Life has changed from the days when you could walk into your lender’s office with an appraisal in hand and get a loan. In today’s lending environment, it's the lender who decides the appraiser and you, the property owner, are often left out of the whole valuation process.
Your first knowledge of the appraiser’s estimate of value comes when the lender tells you how much it is willing to loan. But it doesn’t have to be that way. There are several steps you can take to become part of the process and assure there are no unpleasant surprises when the appraisal report ends up on the lender’s desk.
It's the appraiser’s job to express an opinion as to the value of your facility. This is where you come into the picture—by working with the appraiser to assure he receives the historical operating performance data and any other evidence from the marketplace that supports his conclusions.
You should care about receiving a properly supported appraisal and not just the right estimate of market value, because your loan proceeds are often based upon more than just the market value. Often it is the appraiser’s estimate of future net operating income (NOI) that limits loan proceeds. An appraiser could prepare a report resulting in a value conclusion to meet the lenders loan-to-value (LTV) ratio, but fails to meet the lender’s required debt-service coverage ratio (DSCR).
Step 1: Prepare for the Appraiser
Your best opportunity to receive a proper appraisal is to meet with the appraiser in person at the beginning of the process. You’ll need to bring every bit of information pertaining to your property (deeds, tax bills, income and expense statements, etc.), and spend time going over the data with the lender.
Reproducing the same documents for the appraiser seems redundant and a waste of time. However, going over many of the same documents with the appraiser can pay big dividends. This is your best opportunity to make sure the appraiser understands and appreciates your asset and how it is performing.
When the appraiser calls to schedule the inspection, ask which documents he needs in addition to what the lender has already provided. Be sure to have copies of everything you provided the lender just in case the information wasn’t passed. For instance, you may have just had a successful real estate tax appeal and next year’s real estate taxes will be lower. This could be easily missed by the appraiser.
Due to the nature of appraising, scheduling a specific time of day to make the inspection is often impossible so plan to be available all day. Let the appraiser know you have rental surveys or other data to share and he will make an extra effort to be on time.