I believe it’s important for appraisers to communicate with their clients to avoid surprises and ensure the appraisal process is as smooth as possible. My core passion is transparency and helping our clients make sound investment decisions and solve real estate problems to achieve their financial and business goals.
There are a few ways appraisers can better understand the perspective of the bank appraisal reviewer or credit analyst when completing appraisals. These individuals face questions and deal with pressure primarily from four angles. During the appraisal process, the bank reviewer/credit analyst is the primary point of contact between the lender/borrower, senior management, appraiser and bank auditors such as the Federal Deposit Insurance Corporation (FDIC) and/or Office of the Comptroller of the Currency (OCC).
This article provides insight on how bank reviewer/credit analysts works with everyone during the appraisal process.
This article provides insight on how bank reviewer/credit analysts works with everyone during the appraisal process.
- Lenders have a desire to complete the appraisal in a timely manner to assist the borrower in focusing on their business or other investment needs. They are in communication with the bank reviewer/credit analyst from the onset and want to ensure the appraisal is proceeding without any major setbacks. If something comes up that may impact delivery or information is missing, it is important for the appraiser to inform the bank reviewer/credit analyst.
- Bank reviewer/credit analysts are responsible for maintaining certain production goals and timeliness and typically report to senior management at the financial institution. Unexpected delays from the appraiser due to missing information, inability to schedule property inspections or challenges that arise with the assignment should be communicated immediately to the bank reviewer/credit analyst. This allows the bank reviewer/credit analyst to update everyone on the progress.
Typically, the financial institution sets up the schedule for closing on a loan after the appraisal delivery date is known. The bank reviewer/credit analyst has a specified timeframe to complete their appraisal review. Miscommunication by the appraiser will cause delays that impact the bank reviewer/credit analyst and this can lead to increased pressure from senior management.
- Bank auditors such as the FDIC and/or OCC routinely review bank work files to ensure the proper methods are in place for maintaining credibility and compliance with Interagency Appraisal and Evaluation Guidelines. The bank reviewer/credit analyst is motivated to have proper records and documentation to avoid any conflicts. Appraisers can help contribute to this by delivering appraisal reports that meet state and national requirements and expectations/guidelines of the client.
- Lastly, the bank reviewer/credit analysts are the primary bank contact with the appraiser selected to complete the property appraisal. While many appraisal assignments do not require ongoing communication prior to the delivery date, it is important for the appraiser to communicate with the bank reviewer/credit analyst if something arises that changes the scope of work and/or may result in vastly different expectations.
As an example, some properties have unique characteristics that make finding good market data to support the value conclusions more difficult. In these instances, the appraiser can improve the appraisal review process by communicating via a phone call or email with the bank reviewer/credit analyst prior to report delivery some of the challenges that arose. While the appraiser should try narrating these challenges in the appraisal report, sometimes a brief conversation helps both parties.
As a bank reviewer/credit analyst becomes more familiar with the appraiser’s work product and which property types they excel at, this can help in the best appraiser selection. The appraiser can help by communicating with the bank reviewer/credit analyst if they have expertise in a certain property type and indicate recent similar assignments completed.
Lenders work with real estate investors and owners of small, medium and large businesses (borrowers) to help them secure financing to purchase and refinance real estate that fit their investment criteria and fulfill their business needs. As investors and owners of businesses, these individuals carry many responsibilities, of which financing real estate is one component. The lender can help the borrower ease this process in several ways. Next month, I will share additional appraiser insight to help lenders communicate with the borrower at the onset of the real estate financing process.
Mitchell Simonson, MAI is an expert commercial real estate appraiser and investor. For any real estate related questions or comments, he can be reached at 612-618-3726 or email to mitch@simonsonap.com.