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NAR Leadership Blog

Last Friday, Steve Brown posted the following to the Leadership Blog. Steve discusses appraisals as well as some other challenges the housing market is facing:
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Comments
  1. clayton Sitterly

    The powers that be have to understand that you can not legislate integrity. All the licensing and ethical education in the world doesn’t change an “influenced” or “inexperienced” appraiser…in NYS now the bad guys just dot their “I’s” and cross their “T’s” to make things look right…content has taken a back seat to form… it is like computerized appraising…what you get is like having a glass of ice tea without the tea!

  2. Tom McWhorter

    Why do we have to pay for two appraisals that are $105,000 different from each other? One was low so we had to pay for another one with no response from the previous appraiser.

  3. Appraisers are now taking it upon themselves to MAKE THE MARKET.. two weeks ago my wife & I had a listing with buyers that had come to terms with the sellers, the appraiser used three foreclosed properties in totally inferior, 1/4 acre subdivision as comps.. the subject property was on 1/2 acre +, 5 days prior we had closed on a 300 sq ft smaller home on a dry lot for $20,000.00 more than
    the appraisal came in at.. out of area appraiser, 3 months in the busiiness.(SUNTRUST) shame, shame

  4. Shelly Stradling

    It is very unfair to consumers, both buyers and sellers to have to pay more to obtain an appraisal that is not accurate, is extremely delayed and that could adversely affect the status of comparable properties used on other appraisals. In unique markets, small markets and remote markets the rules of HVCC are not realistic and are a huge insult to local professional appraisers whose knowledge of the market is discounted as not being of value. and hinders the livelyhood of local appraisers. The actions of the bad apples should not drastically impact the good apples. There has to be a better way!

  5. Steve Sanders

    I would like to add my two cents. I was a commercial banker for over a decade and ran a large mrtgage opertion for years after that and have never before experienced what we are seeing in today’s appraisals.
    Appraisers from more than 150 miles away are coming into an area in which they have no experience and attempting to discern the differences between neighborhoods. They are attempting to cove3r as much ground as possible and in doing so are taking photos and writing up appraisals for properties they cannot really remember, and no one dares challenge their opinions for fear of “interfering” in the appraisal process.
    Recently we had a property appraised by an out of area appraiser who indicated that the stains in the closet and ceiling were indications of a leaky roof and recommended a roof inspection. When the lender gave instruction that we must complete a roof certification we argued that there were not stains in either the closet or ceiling and that the light-crete roof was a 100 year roof. The lender insisted, telling us that he didn’t dare challenge the appraiser’s findings. $475 later, the roof inspector found no leaks and indicated that he too saw no indication of leakage or stains.
    This cost both time and money and the appraiser was dead wrong. Someone somewhere has to be able to challenge their findings and it would be far better if we could actually have someone appraise properties that knew the area. If lenders are afraid to ask reasonable questions something is wrong. We are seeing some of the same stupidity and short-sightedness in empowered underwriters who are suddenly making mountains out of mole hills.
    As usual when government intervenes, the pendulum has swung too far.

  6. addy walker

    we have been dealing with the low appraisal in the Riverside area. had one $61,000 low, and had comps to support value $50,000 higher. Even had a second one done and it came in lower even with 3 months old comps to support higher amounts. Insane….

  7. Joe C

    Many lenders closed their wholesale channels and focus on their own retails. The only ones that still doing wholesales set their underwritig guidelines as conservative as 20 years ago. The loan brokerage firms like us are struggling like hell to keep clients. We have so many dissatisfied clients this year complaining either lenders are asking too many obscure document, taking too long, and/or lock expiration. Ever since HVCC came out, we lost half of the clients whose property values are close to the borderline of the allowable LTV. Since we can not consult the values with the appraiser ahead of time, so we can’t guarantee our clients the success of the loans. They have to pay $500 appraisal fee to find out if they have a loan. What kind of a rule is that? It’s a rule to promote betting? What a joke!! Why don’t set the rule to educate the underwriters in the banks how to spot false appraisals??? I thought all these stimulus plans are for helping consumers, but HVCC is definitely hurting consumers and the housing market.
    Meanwhile, loan agents are quitting the loan buisness and are looking for other jobs. So, the national unemployment rate is actually way above what we hear on the news.
    Loan brokerage firms are in the process of being eliminated. Monopoly is in the making, government is helping that to happen. WATCH OUT !!!

  8. David Martin

    I have been a broker for more than 32 years. I have also been a certified residential appraiser and a tax assessor. I have clear insight and perspective to offer on this topic. Trying to bully and strong arm the appraisers is not the answer. Appraisers will continue to leave the field, as I recently did, and the appraisal process will continue to slow and bog down. I have ideas on how this problem can be solved. there is not enough space to go into detail here. If NAR wishes to discuss this with me send me an email. I can be reached at dmartin363@comcast.net.

  9. Karen Waitzman

    I have been very disinchanted with the appraisal system and attitude during the past year. In this lagging economy when house have been priced far below the true value of the home and finally we get a contract worked out where not only extremly low price far below the cost to build and seller payiny closing cost etc the appraisers come in with appraisal $2000 to $20K sometimes below even though we can send comps that are more similar and same area they refuse to change, the either cost the deal completely or everyone ends up not happy and closings delayed to point of totally messing up the lives of those selling and buying. Agents, attorneys have to struggle to make things happen. People want to blame agents etc but we know that homes are priced right or lower than most. I have sent comps of smaller homes that sold for more and the appraiser said will that is not comparable house – no it is a smaller house in same neighborhood and older so the house you are appraising should be higher not lower. They will not change it out of stubborness or laziness. They don’t go inside homes the just want to do by pulling up a few recent sells they choose – this is not a true appraisal. The appraiser gets paid anyway so I think this is just another scam and way messing with an already broke system. Someone needs to make sure they adjust price for upgrades, for taking care of a home, for age and if being built for the cost to build versus a house that is 50 years older with old wiring, old plumbing, old roof, lower purchase price and people just ready to sell or foreclosed on should not be compared to the house to be built that is going to be larger, have all new plumbing, roof, ac, granite, SS appliances etc. Where is the appraiser in touch with reality? HELP!

  10. Karen Waitzman

    I have been very disinchanted with the appraisal system and attitude during the past year. In this lagging economy when houses have been priced far below the true value of the home and finally we get a contract worked out where not only extremly low price far below the cost to build and seller paying closing cost etc the appraisers come in with appraisal $2000 below to $20K below and even though we can send comps that are more similar and same area they refuse to change their appraisal or adjust; they either cost the deal completely or everyone ends up unhappy and closings delayed to point of totally messing up the lives of those selling and buying. Agents, attorneys have to struggle to make things happen. People want to blame agents etc but we know that homes are priced right or lower than most. I have sent comps of smaller homes that sold for more and the appraiser said will that is not comparable house – no it is a smaller house in same neighborhood and older so the house you are appraising should be higher not lower. They will not change it out of stubborness or laziness. They don’t go inside homes the just want to do by pulling up a few recent sells they choose – this is not a true appraisal. The appraiser gets paid anyway so I think this is just another scam and way messing with an already broke system. Someone needs to make sure they adjust price for upgrades, for taking care of a home, for age and if being built for the cost to build versus a house that is 50 years older with old wiring, old plumbing, old roof, lower purchase price and people just ready to sell or foreclosed on should not be compared to the house to be built that is going to be larger, have all new plumbing, roof, ac, granite, SS appliances etc. Where is the appraiser in touch with reality? HELP!

  11. It is interesting to me how the lenders are avoiding the real blame for this mess. The local lender has been in charge of selecting the appraiser. And yes, they all had their favorite who would get the deal done no matter what. This process left out the best and most qualified with the most experience, as the lenders all the way from the local lender/appraiser to the Wall St. CDO sellers were merely after money and not truth in lending. The current solution will be no better than what has caused this mess. We sit in a small board rural area and occassionally get appraisers sent in from 60+ plus miles away who won’t join our MLS, have no famaliarity with the market and haven’t been in one comparable home to complete a true appraisal. The problem with the appraisers is the same with the real estate community. Until such time, that getting a license to appraiser or sell real estate takes more than 3-weeks of what could be called ‘a joke’ of education, we will never see quality and professionalism. All state and national associations along with state Commmissions that license real estate agents, appraiser and lenders are to blame as well for the current mess. Anyone can begin selling real estate and appraising in as little as a month; and in nearly all states in the union you need 9-months of classes to give a $20 haircut. The priorities of what is important are backwards, how can you expect any other results?

  12. Buzz Owen

    Just one idea of many. All lenders must create a list of 10 (number just as an example) preferred appraisers. Upon audit, each appraiser can not can not have received more than 10% of that lender’s appraisal orders. The only way to add or delete from the 10 chosen appraisers is because of appraisal fraud, appraisers choice to be removed, or appraiser goes out of business. Appraisal ordering must be on a rotation basis. I have personally witnessed a large, top 3, tract builder in Houston, give 2000+ appraisals in one year to one appraisal company. Of course the 2000 sold homes was in the ‘good’ times. If a lender has inside appraisers, they can have 10% of the business and no more. Regards

  13. HVCC costing more. Almost cost me a closing taking 3 weeks to come back. My appraiser only charged $325 for Conventional appraisals, but the HVCC ones are $360-$404.
    The guidelines now required by Fannie Mae and FHA already restricted what could be in an appraisal report and the scrutiny of the appraisals by the banks over the last year already solved the issue.
    HVCC is worthless and costs the Buyer more money and delays the process costing everyone more.
    Rick Cason
    Owner/Manager
    Integrity Mortgage
    Orlando, FL

  14. Dan Boor

    HVCC needs to Change!!!
    The actual implementation of the Home Valuation Code of Conduct (HVCC) appears to be counter productive to the Obama Aministrations position because the Administration is spending Billions of Constituent Dollars to stabilizing home values!!!
    We must try to change this appraisal nightmare created by HVCC before it destroys any chance of stabilizing home values in all neighborhoods, whether they are very stable neighborhoods with very few sales comparisons, or neighborhoods riddled with “REOs” and “Short Sales”. Thus, delineating a historical sales market composed of a few willing Sellers, but mostly liquidators (i.e. REOs & Short Sales).
    Jim Amorin’s, president of the Appraisal Institute, reflected the need for change before the U.S. House of Representatives’ Financial Services Committee when he said: “The Institute believes HVCC has too many shortcomings”.
    HVCC appears to have fostered appraisals which are nothing more than glorified automatic valuation model-generated (AVM) estimates of value because their being done by appraisers from outside the local neighborhoods who have at best a limited knowledge of local issues affecting value.
    My 38 years in the Real Estate Industry has provided some insights I’d like to share to help mediate the glaring short comings of the appraisals currently being performed under the HVCC directives:
    * ALL REAL ESTATE MARKETS ARE LOCAL:
    Assign only local Appraisers when possible.
    * ALL COMPARABLE SALES ARE NOT EQUAL:
    Appraisers adjusting for local issues effecting comparable value
    Appraisers adjusting for types of non-comparable sales, i.e.:
    “Market Value” is determined between willing Buyers & Sellers.
    “Market value” isn’t determined by “as is” REO & Short Sale liquidations.
    “Market Value” has to be adjusted by the systemic risk of a “hold
    harmless” agreement in REOs which is being reflected in the Market.
    * LOCAL MARKETS NEED MORE COMPARABLES TO CHOOSE FROM:
    Increase the 90 day comparable window back to at least 6 months.
    * CURRENT APPRAISAL MANAGEMENT COMPANYS (AMC)ARE PART OF THE ISSUE:
    Assigning appraisers by rotation with no regard to proximity to property.
    Adding time to appraisal process – providing less time for the appraisal.
    Reduced fees to Appraisers resulting in inaccurate appraisals by rushed professionals or assigning cheap, novice Appraisers.
    Driving honest Appraisers from the profession, eliminating competition, increasing costs to consumers and reducing State & County revenues.
    Selection of appraisers causing value inconsistencies, time delays and increased costs because of “rate lock” extensions or higher rates
    This continual appraisal battle is creating great stress and financial hardship to all our constituents, whether they are refinancing, selling or purchasing!!!

  15. Tammy Lucke

    The two biggest problems we are having are: (1)lenders calling out of town appraisers who do not belong to our MLS so they don’t have accurate comps, but then want the agents to spend their time giving them the information. (2) Every underwriter we have had loans with question the appraiser and kicks the loan out until the appraiser can come up with “better” comps. If there were better comps, I’m sure the appraiser would have used them, but they are required to pull something better out of thin air. I find the arrogance of underwriters appalling. What happened to the time where the appraiser was the expert and wasn’t questioned? I have had many lenders ask the appraiser to “tweak” his appraisal to make it look better also. That is illegal and the appraisers need to turn these lenders in rather than agreeing to change their work. While I am sure there are appraisers who are not conducting themselves in an ethical manner let’s make sure we are looking deeper into this problem and not just point the finger at appraisers.

  16. Rodney Osborne

    I have been in the industry going on 20 years and this new appraisal process is one of the most horrible process for homeowners and buyers. I had a buyer that had to order an appraisal with a lender. the lender turned the file down for their own reasons with nothing to do with the appraisal. because we had to change lenders the buyer had to order a new appraisal, another $400! We then got the appraisal back after 7 business days and the appraisal was so bad the lender would not accept it. We then had to go to another lender and finally got the appraisal that was done properly and a lender that approved the loan as it should have been in the first place. After my buyer not only paid $1200 for 3 appraisals for a cost that should have never exceeded $350, he also had to pay a $100 per diem for the purcahse closing 8 days beyond the required contract close date. So this new process that is suppose to protect the market and the consumer just cost my buyer an extra $1,650!!! How is this a better system!!

  17. Pamela Kay Smith

    This has been going on for over a year and a half… The appraiser I had for a property in South Lake Tahoe told me there was no choice but to “discount the property by $40,000 or 15% because of a mandate from Fannie Mae. they called it “a potential declining market.” This was in June of 2008. At that time the property easily supported a price of $460K and they priced it at $420K with all the supportive data making it between $460-$475K! Well because the property didn’t appraise the refinance didnt take place.No surprise a year later suddenly the entire community is in a complete downward spiral due to these appraisals. Fannie Mae created by this type of appraisal that prevented sales and refinances from taking place.!!! Thanks Fannie Mae.WE the taxpayers can bail Fannie Mae out but FM and Freddie turn around and destroyed the market at the same time you were being bailed out, by forcing appraisers to discount appraisals by huge amts without any supporting data just to drive the market down. Causing massive foreclosures.. What a Scam.. Who was the ones in charge? If Bernie Madoff got 150 years they should get 300!JUDAS!!!!!!!!!!!!!!!!!

  18. Bob Downs

    In response to Sherman Durst above, I don’t know where he gets his info, but it is totally incorrect, esp. when comparing getting a license to give haircuts. For example, in order to obtain a certified general appraisal license (which I have) 1. You must have a 4 year college degree 2. Obtain a minimum of 3,000 hours of verifiable experience over a minimum of 30 months 3. Have completed and passed 300 hours of classroom courses. If anyone can do this in 3 weeks, it’s simple a falsehood.

  19. Tim

    In regards to Stan’s (and other posts here), this isn’t the appraiser. Its the terms of engagment that come along with the appraisal assignment. ITS MANDATED what is acceptable reporting and what is not. If you are an appraiser and try to “buck the trend” be willing to 1.) Find yourself defending your report for the next 2 weeks. 2.) Find yourself removed the lenders “rotational list”.
    3.) Find yourself removed from other lenders “rotational lists” by virtue of having been removed from one lenders lists. This results in 4.) Out of a career.
    Suntrust is having problems for the last 60 days since they decided to partner with LSI, a HUGE appraisal managment company. LSI pays anywhere from 35%-45% of the appraisal fee collected from the borrower and from assignment to delivery of the report the expectation is 72 hrs. This results in haphazard, inconsistent reporting and maybe a temptation to call for something on the appraisal report in order to generate an additional floow up inspection fee (its rare but it is done). That sort of makes up a littel for the paltry $175 appraisal fee paid for the full report.
    Suntrust used to maintain an approved appraiser list, managed it well and recieved high quality reporting in about 5 business days or so. They also paid the appraisers exactly they fee collected from the borrower with no little “profit margin”. I guess when they saw the big banks making biliions **Thats right BILLIONS** from getting into the valuation services industry through AMC’s models they couldn’t resist.
    Intersting BB & T, another large southern bank tried the AMC thing. It was short lived. They have gone back to hiring, training, maintaining,and ensuring quality control people are staffed at the bank just like FIRREA, TITLE XI from 1989 dicatated by law after the S & L crisis.
    Suntrust and other regional banks should take note. Yes the Countrywides and their AMC, Chase and their AMC, Wells Fargo and their AMC, World Bank and a long list of subprime fraudsters all made big cash on the AMC model. Now they all have big time anti-trust lawsuits and full time regulators around them. Is it really worth it ? I guess so because none of the lenders seem to want to give this extra profit venture up.
    Believe me if you are angry at the system, appraisers are double, but there is not much we can do about it. NAR has a much bigger and stronger lobby than the appraisers. Direct your efforts and frustration right the banks.
    Until appraisers recieve bailout money for making bad appraisals there is no reason to point at us.
    Move your money from from one of the “Big Five” banks and put it in your local community bank, credit union or $ & L.
    That will make Mr Drysdale sad !!!
    *sorry I’m an old guy

  20. Dee

    Question: If Freddie Mac lists a house for one price and the selling real estate company lists it at 7,000 more, which appraisal did they go by and is this legal?

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