Understanding the nuances of property appraisals can make or break a deal in the real estate market. A recent panel discussion at the monthly YPN Breakfast event series invited industry experts to shed light on crucial appraisal knowledge for real estate professionals.
Meet the panel here.
Niko Apostal
Founder of Niko Collaborative
Keller Williams ONEChicago
Nicholas Conteduca
Chief Strategy Officer, Certified Appraiser
Banks Valuation
Matthew Litzenberger
Broker, Coldwell Banker Realty | Ambassador Trainer, MRED | Moderator
Let’s dive into the world of appraisals and uncover the insights that can elevate your game.
Before anything, know The Fundamentals of appraisals
Is an appraisal truly a home’s monetary worth? Not necessarily. As Nick, a licensed appraiser with Banks Valuation, aptly put it, “An appraisal is an opinion given by an appraiser like myself.”
Appraisals typically enter the transaction process after an offer is accepted and the loan application moves to the next step. The lender or loan provider hires an appraiser (not the buyer!).
But what does this mean for you and your clients? It’s about recognizing that an appraisal isn’t just a cold, hard fact—it’s a professional judgment based on a variety of factors. Niko, a team lead with Keller Williams ONEChicago, elaborated on this point: “An appraisal ultimately is how much the bank will value that property as collateral for the money they’re about to give you.”
This nuanced understanding can help you better prepare your clients for the appraisal process and manage their expectations. “Market value is what a buyer is willing to pay,” Niko added.
Where Do Comps Come From?
A common misconception about how appraisals are conducted is that appraisers always observe a “one mile, one year” rule for comps (aka comparable properties). Nick explained, “There’s no rule set to what appraisers could use… If you have to go back two years, if you go two miles, wherever you have to go to get the right data, just kind of support your value.”
As of February 4, 2025, appraisers are formally required to conduct their market analyses and search for comps outside of the “one mile” range of the property in question. If you’re interested in staying updated on new rules, regulations and other appraisal developments, follow Fannie Mae, Freddie Mac as well as the Appraisal Foundation.
This is impactful, especially in unique markets or for one-of-a-kind properties. It means you can think outside the box when preparing for an appraisal, considering a wider range of comparables that truly reflect your property’s value.
Preparing for a successful appraisal: Do Your Research
For listing agents, preparation is key when it comes to appraisals, and it starts long before the appraiser sets foot in the property. Niko shared his approach: “We start thinking about the appraisal from the moment I get the call for that listing appointment.” As he collects information for listing, he’s setting aside documents and details an appraiser might need, such as HOA reserves, a quality floor plan, a list of time-stamped renovations with costs, et cetera. These will go into his appraiser’s packet.
As Niko advised, “There are wonderful data sources available to us through your membership to the Chicago Association of REALTORS®.” Leverage your ecosystem of data tools (all included in your membership) to build a comprehensive picture of the market:
- InfoSparks: A great tool for Reconsiderations of Value (ROVs) and pulled market data over a period of time. Updated with the MRED market data nightly, create visual CMA’s based on your listings, within the platform.
- RPR: It stands for REALTORS® Property Resource. Source properties and local public records for CMAs and home valuations in a user-friendly interface.
- Remine: Access up-to-date public records and tax data. Remine also combines this information with social data to deliver predictive analytics that highlight consumers who are likely to buy and sell.
- FastStats: Download statistical reports with monthly indicators, lender-mediated reports, weekly market activity and neighborhood-specific drilldowns.
- Cloud CMA: Create visually appealing and information-rich CMAs in a seamless blend of data from MRED as well as other real estate websites.
meeting the appraiser
Niko ensures that he is at the property early; he turns all the lights on, and he has his printed (and digital) appraisal packet ready—even a tape measure. It’s okay to ask the appraiser how they would like to receive the packet, and it’s a good idea to come prepared for any case.
When it comes to the actual appraisal packet, less can often be more. Nick cautioned against overwhelming the appraiser with information: “Let’s just give the appraiser the most relevant data that supports why you believe that this property is worth what it’s worth. Don’t overdo it.”
Consider providing a concise packet that includes:
- Recent comparable sales with explanations of their relevance.
- A floor plan or survey of the property.
- A list of recent improvements with dates.
- NOTE: You are allowed and encouraged to provide a list of offers on the property, especially if there are multiple offers. The appraiser should use that in their report in the notes section!
Remember, as Nick pointed out, “If you think about it, say you have a busy appraiser that’s doing five, six a day. I mean, to keep track of all the information is really, really tough.” Be intentional and streamlined with your appraisal packet.
After the Appraisal
If the appraisal amount is on par with the offer amount, congratulations! As a buyer’s agent, continue to communicate with your buyer as the transaction process continues.
Yet even with the best preparation, challenges can arise. Low appraisals are a common hurdle, but they’re not insurmountable.
On the appraiser’s side, it is their responsibility to do their due diligence and document the supporting factors for their analysis. Nick explained that in his company, they pay close attention to whether they expect an appraisal to amount to come in low. “If an appraisal comes in low, we have people consult with us and say, ‘hey, we need some sales to help support this.’ If there are no sales out there to support it, you have to figure out how much a market has increased over a time period.”
As a buyer’s agent, make sure you’re giving your clients options regarding what they can do next. Understanding the “Reconsideration of Value” (ROV) process is crucial. This is where your market knowledge and data analysis skills come into play. Use tools like InfoSparks to demonstrate market trends that might not be reflected in recent sales data. This approach can provide compelling evidence for an ROV.
Building relationships for future success
One of the most valuable takeaways from the panel discussion was the importance of fostering relationships within the industry.
Proactive communication can help streamline the appraisal process and potentially head off issues before they arise. It’s not just about the current deal—it’s about building a network that can support your business in the long run.
Certified MRED Trainer and panel moderator, Matthew Litzenberger echoed this sentiment, stating, “When our clients ask us, hey, when listing my property, what value do you bring? Obviously, we’re going to put the listing in the multiple listing service, but additionally, part of that is we’re going to do is help navigate the appraisal with our expertise and our industry relationships.”
As a listing agent, your careful systems, research and data collection lead to a well-priced property and a solid closing. As a buyer’s agent, the same value proposition applies—your greatest strength is your knowledge and a keen eye for nuance.
Looking to the future: technology and appraisals
As we look ahead, it’s clear that technology will play an increasingly significant role in the appraisal process.
On the appraiser side, Nick shared his excitement about upcoming changes: “What you’re going to see with AI is that it’s really going to change the entire industry. There’s already the tech out there where the appraiser, or they call them ‘data collectors’ too, in the future, will walk through a property, they’ll scan it with their phone, and it will measure the whole property. It will collect all the information they typically collect manually.”
For agents serving buyers and sellers, Niko cautioned against over-reliance on automated valuation models: “I would take all of those automated technological things with a grain of salt. It’s still going to come down to having a human being who knows the process, who knows the property, who knows their market, to be able to come in and speak to the nuances of one particular deal versus another.”
As Chicago real estate professionals, staying ahead of these technological advancements while maintaining the human touch will be crucial for success in the evolving appraisal landscape.
In conclusion, mastering the art of appraisals is about blending deep market knowledge, strategic preparation and strong industry relationships. By embracing these insights and staying adaptable in the face of change, you’ll be well-equipped to navigate the complexities of Chicago’s real estate market and deliver exceptional value to your clients.
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