Exercise Caution When Communicating with Appraisers

The situation is not unfamiliar. You represent a buyer that is in contract to purchase a home. Your client’s financing is contingent on the property appraising at or above the agreed upon purchase price. As your client moves through the steps necessary to close the transaction, you learn from your client’s lender that the property did not appraise. You know this neighborhood, all of the properties, and the recent sales. Believing that the appraiser may not have conducted thorough research in reaching their value conclusion, you reach out to the appraiser to discuss the comparable utilized, adjustments made, and conclusion reached. No problem, right? Not so fast.

A provision in Ohio law (regulating the appraiser profession) prohibits a person from attempting to influence the independent judgment of an appraiser. Specifically, R.C. Section 4735.12(E) provides:

No person, directly or indirectly, shall knowingly compensate, instruct, induce, coerce, or intimidate, or attempt to compensate, instruct, induce, coerce, or intimidate, a certificate holder or licensee for the purpose of corrupting or improperly influencing the independent judgment of the certificate holder or licensee with respect to the value of the dwelling offered as security for repayment of a mortgage loan.

Depending on the tone and context of your conversation, the appraiser could believe that you are improperly attempting to influence his/her value conclusion. If you suggested the appraiser, consider other comparable or different adjustments. The appraiser might feel pressure to alter their independent judgment of value. This is exactly what the law aims to prevent. The consequences for violating this law are significant. R.C. 4763.99 sets the penalty at a fifth-degree felony.

Recently, the Superintendent issued an advisory letter to a broker for conduct that could be interpreted as an attempt to include an appraiser. At the conclusion of an investigation filed by an appraiser, the Superintendent advised the broker to be aware that her comments to the appraiser may be interpreted as a violation of Ohio law. The Superintendent cautioned that the broker’s conduct could have resulted in a license law violation, a possible criminal charge, and may affect the underlying loan. The Superintendent suggested the broker be more careful in comments made to an appraiser regarding a recently completed appraisal.

To avoid any suggestion of impropriety, licensees should avoid any conversations with appraisers regarding assignments of which your client may have an interest. Such will permit the appraiser to provide an independent assessment of the property’s value without any cloud of improper influence.