PVI Program: 3 Proven Steps to Improve Appraised Values
“A written statement independently and impartially prepared by a qualified appraiser setting forth an opinion as to the market value…”
Before we list the how-tos of increasing appraised value, let’s make one thing very clear – an appraised value is not something that is black and white. In fact, if any color at all can be used to describe an appraised value, it is most assuredly GRAY. The fact that the Federal Deposit Insurance Corporation (FDIC) defines an appraisal as “an OPINION as to the market value” tells you everything you need to know. With an “opinion,” there are no absolutes. It’s not like setting something on a scale and reporting its unarguable weight. Appraisers use data to make assessments; how an appraiser assesses that data results in an opinion of value.
In reality, there is much that can be done to fairly and ethically present a property in its best light with reputable data to support superior values. While there are no guarantees that following these guidelines will produce substantially higher values every time, one can be fairly certain no attempt at all will provide poorer-than-expected outcomes. The degree to which this process can make a difference is best illustrated by the case study below. However, before we get there, let’s go through the steps which are known as CMAC’s PVI (Proactive Valuation Improvement) Program.
- Be Proactive – Contact the lender to learn which appraiser is evaluating your property. Provide them with material to assist in their report (e.g. rent roll, proforma, existing leases). A local appraiser, versus a nationally recognized firm, may lack “relevant” experience with your building type. Don’t be afraid to challenge the lender on selecting a different appraiser if necessary.
- Gather Data – The appraiser should provide a list of documents needed to generate their report –documents vital for accuracy. You might need to dig up past surveys, favorable appraisals, or building expenses. What you provide will yield a better result versus the appraiser utilizing a conservative assumption. Communicate any improvements to the building such as generators, HVAC upgrades, reinforced flooring, or shielded walls. Include any historic costs; do not assume the appraiser will be able to accurately estimate the cost of construction.
- Be an Advocate – There are three methods used to determine a building’s value: Cost Approach, Income Capitalization, and Sales Comparison. Cost and income approach require certain data points in order to validate, which simply may not be available. Thus, the appraiser will likely focus heavily on the Sales Comparison approach as it is ubiquitous, dealing purely with recent market transactions. Make your appraiser aware of any similar buildings recently built or sold at favorable values in your area. Illustrating the growth and development in your area can only help.
For further information on this program, contact Sirena Madden at email@example.com or 407-264-7258.