Appraisers' Free Forum

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Yun said the appraisal problem is serious. “Lenders are using appraisers who may not be familiar with a neighborhood, or who compare traditional homes with distressed and discounted sales,” he said. “In the past month, stories of appraisal problems have been snowballing from across the country with many contracts falling through at the last moment. There is danger of a delayed housing market recovery and a further rise in foreclosures if the appraisal problems are not quickly corrected.”

NAR President McMillian said

we need realistic appraisals that are based on proper comparisons and done by a local specialist,”

Question...is that a code word for "we want appraisers we can influence"?

Ter,

NAR has a specific Public Policy with respect to pressure on appraisers:

HERE

Excerpt:

I'm a Realtor®. What does this mean to my business?
NAR's appraisers ought to be able to appraise properties fairly and accurately without pressure to meet a target value. Such pressure jeopardizes the integrity of the real estate transaction. Furthermore, consumers ought to be able to obtain a copy of their appraisal before closing.

NAR Policy:
In 2002, NAR adopted policy that would require lenders to disclose the appraisal, and the methods used to the borrower. In 2005, NAR adopted policy that would: 1. Prevent those involved in the real estate transaction from improperly influencing the appraisal; 2. require lenders to get a physical inspection of the property for higher cost loans; and 3. increase the Appraisal Subcommittee's accountability to Congress, while opposing the expansion of the subcommittee's regulatory authority.

Once again, the onus is put in the wrong place.

USPAP states that we must be geographically competent or make ourselves so. This means that these appraisers perhaps should not accept these assignments.

As usual, the NAR palys the game of situational ethics very well, "local specialist" can be defined as "obedient lap dog on a leash".

I believe that this is code for trying to influence the appraiser at least by eliminating certain appraisers from the ability to complete assignments. I am a Realtor (don't sell) and have been for 25-years, and have always been active with my board. As such, I hear the griping and the shirt ripping and hair pulling, but it is these self-same Realtors who managed to get me off of most of our local lenders panels over the years because I actually reported condition and didn't pay attention to sales price of the subject (funny, they referred me tons of ERC and divorce work, or when they wanted to really get a handle on the value; what does that tell you). Frank, I know you are in the trenches and hear some of the same things. Granted there are a lot of good ethical Realtors, maybe more so than pushy ones, but I am constantly disheartened by the bickering I hear from agents over appraisals. Back when I first started selling real estate, and even my first 5-years or so as an appraiser, if the house didn't appraise at sale price, the deal simply got negotiated or fell apart.

Absolutely appraisers should not be covering areas they are not familiar, or spend the time and gain the knowledge, but I see the NAR fuss as a way to keep the agents in the loop of putting a strangle hold on a number of good appraisers.

I thought, for the fun of it, I would rewrite Nun's statement a little bit. My changes are in red.


Yun said the BPO problem is serious. “Lenders are using real estate agents for BPOs who may not be familiar with a neighborhood, who have only been a real estate agent for a few days or months, or who compare traditional homes with distressed and discounted sales, or even worse homes that are worth significantly more than the subject property,” he said. “In the past months, stories of BPO problems have been well hidden across the country with many contracts being supported by bad data/BPO. There is danger of a delayed housing market recovery and a further rise in foreclosures if the BPO problems are not quickly corrected.”


BACK TO ME AND MY OPINION.........

I do think AMCs could help the industry, if they would keep orders for appraisals to within a 10 mile radius of the appraiser's office. There are times this would not be possible, but if they get an appraiser from 50 miles away, they should explain, explain, explain why they could find no competent & qualified appraiser closer to the subject property (not having one on our magic 'turn time' and 'low fee' list is not a sufficient answer).

Agree tel (last point) other than 10 miles is unrealistic in most instances unless in a very urban location. Make it 25 and you have a deal.

You say 25 just because there is very little civilization in Meechigun. ROFL I would suspect a mileage criteria would be based on the area. Some places it probably needs to be 50+ miles. But in my little area of 3 counties there are 400+ appraisers. I can't count the number of times I have reviewed an appraisal by someone from 120+ miles away...or heard of it.

I got no grief with a specialty appraiser running all over the state because he/she is specialized. But let's face it, 90% of the residential appraisers are not truly specialized.

Or maybe the solution is for the AMCs to limit the appraiser to their own county or an adjacent county. (I live on a county line and there is a 3rd county 5 miles west of me.) I guess I just flat do not like an AMC picking an appraiser from 30 miles away because he will do the appraisal for $140, when there are a ton of appraisers in the local area. (Sorta goes against the free market concepts doesn't it. Oh well JMO.)

Damn there is some meat left on this horse. Let me get some!

I'm feeling your pain Tel! I sit on my hometown BOE and we are currently wrapping up our hearings. Last year we heard about 425 which resulted in effecting about 1,500 properties. A decent sample of property owners submitted appraisal reports with their appeal. Many of the reports were actually done for either a refi or a purchase. I was amazed at the number of the reports where the appraiser was from another part of my Commonwealth. I even had one where the "signing" appraiser came from Rockville, Maryland. The strange thing was that property owner showed me the card that the appraiser who actually performed the appraisal which had a 804 area code phone number on it. That area code is from the western part of the Commonwealth! Weird.

This year we had only about sixty to hear; quite a few brought in reports and several where from outside the area. The reports were missing "details", lots of generic statements/filler b.s. (pet peeve of mine) and overall just plain sloppy.

I think Mako summed up many of the problems quite nicely in another thread. I am a firm believer that over the past seven to nine years, Appraisal Boards across the country dealt new licenses like a dealer at a poker table. I have expressed my feelings about that to several past and present board members (one I talk to everyday and signs my paycheck) with little debate. I can point to about five appraisers in my area alone that I have no idea how they met the requirements to obtain a license. One element that took advantage of this circumstance was the "sweat shops". Can't say that I could blame them. After a while, the kid with the new license and little guidance figured out he/she could make a better living on their own. And violia, you can't swing a dead cat around your head without hitting a residential appraiser. These kids gotta eat and buy the Infamil; so they figure with a good computer, quick keys and canned statements, whats wrong with pumping out twenty or so a week at $140. I was hoping the slow-down in 2007 and 2008 would kill off a few but the damn people survived like roaches.

This story, posted by one of our old friends, tells the whole story vis a vis geographic competence. It also puts the lie to the idea that under HVCC the real estate agent cannot have any influence on the choice of appraiser.

http://appraiseractive.blogspot.com/2009/06/competency-wins-one.html

I posted this elsewhere but am going to repeat it here. I do not believe the HVCC is responsible for out-of-towners doing in-town appraisals.

As a 25-year veteran of the real estate community, 20 of which have been as a full-time appraiser, I can say unequivocally that at least the past 18-years have been plagued by appraisers without geographical knowledge appraising in my market area (Ann Arbor MI). I used to run into them all the time at assessor's office or the Board of Realtors where they were trying to gather data. That at a time where there were at least 15 local appraisers with lots of experience who covered the area. When queried about their knowledge, they were typically inexperienced appraisers who were simply trying to pick up any assignment they could, or their supervisor sent them distances to feed them work.

The HVCC does not change this. It isn't that all of a sudden these appraisers from 100 miles away stop coming (or start coming as is the implication) into areas they are not familiar. This has been ongoing for years. Some AMCs limit appraisers to covering one county, or only adjoining counties, but that can make up a very wide swath of territory and does not guarantee any level of competency.

The HVCC is far from perfect and needs modification. AMCs need to start hiring appraisers to complete assignments based on several factors including experience, quality, ethics, and geographical knowledge. The AMCs need to pay the appraiser the equivalent of their old fee when not working through an AMC and allow them time to complete their due diligence on the appraisal (at least 4 working days in my opinion). That would attract the experienced appraisers with significant education to want to work for the AMC instead of attracting the newer appraiser who is simply happy to get some work. If there is a push from the lending side to have the work product slow down a bit, and to insist on quality reports by experienced appraisers with geographical knowledge, it should turn around some of the complaints. It appears that AMCs hire who they can and require quick turn around based on their clients desires, not necessarily their own, so it will take the lending side insisting on this to help it become reality.

The HVCC is doing something well, which is to take the pressure off the individual appraiser from the lending side. I see this in ample evidence in the press with lenders and Realtors complaining about not being able to use their "go-to" appraiser who always hits the number (reading between the lines, but it is pretty clear).

Lastly, AMCs are NOT mandated. A bank that maintains its own appraisal staff, free from any influence from anyone who earns their living based on the outcome of the transaction, does not need to send through this third party AMC. I predict that there will be a shift back to individual lenders maintaining a qualified appraisal department again. AMCs have been filling the capacity of the old bank appraisal department but are much larger in general than the old system.

tel wrote:
BACK TO ME AND MY OPINION.........

I do think AMCs could help the industry, if they would keep orders for appraisals to within a 10 mile radius of the appraiser's office. There are times this would not be possible, but if they get an appraiser from 50 miles away, they should explain, explain, explain why they could find no competent & qualified appraiser closer to the subject property (not having one on our magic 'turn time' and 'low fee' list is not a sufficient answer).

That may work for urban and suburban appraisers, but for us rural appraisers that just won't do it. We routinely appraise in areas 100+ miles from where we live. That is just the way our business is ..............

Corporate Lackey wrote:The HVCC is doing something well, which is to take the pressure off the individual appraiser from the lending side.

And, putting it on them from the ordering side. Local appraisers tell me there is more serious pressure now because the ordering function is concentrated in just a few hands rather than spread among hundreds of lenders. Since stuff still flows downhill, the lender pressures the AMC who pressures the appraiser. Only difference is that if the AMC pulls your card its a larger portion of the business. Now, I don't know any of this from a first hand basis, it is just what all the local residential guys are saying.

Steve Owen wrote:This story, posted by one of our old friends, tells the whole story vis a vis geographic competence. It also puts the lie to the idea that under HVCC the real estate agent cannot have any influence on the choice of appraiser.

http://appraiseractive.blogspot.com/2009/06/competency-wins-one.html

Hey!! I'm not that old.

I just returned from a meeting with NAR folks in Chicago. The HVCC is an extremely hot topic with NAR leadership. There was some concern expressed about how Yun's comment came out, and acknowledgement it did not come out right and gives the wrong impression.

I've got more news, but have to get some work done after two days out of town. The one piece of news I can provide is that Frank Gregoire has been appointed as Vice Chairman of the NAR Appraisal Committee for 2010. I last served as Chairman of the Appraisal Committee in 2002. You can count on the Appraisal Committee being a squeaky wheel for the next two years.

Congrats Frank!!!!!

I'm glad you're there! We need you.