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Home Builders Blame Appraisals for Lost Sales

The National Association of Home Builders (NAHB) sentiment index is at 17 this month. While MarketWatch reports that this means the sector is lacking forward momentum, at least some of the blame is being placed on the shoulders of appraisers.

In a special question this month, a third of the builders said they had lost sales because of low appraisals. They said appraisers are using foreclosures and distressed sales for comparisons.” According to NAHB, the response is a 25 percent increase for this response compared to the July survey. The article also states that home builders are concerned because of new rules that require an independent appraisal of the new home.


An explanation of the index (from NAHB): “Derived from a monthly survey that NAHB has been conducting for nearly 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view sales conditions as good than poor.” More information is available at http://www.nahb.org/hmi and http://www.housingeconomics.com/.

Comments
  1. David

    The Home Builders are absolutely correct. The worst of the worst are being hired to complete appraisal orders. What else would you expect when the new selection process is based upon providing the highest profit potential to the appraisal management company?
    Forbid AMCs to taking a cut of the appraiser’s fee and you can bring quality work back to the industry. Coincidentally, this would also cure the problem of AMCs lying to borrowers on the HUD-1 about the actual appraisal fee.
    Unfortunately the lender will once again be held responsible for the cost of “managing” those frisky appraisers.
    A much more simple method would be to eliminate AMCs completely. The government should have the means to upload the names of qualified appraisers into a database and use software to randomly select one for each assignment. Assuming that only qualified appraisers remain on the roster this reduces the chance of fraud to zero. As long as AMCs remain in business (and are held primarily by banks) appraisal fraud and mortgage fraud will continue to thrive.

  2. Craig

    Yes, that’s right. The appraisers created the bad economy because we wrote loans based on uncreditworthy borrowers, sold those bundled bad loans on wall street, initiated the foreclosure process, threw good people out into the streets, decided on our own that the market values were in many places being dictated by the huge quantity of empty houses and desperate sellers, then chose to use only those bad sales to apply to new home loan appraisals. Yes, we did it. It’s all our fault. Nobody should point out the over-building in the hey-days of 2004-2006, when the builder’s took charge of telling appraisers their prices “were” market value and you’d better make their number.

  3. Bekah

    The appraisers did not create this bad economy. They were the tool that lenders and real estate agents used to get their deal done no matter what! That is what you would call an escape goat to blame them for this. The consumers and lenders are the ones responsible for this bad economy. Lenders were giving loans to people who didn’t even have a job. Qualifying them for homes that in no way shape or form could they ever afford it had it been a full doc loan. Its amazing how everyone wants to point the finger and blame everyone but bottom line, the consumer should have done their homework and not just relied on their lender. The lenders should of done a better job at qualifying their clients and thought about the loans they were giving to the consumer instead of trying to make a quick buck! The appraisers are now actually doing their job the correct way, appraising homes based on real comps and what homes are really selling for and not being swayed by the real estate agents and the lenders.

  4. fred vander wal

    Yep, blame the Appraisers.
    Why not just tell us to fabricate comps so you can try and sell your $600,000+ edifices to extravagance?
    If you can’t sell one of these properties and then get a fool to buy 1 how do you expect it to appraise? The 3 year old home on the next block just sold for 400,000 and the owners took a big hit. That’s your best comp. Live with it!

  5. Murthy

    We are in a unique situation affected by unfair appraisal practices. Our community is good in standing with excellent neighborhood. The only problem is that Centex-Pulte built a poor retaining wall that collapsed, they built it without obtaining proper permit from the city, they built it out of greed to make money, anyway regardless of whatever it is, it is a mess that is created by the builder. The home owners are victims, why would realtors victimize homeowners in that entire community by slapping with a significant drop in the property value. It is only fair to devalue the affected homes that was built on an improper land. It is unfair for the realtors who made earning out of commissions paid by existing home owners to target their living by slashing their home values. It is only fair if realtors punish the builder some other way (abandon doing business with them or some other way), instead of choosing to victimize the innocent victims. Before they devalue the property of the entire community they must find out the truth and act justly before making any decision, under such circumstances. Overall, it is unfair, unjust to victimize the victims. Who should we contact to solve this kind of problems. We can’t fight back with builder because of another anti-people binding arbitration. So if home value is the only problem for many, and realtors can deal this easily who should be contacted to restore our home values, under this unique situation.

    We appreciate your suggestions, about 800 home owners are affected by irresponsible act of the builder, at San Antonio – Rivermist subdivision.

    Thank you,

    Murthy

  6. Murthy

    We are in a unique situation affected by unfair appraisal practices. Our community is in good standing with excellent neighborhood. The only problem is that Centex-Pulte built a poor retaining wall that collapsed, they built it without obtaining proper permit from the city, they built it out of greed to make money, anyway regardless of whatever it is, it is a mess that is created by the builder. The home owners are victims, why would realtors victimize homeowners in that entire community by slapping with a significant drop in the property value. It is only fair to devalue the affected homes that was built on an improper landscape. It is unfair for the realtors, who made earning out of commissions paid by existing home owners, to target the innocent homeowners’ living, by slashing their home values. Many of them are in the process of selling house due to change in jobs, home value is adversely affecting the lives of many family.

    It is only fair if realtors punish the builder some other way (abandon doing business with them for some time or some other way), instead of choosing to victimize the innocent victims. Before realtors devalue the property of the entire community they must find out the truth and act justly before making any decision and present a justification for their action. Overall, it is unfair, unjust to victimize the victims.

    Who should we contact to resolve this kind of problems. We can’t fight back against builder because of the anti-citizen clause through binding arbitration. So if home value is the only problem for many, and realtors must be able apply some intelligence to restore home values, because the neighborhood is excellent and the problem is localized and homeowners are innocent.

    We appreciate your suggestions, about 800 home owners are affected by irresponsible act of the builder, at San Antonio – Rivermist subdivision.

    Thank you,

    Murthy

  7. New Mexico Legislative is meeting now. We have a bill introduced that will restrict the AMC from taking a portion of the appraisers fee, require surity bonding, requiring full disclosure of the fees charges to the borrower and a few other changes. RELS has hired a lobbiest and is fighting dirty. LSI has sent letters to our Legislature. The bill has passed Commerce and Industry and now goes to Judiciary. We have only one House committee assignment. Looks like the commities will pass the bill however, I will be surprised if the House and Senate will OK the bill. Wells Fargo and BOA are putting big money into the pockets of the most powerful of our legislators.

  8. Yep, we appraisers are the anti-christ. It was all our fault with the exception of Bush is always at fault. We falsified income and expense statements, we did a really shabby job of underwriting the files, we made these people take their free house and move in and make no payments, we pressured all of the banks to make these loans, and overappraise everything we do. All for the privilidge to get paid $375.00 then wait 3 to six months for our money, if we get it at all, we are at the root of the whole melt down. I’d like to know where my share of the loot is, because I sure could use it to start in some other non real estate related business, maybe something illegal, like growing weed or running hookers, maybe become a mortgage banker, or how about president, need a free pass. No longer does hard work, being honest, and taking pride in my work, helping others get started, dont get you shit!, all for nothng, looking at the banks and politicos, crime does pay. It’s a backward ass world, 35 years and the banks have finally gotten their way. What happened to us, people are getting tired of this crap, the guy flying his plane into the IRS kind of tells the story. I’ve been forced out of business, by the goverment and have no voice. We have got to get rid of these life-time crooks and get back to of the people, for the people and by the people. It’s getting pretty bad when citizens start taking drastic measures to be heard.

  9. Leonard Burst

    I have been pressured to inflate values in all sorts of situations by the lenders. They call on cell phones with the phrase, “you need to do something with the value”, “it was higher three years ago”, “I need more from you on that one”. I receive multi family tracts, a home with other rent structures, and am told to omit the other structures and provide a SFR report(It is multi family and income property). I get hundreds of acres with cattle, crops and multi barns, with a factory build home and asked to appraiser it as SFR(It is agricultural use). When I refuse the request I get no work for months or never again, from that lender. The lenders pressure the appraiser to inflate, omit, overlook and break our ethical code; themselves or thru management. There is no limit to the tactics, based on greed, that are applied. I don’t get a purpose, a guideline or a contract with many orders. It must stop!

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