When hiring an appraiser it is important to hire someone with local knowledge and understands the neighborhood he or she is working in. As a homeowner, it may seem it is out of our control since appraisers are usually chosen by an AMC (Appraisal Management Company) who vetts and approves the appraiser for work with their lenders.   Some AMC’s will use appraisers based on their proximity to the property they are appraising, which is a good thing for all parties. But there are still a good amount of AMC’s that will hire appraisers based on their lower fees and will broadcast the appraisal work to the lowest bidder which includes appraisers from sometimes 90+ miles or more away from the property they are appraising. The AMC’s do this to reduce the amount they will pay for the appraisal but still keep a large portion of the total fee paid by the consumer. This doesn’t bode well for the majority of homeowners and here are a few reasons why;

• School districts, Property tax, and special assessments – It’s important to really know the neighborhood you are appraising in. There can be subtle and not-so-subtle differences from neighborhood to neighborhood which can drastically influence value. An out-of-the-area appraiser may not realize these differences which can make a huge difference in the opinion of value. For instance, if your home is located in a top-rated school district and the appraiser uses comps from an inferior school district can negatively affect your value. I have seen it before where a school dividing line may be near a home and the appraiser wrongfully uses comps from a different school district. Homebuyers will often pay much more to be in a good school district which saves them from spending money for private schooling if education is a priority. Another example, encroaching on different neighborhoods within the same city that has different tax rates and assessments. When buyers know they will have to pay much more for property tax and assessments it will drastically factor in on whether or not they will be willing to pay more or even buy into this neighborhood. Using comps from a different neighborhood with different taxes and assessments can convey poor results on an appraisal report. In both the example of school districts and property tax assessments, I have personally seen huge differences in value in only a matter of blocks, not miles. A local appraiser who lives and works in the area will be able to identify the differences and use the proper comparable sales that are most similar and best reflects your home.

• Local building requirements and architectural styles. Different parts of the country as well as different parts of your state and municipalities will have different building requirements and different architectural styles. In some areas of San Francisco, Victorian and Edwardian homes are typical. They were typically built over 100 years ago and have an architectural style that no longer exists with new construction and is long forgotten. These types of homes require special attention and using comps with vastly different architectural styles will not cut it since the typical buyer won’t view both types of houses as equal. Buyers normally will have a preference and will pay more or less for a style they like. In many parts of Southern and Northern California, there are many mid-century modern homes. This is a unique type of architectural design with different building materials and designs compared to your typical ranch home. A typical buyer who is looking specifically for an Eichler home (Mid Century Modern famous Architect) will not think a standard ranch home is comparable. I have found in my experience that people either love or hate mid-century modern homes. If you were to look at an appraisal report and notice standard ranch homes as comparables for your mid-century modern home, you probably wouldn’t approve as the maintenance, design (no attic, no crawlspace, custom floor to ceiling windows, radiant heating, etc.), and flow are completely different, to say the least. Different municipalities have a vast array of regulations governing what is allowed and not allowed on your premises. In some areas, accessory units are legal, fully built out basements with additional rooms and bathrooms, and little to no setbacks are allowable. While others have strict regulations against them. A local appraiser will have likely done their homework and understand the differences over one that is not familiar with the area. Furthermore, if you are getting an out-of-town appraiser who is working for a low fee, he or she may not be inclined to spend the extra time researching your design and local building codes.

• General understanding of planning/redevelopment – A local appraiser who has lived and worked in the area has most likely seen the neighborhood go through significant change. I live in the city of San Diego and it is constantly changing from year to year. What once was open-land has now been developed (maybe several times over)! With change (either negative or positive), will have a significant impact on value. An appraiser who knows the past and the future of what is planned for your city will also understand how it is affecting values due to a shift in sale prices. Some areas in San Diego have been re-zoned to allow different types of buildings whether it be residential, commercial, mixed-use, etc. Understanding the local planning and development is something that a local appraiser would understand more so than an out-of-town appraiser as the local appraiser is your neighbor.

There are many more reasons to hire a local appraiser. I have only highlighted a few of them above.

What can I do as a consumer?

• Request a local appraiser – It may seem like you don’t have a choice in the matter. You obviously can’t hire your neighbor who happens to be an appraiser because of conflicts of interest. But you can request that your lender utilizes an appraiser that is local to your area and has experience appraising in your neighborhood.

• If you are doing a private appraisal for a divorce, estate, PMI removal, bankruptcy, or just for an estimate of value, always look locally first as an AMC is not required for this. Interview the appraiser over the phone or email, check their website, and make sure your neighborhood is one they service regularly.