Why does it seem almost inevitable that an adversarial relationship should develop between an appraiser and an underwriter? It is unfortunate that these two participants in the business of residential mortgages cannot understand that they are working toward a common goal. They are both striving to determine an accurate representation of the collateral value. However, the underwriter must also reconcile this value with many other factors, of which the appraiser is not aware.

The typical confrontation often unfolds as follows: After a long day of property inspections, research, and photo-taking, the appraiser returns to his office only to find a note sitting on the desk. The message asks the appraiser to call so-and-so at XYZ Lender. There is also a reference to a particular property address, recently appraised.

The appraiser knows exactly how hard he worked -- and how much time was spent completing that job -- and can't imagine how someone who may be halfway across the country could possibly question the final product. The issue of trust also comes into play. Before the return call is even make, the appraiser has his hackles up. The underwriter knows from experience that with the callback there may be some resistance. This sets the stage for a less than ideal conversation.

The return call may actually reach a loan processor or account executive, who can only relay a complaint: "Our underwriter does not like your appraisal. He wants three new comps." The "solution" has been dictated to the appraiser, but the exact "problem" has never been identified, much less discussed.

In this all too common scenario, the appraiser would do well to take a few deep breaths, count to 10, and ask to speak with the underwriter. Once they make contact, both sides can try to reach a middle ground.

Of course, not all appraisers are paranoid, and not all underwriters are tyrants. The appraiser can be considered at least a temporary employee of the lender, who has hired him to function as an unbiased expert -- to be, in effect, an extension of their lending unit, their eyes, ears, nose, and legs in the field. The underwriter and his employer expect the appraiser to paint a complete and accurate picture of the subject property and the local market, including both the desirables and the deficiencies.

It would be extremely helpful for the appraiser to keep the underwriter's bottom line in mind when returning that call. He is interested in protecting the position of the lender and has paid for it. Somewhere in the underwriter's head, and underlying his perspective on the appraisal report, is the thought: "If we should come to own this property, will we be able to get our investment back?"

Even a top-notch underwriter would not claim to possess total knowledge of property values and adjustment levels in any given market. But he must, upon completing a review of the appraisal report, be comfortable with its conclusions. This will not happen unless the appraiser is able to tell the "story" of the subject property effectively. And basic logic dictates that in order to tell a story, a text is needed -- in this case in the form of commentary and explanation.

To remain competitive, appraisers have had to cut their fees to the bone, but they would certainly benefit from considering that it is more cost-effective to address report questions on the "front end" -- when all the pertinent data are fresh and on hand -- than on the "back end," when the report is old and memory is already fading.

The crucial factor in appraisal credibility is "Explanation Explanation Explanation " It is always puzzling when an appraiser "checks" a particular box on the form or jots a brief statement that inadvertently raises a "red flag." The appraisers have done the fieldwork and accumulated a lot of data along the way. They should share that information.

A few pieces of advice for the appraiser:

Generic or "canned" statements may save a little time but can be applicable to almost any property. They are no match for subject-specific information.

If the subject property is in any way unusual, or similar proximate and current comparable sales are not readily available, always insert a brief comment addressing the subject's marketability.

Keep a camera with you throughout the inspection. It is far more efficient and effective to provide an image of an item affecting value than to try to describe it in words. Take a quick shot of that landscape. Show the crack in the fountain wall or water stain on the living room ceiling.

I hope appraisers will view my thoughts as a constructive attempt to increase the consistency, readability, and integrity of their reports, as well as to improve the crucial relationship with the underwriter. The suggestions have been rather broad, but specific advice on various report sections would also enhance the report. This advice will follow in a second installment.

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