Appraisal Forum: We’re in this Together

One million new residents in central Ohio by the year 2050! That is just one of the startling statistics provided by the Mid Ohio Regional Planning Commission (MORPC) in their recent update on growth trends for this area. Also predicted are 300,000 new jobs and this may be conservative based on recent trends and announcements. For more details on these statistics please go to

Our recent Appraisal Forum seminar held in October of 2017, focused on the market realities of this unprecedented growth. Presenters at the seminar included Thomas L Francis Jr., RAA; Durk Reese; Felicia Sauder, SRA; and myself. Primary topics included discussion on the very strong demand for housing, lack of inventory, rapidly appreciating housing prices and shortage of affordable housing. As a result, marketing times for modest priced houses are often measured in hours not days. The shortage of affordable housing in many areas translates into multiple other situations where the final sales price is often bid up much higher than the original listing price. This poses challenges for all involved parties; buyer, seller, REALTOR® and the appraiser.

Unless the buyer is in a position to pay cash or supplement any estimated value shortfall, challenges are likely to arise.

Appraisers must follow strict appraisal guidelines required in most situations by Fannie Mae, Freddie Mac, FHA and/or VA. Underwriters for lenders must review our reports and agree with our analysis and conclusions. They often challenge our reports when we are dealing with unique properties or support for the estimated value is perceived as weak.

When dealing with rapidly appreciating markets, support for positive time and adjustments is critical. This is one of the important areas that REALTORS® can assist appraisers in understanding the dynamics of the marketplace. Providing facts about the listing history of the property is critical. When a house is listed and sold on the same day with multiple offers above the original asking price, this information can be quite important and influential in our analysis. So please share these important facts with the appraiser. Also, timing is of the essence, once the report is finished and submitted to the lender our ability to communicate is severely restricted. Therefore, provide this information before or during the appraisal inspection to ensure the appraiser can consider it when completing their analysis.

One other critical component of the appraisal report is the MC form required by most lenders and governmental agencies. Briefly, this market conditions (MC) form requires the appraiser to complete a statistical analysis of the sub-market in which the subject property is located. This analysis covers the past twelve months and documents important trends such as median sales price and days on market. Both of these factors are critical in supporting positive (or negative) time adjustments on the appraisal report.

There is also a line item for “Median Sale Price as a percentage of list price”; this is where REALTORS® can provide valuable assistance. Basically, the calculations are a simple ratio of sales to list price. Historically sales prices have averaged 95 percent to 98 percent of list price in the Columbus area. Not anymore! Many areas routinely average 100 percent or higher. However the true percentage would often exceed 100 percent if the original list price was not changed after the property was placed in contract. Therefore, in many markets the actual ratio might be 103 percent, 105 percent or even higher. This critical data provides additional support for positive time adjustments to accurately reflect actual market conditions. In turn the underwriters who review the reports are more likely to understand and believe that positive time adjustments are accurate and reflect market conditions.

Bottom line is the final estimated value in the appraisal report will have better support and justification. Keep in mind appraisers are required to report the full listing history including all the price changes so modifying the list price after the property is in contract serves no real purpose but distorts market trends.

So in summary, connect with the appraiser early, share all pertinent data and do not adjust the original list price after contract.

On behalf of our panel of appraisers, I want to thank our REALTOR® colleagues for their interest and attendance at our Appraisal Forum seminars over the past three years. We look forward to working together and seeing everyone at the next seminar in October.

Columbus Appraisal & Consulting Company, Inc.
Real Estate Appraisers
3964 Brown Park Dr., Suite A, Hilliard, OH 43026
Phone (614) 771-0101, Toll Free (877) 771-0131,
Fax (614) 771-0196