Realtor BPOs don't devalue properties
Letter to the Editor
By Inman News, Tuesday, March 16, 2010.Re: 'NAR defends BPOs' (March 15)
Dear Editor:
It is amazing to me that appraisal companies are implying or accusing licensed Realtors who provide broker price opinions for lenders of devaluing properties.
In our part of the country, the appraisers are the ones who are giving low value to properties, even in cases where the buyers and sellers have agreed on the price. I thought that was what a free market was about.
Our local Realtors are more familiar with the local market than the appraisers, who often come into our market from a different area.
The North Carolina Real Estate Commission does limit licensed real estate agents when doing BPOs. BPOs must only be done when the Realtor is attempting to secure the business of the principal seller, whether it is a builder or a lender.
We acknowledge that we are not appraisers and a complete appraisal must be done by a licensed appraiser.
Thank you for keeping us updated.
Allaire Cramer
Weichert Realtors Craven & Co.
Concord, N.C.
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Submitted by Joseph Marovich on March 16, 2010 - 3:05pm.
The appraisers saying they should be the ones doing BPOs is akin to attorneys saying REALTORS should never fill in the blanks of an attorney approved contract because we're practice law. Allaire's comment is right on target as to where the appraisers sometimes come from in relation to the subject property.
Joseph Marovich, ABR,ASR,e-PRO,GREEN,GRI,PMN,RSPS,SRES
Inductee REBAC Hall of Fame
MAROVICH BUSINESS INSTITUTE
www.MarovichBusinessInstitute.com
732 961-9618
Submitted by Chris Manning on March 17, 2010 - 3:13am.
No question, Allaire's comments are right on target particularly when the appraiser is doing a blind value.
They claim they are conservative and somehow that implies disciplined. So they render a value that is low and sometimes stupid low because they are, quite frankly, afraid of being audited, reviewed and, in general being called out on the carpet to justify their values. When they sign off on an appraisal they might have to justify their value and their methodology years later. It is classic CYA behavior.
Part of this fear is justified in the broader sense: we are coming off a period where some of their brethren were easily led to adjust their values to appease big customers that 'needed to get them up' to make the deal work. There were a few among them that were on the take altogether and - well - the fall out was considerable (the fact is that the kind of flip loan fraud at the center of the cyclone of sub prime was simply not possible with a willing appraiser). The resulting witch hunt to eliminate the riff-raff caused the entire community to be on guard; the new buzz word is "conservative" which really means "scared they are going to lose their license."
To the appraiser community if a little "low" is good "a lot low is better." Of course, that is only when appraisers come in low - when agents or brokers do it, we are 'devaluing property.'
Agents and brokers are trying to do business in the market. In many cases we have vested interest in the outcome but we can't pull the values out of thin air - in fact, BPO rules are generally tighter than are the corresponding rules for appraisals. We are engaged in the conveyance of real property and have a vantage point that is uniquely rooted in the trenches. Are we trying to sell our values? You bet we are - we are trying to do business here. Are our values subjective? Sure - and so are appraisers' values. Both are an estimate of value based on their respective methodologies.In spite of what appraisers tell you none of this is science - it is all alchemy. Just turns out agents and brokers are trying to do deals and in my experience that yields better results overall.
Submitted by Charles Jack on March 22, 2010 - 11:28am.
Sorry, but to compare BPO rules as being "tighter" than the corresponding rules for appraisal is just plain nonsense. And I am both a licensed broker / salesman and an appraiser so I have knowledge from both sides of the table.
There is no USPAP, there is no FNMA, FHLMC, FHA rules to follow. There is no UASFLA, ERC, or various state appraisal laws to follow when doing BPO's. Please take about six or seven appraisal regulatory classes (all day courses or multiple day course) to educate yourself about the actual "rules" for appraisal. (In the appraiser's case, in many cases these are actually "laws" that they are required to follow with real consequences for not following them.)
If you want a BPO, great, prepare it in complete compliance with your respective state law regarding BPO's. But don't substitute them for a situation that truly calls for a market value appraisal. And don't prepare valuations with no bona-fide corresponding brokerage opportunity. Then you're just an appraiser wannabe without the requisite liceense and training.
I've got no problems with brokers that want to charge fees for valuation opinions. We have a career path for that. It's called "Appraisal". Take the course, pay the fees, take your license exam, get certified, get your business license, get your E&O insurance, keep your CE up to date, etc., etc. Then you can play appraiser right along side of me all you want. No problem.
How would brokers like it if appraisers could do "appraisal sales transaction consulting" that looked like a duck and quacked like a duck but I wasn't calling it a duck (in this case duck = brokered transaction) so I could get away with it? Would any brokers care? I'm sure they would... That's how appraisers look at BPO's...
That's why I went and secured my broker's license years ago to do transaction consulting and transactions where I was not involved in any valuation duties. Perhaps the brokers may wish to do the same and secure their appraisal license and actually experience what it's like to walk in the other guy's shoes before they comment ignorantly.
"Trying to do deals" is what has created the mess we are in. Actually killing some deals that don't make any financial sense whatsoever is what most of us should have been doing at some point in our careers in the last few years. And this goes for appraisers, real estate agents, brokers, mortgage professionals, title companies, etc.
Charles E. Jack IV, MAI