Importance of a Local Appraiser

A simple piece of advice for mortgage borrowers: When an appraiser calls to set up an inspection, ask one important question: Do you live in the area?

When appraisal management companies (AMCs) entered the mortgage loan process (after sweeping government regulations took effect in May of 2009), the mechanism for appraiser selection changed significantly. Appraisers now receive work by being put on the AMC’s “list,” and then the appraisal assignments are distributed randomly on a rotational basis (or an appraisal is sent to numerous appraisers and whoever hits the “accept” key the fastest gets the assignment). In theory, this would be one step in preventing any pressure on appraisers to “hit a value.”

In reality, it often means that a less experienced appraiser, often from as far away as 100 miles, receives work that formerly went to local appraisers with significant experience and extensive familiarity with a market. Thus, rather than being an improvement, this AMC list/rotation mechanism can result in inaccurate values that perpetuate the mortgage/foreclosure crisis and poor housing market.

For the homeowner, this can make or break a deal. An out-of-town appraiser often has no knowledge of many of the factors—such as school systems, neighborhood prestige, similarities/differences between nearby markets (vital in selecting comparables)—that are all important elements of an accurate valuation.

The borrower can tell an appraiser, “thanks, but no thanks” if he or she is from out of the area, and demand that the mortgage company send an experienced, qualified local appraiser. It’s in everyone’s best interest to do so.