Just the beginning for appraisal 'mess'
Letter to the Editor
By Inman News, Thursday, June 4, 2009.Re: 'Appraising the new appraisal problem' (June 3)
Dear Editor:
It's a mess already and it only just begun. I am going through an appraisal right now on a property in the city of Brea in Orange County, Calif.
The lucky, random chance drawing for an appraiser brought me one from another county -- 28 miles and four cities away. He, not knowing the neighborhood, pulled in comparable and sold properties from another city -- one mile from the subject property. Well, guess what happened? On a fast sale of the property at $400,000, the "value," and I must use the term loosely, came in $60,000 low.
Now that we as the agents for the sellers and buyers can't talk to, discuss or ask any questions of the expert appraisers, just how is the road to real estate stabilization and buyer confidence in the home-buying process going to shape up?
Larry Gibson
First Team Real Estate
Fullerton, Calif.
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Submitted by David Gorman on June 5, 2009 - 3:19am.
Appraisers make many errors in their data collection and analysis so it is good to review the appraisals rather than accepting as face value.
David Gorman/Broker
Cashback Realty.com
(Offering discount real estate to home buyers.)
Submitted by Margaret Summers on June 5, 2009 - 3:26am.
My understanding is that we are allowed to talk to appraisers...they are just not allowed to talk to lender.
Submitted by Emmanuel Scanlan on June 5, 2009 - 4:04am.
The new appraisal rules were to protect the consumer and prevent the appraisal debacle that help contribute to (not the root cause of) the current housing mess. However, it is another example of creating new rules and laws as a knee-jerk reaction to a problem instead of using/strengthening/enforcing existing rules and laws.
The only purpose of the new laws was to make politicians look good in the eyes of the consumers and appease the Appraisal Management Companies. The AMC's will now control and make loads of money not only off the backs of Appraisers but also will be detrimental to consumers. AMC's will wreak havoc with the market in a different way and will take years to stop.
Emmanuel J. Scanlan
PS Inspection & Property Services LLC
www.psinspection.com
214-418-4366 (cell)
TREC License # 7593
International Code Council, Residential Combination Inspector #5247015-R5 (Electrical, Mechanical, Plumbing and Building)
Certified Infrared Thermographer (ASNT-TC1A Standards)
Texas Residential Construction Commission, Third Party Warranty Inspector #1593
Texas Residential Construction Commission, Inspector, County Inspection Program
Texas Department Of Insurance, VIP Inspector # 08507061016
Hayman Residential Engineering Services, Field Technician
CMC Energy - Certified Energy Auditor
Knowledge is power, but sharing knowledge brings peace!!
Submitted by Gary Leogrande on June 5, 2009 - 4:54am.
It really is a mess with dramatic repurcussions for Buyers, Sellers and Agents. This week I spent hours tracking down a Review Appraiser for one of my listings. It actually took 21 days from date of appraisal inspection to date of submission to the underwriter. When questioned about where the appraisal was, the appraiser said he answers to no one and is not allowed to give any details.
Submitted by John Rakoci on June 5, 2009 - 4:57am.
Random drawing of appraisers is a good idea. Sadly, there is no method in place to see they are based within a reasonable distance of the subject property. In some areas 25 miles or more is sufficient, in others 5 miles should be max.Another govt program where the consumer can be hammered.
Submitted by Timothy Countryman on June 5, 2009 - 6:45am.
A while back I met an appraiser from 200 miles away from a subject property. When asked he said he has worked in 23 counties for over 20 years, and was completely confident in his ability to do his work properly in this municipality. It was difficult for me to share that confidence.
In this particular community, values can vary by a factor of 3 or more within a mile due to neighborhood considerations. I am uncomfortable offering opinions of value in a community 20 miles away because sometimes subtle factors can have a significant impact on a property’s value. Local factors can change, and if we don't have our thumb on the pulse of a community, values can be impacted without us being aware. These factors are an important part of interview process with owners as we prepare to establish a listing price. Yes, we have the tools to price and list properties over a broad geographic area but without local understanding we are not being professionally conscientious.
It is not uncommon to find an appraiser who is unfamiliar with a neighborhood. It is our duty to our client to be prepared for that possibility. A suggestion for dealing with this is to offer appraisers your own comparables. They may not take them or use them, but sometimes they are gratefully accepted.
Appraisal is not as easy as comparing numbers. Understanding neighborhoods and community are equally important. Not understanding this is shirking professional ethics.
Timothy Countryman, GRI, CRS, CRB
Licensed Real Estate Broker/Owner
Countryman Real Estate Associates
www.CountrymanHomes.com
Newburgh, NY 12550
Submitted by Christine Donovan - Costa Mesa Real Estate on June 5, 2009 - 11:14am.
The government wanted to be sure the appraisers weren't influenced, but now it seems they're not held responsible either to those who truly understand their valuations.
There are many great appraisers out there, but now those who know who they are and appreciate their knowledge and professionalism can't use them.
www.livingcostamesa.com
Submitted by M C on June 5, 2009 - 2:08pm.
The HVCC was the result of a failed lawsuit by yet another incompetent NY attorney general (NYAG)Cuomo. The lawsuit was against the country's largest appraisal management company (AMC) eAppraisalIT allegedly inflating appraisals. Never did the NYAG present any data of facts on his allegations. Oddly enough, the AMC's are still running the show.
The NYAG then fired this guns on Fannie & Freddie as their stocks tanked in March 2008--6 months before Fed govt takeover. The weakened Fannie & Freddie capitulated to the NYAG's political headliner HVCC. The NYAG did not go after his FHA & VA loans because they strength was raising in housing crises. He could not figure out how to make headlines for himself attacking HUD.
The National Association of Mortgage Brokers (NAMB) were the only group that shouted from the rooftops and into the courtroom attempting to stop the attack on consumer choice and control. NAMB filed the lawsuit against Fannie & Freddie. President Obama told the court his administration was above the law and did not have to respond to lawsuit as long as Fannie & Freddie were under the conservatorship of the federal government.
So here we sit today. Realtors and Consumers are beginning to wake up to the screwing of the consumer and Realtors' commissions are being affected by the defective HVCC. A policy that strips away appraiser accountability, consumers have fewer choices of loan providers because Mortgage Brokerage companies can no longer order their client's appraisals (only banks are going to look out for the consumer--boy do I have a credit card deal for you)and consumers pay more for delayed and low-balled appraisals.
Next President Obama will tell us that our Doctors can not talk to us because they tell patients what they want to hear when they talk to each other. "Doc, make sure you only tell me I do not have cancer." President Obama will set up Doctor Management Companies (DMC) that will charge higher fees for doctor visits and will act as the ethical wall of conversation by interpreting what a doctor really meant to say after they review the doctor's patient report.
First it was banks and insurance companies being told by fed govt how they will run the companies, then real estate appraisals, then automobile companies and the cars they will manufacture ,then it was the courts being told the fed govt was above the law,now they have their guns pointed at your doctor, what will be the next?
Stand up America and yell out your windows that you are mad as Hell and you are not going to take the federal government taking over our Choice & Control. The federal government is not smarter nor more efficient then the citizens they are suppose to represent; not control.
Hell No HVCC!!
Submitted by michael Espiritu on June 5, 2009 - 3:46pm.
The new appraisal rules should never have been necessary but due to shady dealings these are steps that are welcome.
I think it is ridiculous that appraisers from outside an area that they are unfamiliar with are doing local appraisals and using data that is not relevant. I had an appraisal that showed the RV parking on the wrong side of the house and almost every word was misspelled on the report. It makes it hard to question value when you have to refer to an unprofessional report.
An appraisal should be an estimate of value with no price in their mind at all. a truly independent valuation.
Lenders, agents, buyers or sellers should never have any influence on an appraisal. If I question an appraisal I have the comparable data to back up my value. Many agents do not know how to correctly price a property and simply list a property for the price the seller dictates not what the market states it should be.
In the Inland Empire section of SoCal there has been overbidding on properties in order to obtain the property. If the property will not appraise and you as the agent know it won't appraise then that should be communicated.
There is enough comp data in my area that appraisers really should have no problems getting true and accurate data.
Stop making excuses and do your job accurately and with integrity!
Submitted by Gary Crabtree on June 5, 2009 - 5:42pm.
As an appraiser of 48 years, I am appalled by the HVCC and the "shoddy" work and values that it is producing. Many of us, will be driven from the profession. Why? Its a matter of MONEY. The typical appraiser BHVCC (before HVCC) would charge $350 to $400 for a complete, creditable appraisal. Now that the AMC's have their hand in the "cookie jar", the appraisers fee has been cut to $175 to $250 (mostly $200). By the way the big AMC's are owned by the banks and/or title companies. The order is sent to all appraisers on their list and the first one that accepts, gets the job, regardless of his geographical competency. Also many AMC's requre appraisals to be completed in 5 (calendar) days so if you get the order on Friday, its due by Tuesday and/or 24 hours after your inspection, regardless if you have all of your data available and confirmed. The appraisers that are accepting this work are "newbies" and have never been through a market recovery in thier lives and they still are making market adjustments at 2-3% per month, hence the "low ball" appraisals. Talk about client pressure, now its coming from AMC's and they don't give a rip about values, its all about MONEY and turnaround times.
PS: To the previous poster: these are not excuses, they are facts. You try doing your job accurately and with integrity when you have operate under this kind of pressure for half of what you were making.....
How much do you want to bet that Cuomo has his finger in the AMC pie?
Submitted by Matthew Gloege on June 5, 2009 - 10:16pm.
Re: Your comments "in Appraising the new appraisal problem" I have held an Oregon brokers license, past member of the Realtor's Board and hold a State Certified Residential Appraiser's License. Member Community College Advisory Committee (occasional substitute teacher) experience in the Portland, Oregon market for over 35 years, own my own company --yada, yada yada, I didn't just fall off the turnip truck. Lotsa good comments folks.
Realtors: try this. It's a little expensive but should work. Bring your own experienced, honest, knowledgeable appraiser to the appraisal inspection after you hired her/him to do a full FannieMae appraisal on your sale. Give the appraisal report to the AMC appraiser and suggest to the AMC appraiser that he/she hire this appraiser as a licensed contributor to his/her work and use the information in the first report to base his/her report on. You will have already advised your appraiser what they are being asked to do and paid for the first report anyway so your appraiser shouldn't have any objections. Relax, it can all done legally in accordance with USPAP with proper disclosures - (incidentally, we all know how to do it!!) Remind the AMC appraiser in front of your appraiser that the "Competency provisions" of USPAP also include geographic familiarity and if they are working for 1/2 the fee and driving 25 to 50 miles for the privilege they might just like having half their work done for them. Courage!! You can sell this thing!! We are all willing to give a selling Realtor a seller's bonus in a tough market -- why not skip the bonus or part of it anyway and spend it on some good professional help. By the anecdotal way, someone in the Appraisal Institute calculated that if Appraisal fees had gone up in the last 10 years or so on a par with everything else (haircuts, groceries etc.) that the typical appraisal would cost in the neighborhood of $950. I work for about half that and since Fannie Mae keeps adding more and more useless statistical gathering forms to their special appraisal requirements and the AMCs want me to work for half of what usually get anyway I stopped doing Fannie Mae work. Niche markets all over the place. Of course you have to actually do some sales work to get that kind of stuff -- you actually have to get off auto pilot and think about "salesmanship". These are the type of people the AMCs are ending up with people that don't want to bother thinking; its actually part of their sales pitch -- "Ra ra ra! Come with us, we'll manage all the administrative stuff etc. etc. etc. and you won't have to do anything especially including thinking about your business!" In reality they do NOT save work they increase work. I have spent years firing lenders of all types for putting some rather disagreeable pressure on me for values. The AMCs were supposed to stop that. Now I am beginning to hear stories about some appraisers that are being threatened by their AMCs to get their values up or they will not be getting paid. Anyway, after firing a bunch bunch of lenders over the years I've managed to collect a dozen or so top professional lenders who see the value in an honest professionally done appraisal. I call them my client base. My entire client base vaporized last month. What would you do if ever person you ever sold a home to -- I'm assuming you kept the best and culled the complainers out of your list -- vaporized. Now they can't call me anymore nor can they even hint at having the AMC hire me.
Submitted by Bruno Skopinich on June 7, 2009 - 4:39pm.
Here is an idea...
When the deal falls apart, and it is due to the appraisal coming in Low...
Just SUE them!
Sue the appraiser and the Management Company!
I hate lawsuits... but perhaps the remedy would be to make this regulation more chaotic so as to get the politicians attention.
This is why people like ... Andrew Cuomo must Not have a Future in politics! He started this mess... just so he looks good for his next political appointment.
This regulation is a "Restriction of Trade" I believe that is an FTC violation. But I am not a lawyer.
Submitted by Matthew Gloege on June 7, 2009 - 10:18pm.
Here's another one that might work.
Revoke HVCC and let Lenders go back to the original way. Pass a universal federal banking law that goes something like this, "It shall be a felony punishable by a $10,000 fine and mandatory five years in prison for an appraisal value, of any kind and in any form, to leave an Appraiser's office by any means until the fee for that appraisal be paid in full and the instrument of payment cleared the issuing institution."
Let me know when you've picked yourself up off the floor an I'll continue.........
Attorneys and Auditors: Now if the appraisal comes with incorrect comp choices, calculations, justification and/or USPAP violations (not "low" which is old time lender pressure speak) then it can be reviewed and God help the appraiser who is just throwing things against the wall. A State Board Audit, let alone the resulting law suit, will cause that person to (how do I say this charitably).... have to find a new line of work. If the appraiser already has his money and intentionally misleads then it also becomes a con game -- FBI?
Appraisers: If there are 500 Fannie Mae appraisals a week in an area there will still always be 500 Fannie Mae appraisal in a week no matter how many lenders threaten appraisers with "no more Business for you". The math doesn't lie. When faced with that kind of pressure the appraiser can calmly say "OK" I've already been paid and am ready to take the next order. Your next order will not have any pressure attached to because your next paid order will be coming from a lender who just fired your competitor and vice a versa. The math doesn't lie.
"We won't be able to send you your fee until you get it 'right'" will be a thing of the past because the appraiser will already have their fee. "....getting it right" is institutional blackmail. Maybe we need some social engineering here, to protect the little guys from the money lenders.
Incidentally, all you non appraiser types, this kind of lender pressure is rampant, typical and frequent. New loan officer: "If you get paid up front we loose all our leverage." Actual quote. When asked for the source of that information I was told, "They taught us that in class" Actual quote.
Brokers: how would you feel when sitting with a seller in escrow and at the last minute they turn to you and say something like "I want you to cut your fee by 85% or I walk" (and you know they mean it!!)
Lenders: Rate quote competition is a circus. Granted, its not very agreeable to find the appraisal confirming that your applicant applied for too large a loan (ie. the appraisal came in "low") and you must find a new client. But, then again if your applicant pays at the door you don't have to worry about paying for an appraisal when there are no funds out of a non existent closing. Anyway here's the big one: the applicant pays the appraiser at the door and your applicant stops shopping rates! Experienced loan reps are often thankful for a mechanism that finds out how serious the applicant really is.
We need to stop vilifying one another and all legitimate lenders, appraisers and brokers combine forces and remind Fannie Mae that it just had a good idea that doesn't work. Ever have one of those?
Our government has never had a problem passing social engineering mechanisms. Buy'n on time is a hallowed American banking tradition but does such a tradition really strengthen the integrity of the appraisal process? Nothing's perfect but paying the appraiser up front would solve many more problems than it would create.