds strange to state in the written report that you can't see behind finished and inaccessible areas, then I'll tell you another bedtime war story so you understand why. I once did an inspection and there was a section of the ceiling on the top floor of the house that had some brown water stains. The water stain wasn't that large and it didn't appear to be recent. You'll find this condition often in attics where there will be old water stains from roof leaks that have since been repaired. I told the client at the inspection site and in the written report that there probably was some damage to the areas behind the sheetrock ceilings. I explained that I can't detect this damage because it's not visible. When the client applied for his mortgage loan, the bank appraiser went through the house and mentioned the water stains on the ceiling in the appraisal report as well.

About three weeks after the date I did the inspection, I got a phone call from this client. He said that he needed a letter from me stating that the roof was in good condition and that it wasn't leaking. He said that the bank read what the appraiser had put in his report about the water stains. As a result, they required this letter for a final approval to lend him the mortgage money to buy the house. I told the client that I can't give him a letter stating that the roof is definitely not leaking and that everything is in good condition. He kept pushing the point of how he needed a letter because he felt that anything would help to satisfy his lender. I told him that I would not make any statements that could be misinterpreted. Furthermore, I said that the only thing I could write would be what I had stated in the written inspection report and that was: "the water stains did not appear to be recent and appeared to have been from a prior roof leak but there could be damage behind the finished areas." This statement turned out to be exactly what had happened. The seller of the house had a roof leak in that area before having the house last reroofed. After the new roof was installed, the water leak stopped. The only problem was that the seller was too cheap to pay to have the damage to the roof rafters repaired. There was no attic for me to view this damage due to the design of the house!

Well, about a month later I got a phone call from this client. He told me that after he closed on the house, he had a contractor open that section of the ceiling. Beneath the ceiling covering they found extensive water damage to the roof rafters. The client was unhappy because he felt that I didn't tell him "strongly" enough that there could be damage behind the sheetrock ceiling. Do you believe that!!!  What more do I have to do? I told him at the site and I put a statement in the written report! I guess he felt I should have beat him over the head with the idea to make him understand it more clearly. In reality, this client himself was the main cause of his problem! This client, like many people who buy homes in an emotionally excited state, made the mistake of not taking a step back and looking at the deal like a typical business decision. He was overly eager and excited about buying a house because the real estate market values were appreciating very quickly during those years. He knew buying a home would make him money, like a business investment, but he was too emotionally excited to take the time to check everything out and get repair estimates BEFORE the closing! This happens when people let their emotions get too involved in their home search. So learn a lesson from this and don't leave anything to the imagination. When you start to book a lot of appraisals you'll have a hard enough time remembering a house you appraised one month ago; let alone if you have to remember details about it a year later.

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