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Appraisals Making it Harder to Refinance or Sell

Today’s Wall Street Journal reports on the impact appraisals are having on the real estate transaction, whether it be a sale or refinance. The article covers all the current hot topics of the appraisal industry: HVCC, AMCs, and appraiser pressure.

The article focuses primarily on how these factors are influencing the ability to sell or refinance. Making things more difficult is the fact that values are hard to determine in today’s market. One woman’s home appraised at over $600,000 two years ago and just recently re-appraised at $250,000, according to the Journal. Prices are volatile and lenders are pressuring appraisers to be more conservative.

The Journal noted that HVCC prevents some abuses at the expense of flexibility. AMCs are cutting into appraiser fees and one appraiser acknowledged that he received an assignment 100 miles away in an area where he has little knowledge of the neighborhoods.

Comments
  1. Edd Gillespie

    Blame the appraisers? I thought we all figured the recent ups and downs of the housing market were not controlled by what the appraisers say is going on. I guess you are just parroting the Wall Street Journal without a thoughtful comment.
    The real news is that after all of the hard reality lessons sellers, real estate agents and loan officers are still shooting the honest, hard working and well trained messengers along with the fly-by-nights.

  2. Tim

    The HVCC has increased the competition between AMC’s. Since they all provide basically the same service, for an outrageous fee, the only thing they can compete on is turn around time metric. Under this business model little time is available to do a proper valuation. The AMC’s reward 24-48 hour completition times with more business so appraisers who do take their time and properly research and verify are identified by their “TAT metric” and scrubbed from the list of approved appraiser. In light of lower fees many appraisers do not have adequate market data. Membership in MLS boards COST MONEY and these memberships costs that allow for access to data keep going up. Corner cutting all the way around affects the valuation and affects the consumer in the product they receive. Since AMC use is not a REQUIREMENT for lenders (just and added extra unearned profit from joint venture enterprises) I would take a hard look as a Realtor to whom I would place my buyer with for financing. If the lender uses AMC’s I would look for another lender. Especially if that lender uses an AMC that “broadcasts out” valuation orders to all of their approved appraisers within 100 miles and the first one to accept it under the reduced fee and turn time expectations gets the assignment. It almost insures a terrible experience for the buyer.
    Many lenders have gone back to the original FIRREA, TITLE XI regulations that came about after the S & L crisis/bailout and maintaining their own panel of appraisers. These lenders pay full price to the appraiser, maintain oversight and require local competency. Quality valuations without unrealistic time constraint. The lender is STILL responsible for the appraisers that are used under HVCC and whether or not they use AMC’s. In reality the AMC is an additional liability for the lender and this all will wash itself out as soon as lenders realize that they will have to maintain quality control and they cannot outsource it for a profit.
    This is the main cause for poor appraisal quality. Low apraisals are a fact in a declining market and lender pressure on the AMC filters down to the street level appraiser. Since those appraisers are on the road traveling distances for appointments, trying to maintain this stupid TAT metric, and accepting 50% of the usual income, do you think they really have the time or motivation to argue with the AMC on why they used one sale over another ? One mile, 90 days and it doens’t matter if a comparable was a foreclosure or not, what condition, terms or sale, ect. AMC’s dictate terms of assignment those appraisers deliver and move on to the next. They cannot afford to do anything else under this business model.

  3. Wilcox & Associates

    I agree with both of the above comments. I have been appraising for over 17 years, and in that period of time, my fees have not appreciably increased more than about $50, while Realtors and Lenders, as well as Title Ins industry, have fees based on a percent of the sales price or loan amount, which HAVE increased by about 3X (in our area, at least) over that period of time. Even in this economic downturn, prices are still much higher than they were 17 years ago! Now the AMCs and Lenders, Fannie/Freddie and everyone in between, want us to cut our fees while doing more work in a shorter period of time. Fortunately so far, my office has been able to turn down work which doesn’t meet our fee/time schedule, but that may change any day. Why doesn’t the NAIFA and other appraiser organizations stand up more for their members? This HVCC seems more like a measure to punish appraisers than to try to regulate fair and accurate loans based on fair and accurate property values! I agree that AMCs (and lenders) are trying to pressure appraisers to DROP values now, rather than INCREASE values, as had been the case at times in the past, but the fair thing to do is to not pressure the appraiser AT ALL, either way!

  4. Wilcox & Associates

    I agree with both of the above comments. I have been appraising for over 17 years, and in that period of time, my fees have not appreciably increased more than about $50, while Realtors and Lenders, as well as Title Ins industry, have fees based on a percent of the sales price or loan amount, which HAVE increased by about 3X (in our area, at least) over that period of time. Even in this economic downturn, prices are still much higher than they were 17 years ago! Now the AMCs and Lenders, Fannie/Freddie and everyone in between, want us to cut our fees while doing more work in a shorter period of time. Fortunately so far, my office has been able to turn down work which doesn’t meet our fee/time schedule, but that may change any day. Why doesn’t the NAIFA and other appraiser organizations stand up more for their members? This HVCC seems more like a measure to punish appraisers than to try to regulate fair and accurate loans based on fair and accurate property values! I agree that AMCs (and lenders) are trying to pressure appraisers to DROP values now, rather than INCREASE values, as had been the case at times in the past, but the fair thing to do is to not pressure the appraiser AT ALL, either way!

  5. Mark Sherman

    AS an appraiser since 1983 and an SRA with the Appraisal Institute the “curse” of the AMC’s is real. Low fees (they take approx. 20%), the demands of quick turnaround and low fees,a barrage of unrealistic rules and regulations, and the lack of personal contact is further discouraging the honest competent appraisers to leave for alternative jobs. Also, the increased regulations is not really helping. Good underwriters already recognize a good appraisal from a bogus appraisal. Why not enforce the present appraisal laws and standards? Why create more rules and regulations when most dishonest appraisers are still in the business? It is a real shame! And more good appraisers are leaving for other options! The appraisal industry is still in a mess and will not chnage soon! Many will still suffer for the fraud, incompetence, negligence, and unecessary regulations!

  6. Danielle Carlson

    The new HVCC is absurd! For those of us hard working mortgage brokers who believe in accurately quoting a borrowers costs, HVCC has thrown a big monkey wrench into the works. One of the bigger factors that contribute to a borrowers costs is the loan to value. How are we going to accurately quote a borrower their costs without knowing the value in advance. Prior to May 1, most lenders would not accept a file without the appraisal. Now we have to select a lender in advance and it is up to their discretion as to whether or not they will transfer the appraisal to another lender. The new law does not increase transparency, if anything it decreases it. Another point is the advance disclosure. What is the borrower expected to do with the appraisal for 3 days? Are they expected to go out and pull their own comps to see if it is a good appraisal? The whole situation is absurd and HVCC should be done away with. The appraisers did not create the mess that the market is in. It was the rediculous loans that were written by lenders that the taxpayers have now bailed out!

  7. pcloutier

    Appraisers causing problems because appraisals are lower? Last I knew the credit crisis was created by the ability and intent to provide easy credit to people who lacked sufficient resources to stay the long course. That and the hyper-inflation of real property prices because of laissez-faire policies led to an unsustainable condition. Is anyone advocating more of the same?

  8. mamie mickelson

    We have such a time with appraisers from out of our area–we are rural and Twin Cities appraisers do not really understand our problems. We have 95% foreclosures or short sales so it is virtully impossible to get a real value for properties that are just regular sales. Please help along those lines.

  9. Care Bellamy

    I am trying to purchase a home for myself and I am a Real Estate Agent in Central Florida.
    The home I want to buy in Oviedo is in mint condition and has been seller owned since it was built. I do not want to live in a disgusting, trashed foreclosure home.
    My problem is this: I offered $225K on the home I love and the seller’s signed contract.
    However, when I ordered the appraisal, the FHA appraiser used mostly foreclosure comps and valued it at $183K.
    I am stuck in the mud! I cannot afford to buy this home with a convention loan. I don’t have the cash, I have to use FHA.
    Now, the seller’s can’t sell it to any other FHA buyer’s, they are now stuck.
    They owe more more than the appraised value on the home and cannot sell it without short saling it.
    I want to live in a well maintained, manicured home that I can move into and relax.
    How can this situation be resolved…HELP?????

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