What's My Franklin TN Home Worth?: Do Appraisers Need a Target to Determine a Home's Value?

Do Appraisers Need a Target to Determine a Home's Value?

Do Appraisers Need a Target to Determine a Home's Value?Franklin TN has been in a hot seller's market for much of the last three years. Due to the lack of inventory, home prices continue to rise. Prices are climbing so quickly, appraisers only use comparable sales made within the last 90 days.

When one of my listings is being appraised, I don't leave anything to chance. I meet the appraiser at the listing. I provide a list of upgrades my clients have made to the property, I provide them with a copy of the contract (which has already been provided by the lender) and then I send them the comparable sales that helped us determine the sales price for our listing.

While not every appraiser appreciates this, it does make his job a little easier when looking at comparable home sales.

I always ask that they call me if they have questions or don't think a house will appraise. To which they respond that they work for the lender and all correspondence will be with the lender only. That's what they should say.

When I am representing a buyer, I don't know when that appraiser is scheduled to appraise the property. I don't have his name, his number or the company he works for. Both the lender and I are in the dark. That's okay. That's how the system is designed to work.

There's only one problem. What if the appraiser doesn't thoroughly review the contract submitted by the lender? Or there's a typo on the documentation he receives?

Do appraisers need a target to determine a home's value?

An appraisal was recently performed on a home one of my buyers was purchasing. When we received the appraisal, it was almost $20,000 lower than the purchase price. Panic ensued. My buyer wasn't as anxious about overpaying for the house as he was about asking the seller for a $20,000 price reduction. In our hot seller's market, he was concerned the seller would walk away from the deal which was absolutely possible.

I asked the buyer to send me the appraisal so I could review it prior to submitting our amendment requesting a price reduction. That's when I realized the appraiser had picked up the wrong purchase price from the contract. Our original offer was substantially lower than list price based upon recent home sales in that neighborhood. 

The appraiser hadn't looked at the entire packet submitted which included an accepted counter. Instead, he just looked at our original offer. He determined the value to be the exact amount of what he thought was the purchase price . I contacted the lender immediately. I could hear panic is the lender's voice as well. I told her that the purchase price would need to be amended on the appraisal before I could submit a request to the seller for a price reduction. That's when she dropped the bomb.

I was told, in all likelihood, the appraisal would be adjusted to match the purchase price. Say what? Isn't this why the federal government put all these guidelines in place? To prevent this type of thing from happening?

She then told me appraisers use the purchase price as a target. The only time they actually see homes not appraise is if there is a blatant disregard by the listing agent when first pricing the home. They are finding that 99% of properties are appraising at or slightly above purchase price. Home prices are rising so quickly, it's difficult for appraisers to keep up with the market. They are really relying upon agents Do Appraisers Need a Target to Determine a Home's Value?who are in the trenches to price accurately.

In other words, appraisals aren't really providing us with a home's accurate value. The appraiser just shoots for the targeted sales price.

My next question: How are you going to tell my buyer that this home now miraculously appraises for $20,000 more? She back-peddled a little and said the appraiser would be re-visiting his data to make sure the value provided was accurate.

Within a day, we received a new appraisal with an adjusted valuation slightly over contract price using different comparable properties to support his findings. It sure doesn't make this guy look very credible.

My buyer was thrilled. He didn't have to go to the seller and ask for a price reduction. We closed on time without incident. Unfortunately, my opinion of appraisals is forever tainted.

Do appraisers need a target to determine a home's value?

Photo courtesy of freedigitalphotos.net/stuartmiles

Tammie White, Managing Broker/Owner
Franklin Homes Realty LLC
Franklin, TN
(615) 495-0752 
This posting with the content written here and photographs displayed are the intellectual property and opinions of Tammie White of Franklin Homes Realty LLC. Any party who uses this material without the written permission of Tammie White is subject to copyright infringement and possible lawsuit.
Comment balloon 33 commentsTammie White, Broker • September 01 2015 08:39AM


Hi Tammie - You raise a very good point. If the real purpose of an appraisal is to determine actual market value, there should be no need to provide the appraiser with a "target". Giving them the answer at the same time as the question seems to suggest that the process isn't meant to deal with actual value as much as it's a broad reality check for everyone in the transaction. But everyone plays by their own rules, so it's a mess in real life, particularly in hot markets like ours.

Posted by Dick Greenberg, Northern Colorado Residential Real Estate (New Paradigm Partners LLC) about 3 years ago

A true appraisal should start with no info and go from there, but most bank appraisals give a  target number.

Posted by William Feela, Realtor, Whispering Pines Realty 651-674-5999 No. (WHISPERING PINES REALTY) about 3 years ago

Tammie, it is always good to meet the appraiser, and have not had too many that would prefer I not be there.   Just have to stay out of their way and don't ask too many questions.....

Posted by Joan Cox, Denver Real Estate - Selling One Home at a Time (Metro Brokers - House to Home, Inc. - Denver Real Estate - 720-231-6373) about 3 years ago

Tammie, I always wondered what would happen if appraisers didn't have the sales price or a copy of the contract. 

Posted by Patricia Kennedy, Home in the Capital (RLAH Real Estate) about 3 years ago

I've always said the appraiser is only there to justify the collateral for the loan to the bank, not to actually set value.  I stand by my belief. 

Posted by Tammy Lankford,, Broker GA Lake Sinclair/Eatonton/Milledgeville (Lane Realty Eatonton, GA Lake Sinclair, Milledgeville, 706-485-9668) about 3 years ago

By definition an appraisal is an opinion of value.  Opinion is the operative word there.  Of course it's not just looking at a home and saying, "I'd pay $300k for it" or anything like that.  The opinion has to be supported by data.  What lenders are looking for is market value, which by definition is what is the likely price that a home would receive on the market.  In the case of a purchase the contract price serves as a pretty good guide for that in most instances. The house was marketed for a reasonable time for the area, an offer was made and accepted.  At that point the appraiser's job is to see if that value is supported to protect the bank from lending on collateral that doesn't fall within their value parameters. I disagree with the lender's assesment that the appraiser's use the purchase price as a target.  I've had appraisals come back way lower than the accepted price and some way higher. More often than not they're right around the purchase price.  Consider to that in a rapidly increasing market the appraiser is relying on older data in some instances so supporting a higher purchase price may prove difficult.  I believe the appraiser in your example is in the minority and may be inexperienced.  I wonder how he/she explained to the AMC that the value increased by $20k

Posted by Mike Tizzano, Protect Your Transaction Certified Lender (Amerifirst Financial, Inc Equal Housing Oppurtinity Lender AZ BK0013635 NMLS 145368 LO:1015837) about 3 years ago

Tammy Lankford You're absolutely correct, the market sets  the value.  The appraiser reviews the data to give assurance to the lender that the home falls within the lender's parameters.  You don't need an appraisal for a full cash offer unless the buyer wants one.

Posted by Mike Tizzano, Protect Your Transaction Certified Lender (Amerifirst Financial, Inc Equal Housing Oppurtinity Lender AZ BK0013635 NMLS 145368 LO:1015837) about 3 years ago

Tammie White I am always concerned when the appraiser asks for the contract! Why should they know what the contract price is?

You are so right - why do they need to target a price to arrive at?

Posted by Praful Thakkar, Andover, MA: Andover Luxury Homes For Sale (LAER Realty Partners) about 3 years ago

I suspect they do things a little bit differently in Tennessee. For starters, the appraiser most certainly IS allowed to talk to the listing agent. Now, of course, I probably do things a little bit differently, but I have learned not to insult appraisers in my area. If I were to meet an appraiser and had them comps, that would be a slap in the face, saying they don't know how to do their job. What I do instead is say if they encounter a problem coming in at value, to contact me, and I will send the comps I used. I have had them contact me, and they have used my comps. But everybody does things differently, it's what makes the world go round.

Posted by Elizabeth Weintraub Sacramento Real Estate Agent, Top 1% of Lyon Agents, Put 40 years of experience to work for you (Lyon Real Estate) about 3 years ago

Tammie White - Appraisers should ONLY h ave one target and that is "market value." They should not be influenced by the contract amount but by indicators of market value and market trends that affect the subject property being appraised - period. 

Posted by Richard L. Sanderson, helping improve local property tax systems (Richard L. Sanderson Consulting) about 3 years ago

even when things immediately were different under the new rules - the appraisers still tried to make the target price- they don't want to tank the sale. 

Posted by Lise Howe, Assoc. Broker and Attorney Licensed in DC, MD, VA, (Keller Williams Capital Properties) about 3 years ago

I know appraisers can find out the list price but they should not have the sale price at the time of the appraisal . 

Posted by Gita Bantwal, REALTOR,ABR,CRS,SRES,GRI - Bucks County & Philadel (RE/MAX Centre Realtors) about 3 years ago

In addition to being a REALTOR, I'm also a personal property appraiser (I appraise the stuff IN the house, not the house itself). I don't EVER have the requested results delivered to me before I start. Neither should real estate appraisers. Take, for example, a pair of Sevres porcelain urns. I figure out what factors contribute to value (size, age, condition, artist, etc.), then go find the sales data of similar Sevres urns that have sold, and use the comps of the ones having like kind and quality to determine market value. Just like real estate appraisers, personal property apppraisers write the to USPAP standards.

Posted by Lorrie Semler, REALTOR® in the Dallas area. Call/text 972-416-3417, Real Service. Real Results. Real Estate (United Real Estate) about 3 years ago

Thanks Tammie!!!

Appraisers use the purchase price as a target. The only time they actually see homes not appraise is if there is a blatant disregard by the listing agent when first pricing the home. They are finding that 99% of properties are appraising at or slightly above purchase price.

Posted by Sham Reddy, CRS (H E R Realty, Dayton, OH) about 3 years ago

i look at it 2 ways, yes the purchase price is a good target however to truely be independant, they should look at the most similar comsp sold within teh last 6 months within 20% in size, 20 years in age,  and then add or deduct for extras, upgrades or repairs. However most do use the target. The way they have changed choosing appraisers has been a trainwreck and has certainly not helped or protected the consumer or the bank

Posted by Scott Godzyk, One of Manchester NH's Leading Agents (Godzyk Real Estate Services) about 3 years ago

I have never liked the idea that the appraiser is given a copy of the contract with the purchase price on it.  Appraisers should have to build a price from the ground up, just the way that Realtors do when they do a CMA for sale.

But in reality, appraisers use the agreed upon purchase price, and then go out into the market and see if there is data to support that purchase price.  And more often than not, at least these days, unless the purchase price is outrageous, the appraisal often comes in at exactly the agreed upon price.

What a remarkable coincidence.

Posted by Alan May, Helping you find your way home. (Coldwell Banker Residential) about 3 years ago

Hello and congratulations on your featured blog post! Well done and hope to see you have many more featured post.

Posted by Mery Fernandez Empire Network Realty Luxury Brokerage, The Rise of An Empire, Let's Build Yours! (Empire Network Realty INC.) about 3 years ago

The appraiser works for the bank. Their role is to bring relevance to the banks exposure to risk.


The FIRST thing the real estate professional does is exclude the appraiser from the process.  You do that by selecting a buyer willing and able to purchase at the negotiated price. Most of the real estate I sell is way above comps and the appraised value. Contrary to popular opinion, the buyer did not overpay, the paid EXACTLY what they agreed to be the market value.

IN alignment with the content of your blog, I find appraisers are lazy. Make their job easy and logical, and they will go the direction you need.

Just make sure the buyer selected has available a pile of cash to bridge the gap in a hot market.

Posted by Annette Lawrence , Palm Harbor, FL 727-420-4041, Making FLORIDA Real Estate EZ (ReMax Realtec Group) about 3 years ago

On my last appraisal appointment, I let it slip that I had two previous appraisals. Eagerly the appraiser wanted to know what they came in at. I said I can't tell you. We had an argument as to why. I cited ethics as the appraisals belonged to the owner not me and I had no permission to release the data. He resented that. The outcome? He played it safe. His value? House is worth contract price

Posted by Richie Alan Naggar, agent & author (people first...then business Ran Right Realty ) about 3 years ago

A few years ago it seemed common for properties to not appraise, but with lack of inventory in many markets the demand is there. The contract price is what proves the demand. Sometimes when a property gets bid up over asking price there is an appraisal issue which is why as a listing agent, I always make the appraiser contact me before they can view the property. That way I can tell them what the contract price was and if we had multiple offers, etc.

Posted by Rob Arnold, Metro Orlando Full Service - Investor Friendly & F (Sand Dollar Realty Group, Inc.) about 3 years ago

I had a very hard time with appraisers in my market a few years ago constantly undervaluing homes even when I provided them with several quality and accurate comparable sales. Sometimes the comparables would be model matches and yet the appraiser would still come in with a lower value than contract price. Thankfully appraisers seem to have gotten the message that the market has increased and stabalized here. It's been a while since I had to fight an appraisal. 

Posted by Nicole Doty - Gilbert Real Estate Expert, Broker/Owner of Zion Realty ZionRealtyAZ.com (Zion Realty) about 3 years ago

Appraiser gets paid even if the property does not close. Seems that we could work together on a few items to better understand what an appraiser is really looking at..... Why they chose the comps they do .... Does a water view add value to a property ????? 

Posted by Laura Filip, What can we do for you today? (Laura Filip Broker , Opening doors for All Seasons of Life ) about 3 years ago

That unfortunately sounds like a really terrible appraiser...or one that is very overworked and very underpaid.  I hate when appraisers try to hit a target.  We already KNOW what the contract price is, tell us your opinion of value, that's what they're getting paid for.  They do buyers a disservice by hitting a contract price.

Posted by John Meussner, #MortgageMadeEasy Walnut Creek, CA 484-680-4852 (Mason-McDuffie Mortgage, Conventional Loans, Jumbo Loans, FHA, 203(k), USDA, VA,) about 3 years ago

Here's my feeling on appraisals..they are a safeguard on behalf of the lender.  The reality is that market value is determined by buyer and seller, and what they agree.  That's it!  That's the market at work.  An appraiser overseeing it for the mortgage company is just making sure the value is there.

Posted by Chris Ann Cleland, Associate Broker, Bristow, VA (Long and Foster REALTORS®, Gainesville, VA) about 3 years ago

Hello Tammie.  Hope all goes well for you and Tom.

As you are aware, I am a vocal champion for processors and underwriters:  I value their hard work, and think they often get the short end of the stick; but I cannot buy the explanation that the appraiser blindly uses contract price to determine value.  My experience has been that we cannot lump all appraisers into one group any more than we can lump REALTORS® into one. 

If an appraiser is unable to document his conclusions, NO underwriter is going to let that slide. 

There is no excuse for an appraiser to not review a contract as part of the appraisal process.  That appraiser has to know that the Counter offer process is common and that price is probably the most likely change to be found.  My processors would have spelled out contract price on the cover sheet sent with appraisal request.

Some took offense with the appraiser even having a copy of the contract, but would they want a jeweler to appraise a diamond without full and complete knowledge of that diamond?  What determines value?  Is average square footage the best indicator of value?  Do most experienced REALTORS® simply run a CMA and declare that as true value?  We certainly hope not! 

In Franklin, are you seeing many appraisers use "Time Adjustments?"


Posted by Fred Cope, Looking For Homes With A Smile (Reliant Realty in Nashville, TN) about 3 years ago

I have had some interesting experiences with appraisers.  I find they do tend to aim for the contract price and try to find a way to make it work.

Posted by Joan Whitebook, Consumer Focused Real Estate Services (BHG The Masiello Group) about 3 years ago

Tammie, I too would love to see what an appraiser comes up with without seeing the contract. They say they need it so they can see all the terms, etc., but it would be interesting. 

Posted by Sharon Alters, Realtor - Homes for Sale Fleming Island FL (Coldwell Banker Vanguard Realty - 904-673-2308) about 3 years ago

Congrats Tammie on your featured blog, hopefully you can keep them coming, topics that are featured take blogging talent!

Posted by Vick The Broker . (Olympus Executive Realty INC.) about 3 years ago

1) It is a fallacy that appraisers in a rising market can only use comparables that closed in the last 90 days.  Older comparables can and should be utilized if they are the best comparables, as long as they are adjusted properly for market conditions (sometimes referred to as a "time adjustment").

2) It is a fallacy that value is determined by a willing buyer and a willing seller.  A contract PRICE is determined by a willing buyer and a willing seller.  Prices are facts.  Value is an opinion.  I urge all realtors to read the definition of market value in the appraisals they receive, but it states in part (bold added for emphasis):

"the most probable price which a property should bring in a competitive and open market..."

A single sale or contract price does not necessarily reflect market value.

3) Any appraiser who uses contract price as a "target" does not deserve to retain their license.  That said, there are many appraisers facing "turnaround time" pressure imposed by many AMCs that they've resorted to shortcuts in order to survive.


Posted by Jesse Skolkin (Independent New York State Certified Real Estate Appraiser) about 3 years ago

In our area home are sold 13-19% over listed which is often higher than sold comps. I am not aware of any homes that were appraised low enough to fall through.  A couple were 10-20K under over $1,298K.   35% down. No biggie.

These days they serve as a gate keeper.  

Posted by Sam Shueh, mba, cdpe, reopro, pe ( (408) 425-1601) about 3 years ago

Most probable price is what we work on these days.

In a rising market with no defaults it is easier to get loans. I was suprised professionals who start out with less than 2 years got a jumbo loan as solo buyer.

Sam Shueh

Posted by Sam Shueh, mba, cdpe, reopro, pe ( (408) 425-1601) about 3 years ago

I find the challenge with appraisals is when there are few similar properties, ie golf course lots, waterfront (some in Phoenix but often difficult to comp), hillside lots,  houses backing to major streets, etc.  If you have a track home and it is a model match for the subject property there are usually no issues.  Once the appraiser has to value unique properties we can have issues.  There is no standard for an appraiser to add a specific dollar amount for a golf course lot.  Then not all golf course lots are created equal. 

Posted by Shirley Coomer, Realtor, Keller Williams Realty, Phoenix Az (Keller Williams Realty Sonoran Living) about 3 years ago

Good morning Tammie. I always recommend that listing agents have a set of comps ready for the appraiser, most really appreciate it and it sure does help.

Posted by Joe Petrowsky, Your Mortgage Consultant for Life (Mortgage Consultant, Right Trac Financial Group, Inc. NMLS # 2709) about 3 years ago

This blog does not allow anonymous comments