Foundation Upholds, Shortens AI Suspension

The Appraisal Foundation today released a statement upholding their suspension of the Appraisal Institute (AI).  However, the length of the suspension was reduced to December 31, 2010.  The suspension was initially to last through April 15, 2011.  The notice comes after an appeal by the Appraisal Institute was heard by the Foundation

  1. Mona Capaci

    I would like to know what VAR’s and NAR’s position is on this.

  2. Jerome Nagy

    NAR does not have a position on this.

  3. Robert Heinrich

    I am looking for details regarding AI suspension

  4. Paul

    This maybe out of context but feeling like venting today. After 21 years selling real estate, I see very little need for even having appraisers involved in the transaction. It is not an exact science yet it is treated as such. Hire three appraisers, get three different values. As a cheif appraiser for a very large mortgage company based in Michigan (until bought out by BofA) told me he tells the appraiser to look at the sales price and justify it, makes good sense to me. Who has a better opinion of value then the person who has look at the competition and made an informed decision on what he feels the home is worth or “market value”. He will be making the payments, so in my opinion that is the value of the home. Why does an appraiser who may not even be familiar with homes in the area be the one person to determine the equity in a home (after all that is really what they are doing) they are not gods!!!! I could go on and on about the appraisal system and its effect on real estate, I just truly believe it should not be left up to one person to determine value, the value is determined by the buyer as is in ALL free market situations, why is housing different? I would love to hear somebodies opinion why that is!

  5. Chuck

    In response to Paul: Part of the reason the real estate industry is in the shape it’s in today is because a few dishonest appraisers were valuing homes 20-30 percent above what they were actually worth because a realtor, buyer and/or mortgage broker wanted it to come in at that value and then when the buyers had some financial difficulty or tried to sell the property they were so far upside down in the loan, foreclosure was the only option. If an appraiser does an honest and diligent job in valuing a property, it’s going to be pretty close to what it’s worth regardless of what others want it to be worth.

  6. mconn

    Paul, if you were lending your savings to individuals would you want to know what you had as collateral? Or would you trust the individuals assessment of value. Prudent lenders would, of course, want and demand an independent assessment of value. A decision by a bank to stop using appraisals would be a quick step towards failing.

  7. Ted

    Paul – you must be new to this business? How informed is the buyer in any particular neighborhood? He wouldn’t know an apple from an orange in most cases. They are sold on features and location. Most are uninformed. Are we going to leave it up to the realtor to assign value? Most, not all, realtors don’t know how to assign value to a property. They either repeat tax record values or assign value based on what the home owner says they want. We all know where that goes. And you know, an appraiser doesn’t have to be involved in the transaction….that is if the buyer is paying cash. But, can you believe it, when someone else puts up the capital for the purchase they kind of want to know what risk is involved. No not all appraiser’s are perfect but you have to have checks and balances. We all know what could happen if we don’t, can you say foreclosures…underwater….etc. Also, it is better you have appraiser’s because who else will the buyer suit when they find out they can’t sell their property because it was valued to high?……you.

  8. Dave Gibbs

    I question the relevancy (at this stage) of anything having to do with the Appraisal Foundation or the Appraisal Institute.

    What we need are relevant regional MLS database that are standardized to an efficient extent and that are keeping up with the local markets and latest technology.

    NAR needs to have a position in order to be relevant itself.

  9. Kenny C

    In a purchase transaction the Bank hires the appraiser. The Bank is the one lending the money, therefore they want to know the real value of the house. Many times the buyers are influenced by emotions. The appraisal should be based on similar closed sales, not on the subject’s selling price.

  10. In response to Paul’s comment..I am a licensed broker in two states, certified appraiser in two states, with 25 years of experience. To say there is no need for an appraiser is the same as saying there is no need for a real estate salesperson. In a perfect world, values would neven decrease, buyers would be informed, and sellers would be HONEST. Unfortunately, none of these are true. Then throw in the greedy banks, who don’t care who gets hurt, and most everyone can see the need for an honest opinion of value. Like myself when selling a property, I’m sure you feel it would be a whole lot easier if you could just write the contract, and go to closing. The debacle of the financial industry shows a need for checks and balances within the system. If,also, more agents were educated on values, and did their homework ( CMA’s) there would also be less problems. To put the blame all on appraisers is certainly not right. If the banks were using their own money,then they could do whatever they wanted to. If the real estate agent were to be married to the deal, and would be willing to step up to the plate when a property went to foreclosure two years later, then yes there would be no need for appraisers. Everyone wants the money now, but no responsibility later. So, Paul, before you pint fingers, you should look in the mirror first. And, as I said, I’m also a broker and sell real estate.

  11. Alex

    For Paul,

    I’m both a broker and an appraiser and I hear your frustration. However, an appraisal is not for the benefit of the buyer/seller to justify the sale – it is to protect the lender. There are many instances when a property sells for more than it should – perhaps the buyer just falls in love with the home and is willing to pay the list price. This happens often with dual agency – I see it all the time when appraising. With an outside agent you usually see a 3%-7% discount to list. Also, the appraisal deminishes the possiblity for fraud as both parties could jack up the pirce of the property and get a mortgage for more than the proeprty is worth. An appraisal for the benefit of the lender would catch this. As for the chief appraiser’s actions well that is just flat out wrong and that appraiser should not be in the business – that’s how we got into this mess.

  12. Chris

    My response to Paul! Here is the deal in my county right now. We have 4 major realtors in this very rural county. As appraisers we do a market conditions report that is now required. When I do a search in my county of all single family home sales and apply them to the market conditions report the results are that in my county sale prices are down in the last 3 month period by approximately 23% from the previous 4-6 month period, the listing prices are up 4% and the number of sales are down 16%. The sales for this report are taken off my Multiple Listing Service. What is wrong with this picture? This is the market that realtors are creating in an economy that should definitely show a decrease in listing prices….. That’s what realtors know about values. I did an appraisal of a property a few months ago and the homeowners weren’t happy with the value on their new construction home. They built the home through a general contractor. It wasn’t a spec home. 3 weeks later I received a market report created by one of the local realtors for this customer from the bank. The realtor had used 5 comparable sales that were on large lake lots and the value of those lots alone were worth at least $150,000 more than the lot that the subject home was built upon. We are talking a home worth $250,000. The realtor did nothing but please the homeowner. The typical home buyer knows nothing more than what the local realtor wants them to know. Every realtor today should have to take a course on just the specifics that an appraiser is subject to when appraising a home for the secondary mortgage market. Realtors are also notorious for making mistakes in gross living area, dates of sale, listing times, number of bedrooms and bathrooms, etc. Do your job Paul and make some sales. Appraisers need them right now!

  13. Ambrose Yong

    Just got back into the R. E. market after 2 years absence…when did the table turn to a point where appraiser (borderline GOD) can dictate real estate transaction. Just venting…they killed 7 deal for me this year so far…FHA 120% on flipping rule ie, seller bought a fixer upper at $150,000 put in $40k of repair and update and to get the property up to code…market comp’s indicate $280k to $300k listed at $260k,,,under contract for $285k with 9 offer (L.A. county area)…appraisal came back at $180k because of the FHA rules…????? that is why the market is not turning around. Gove’t control appreciation.

  14. Paul,

    I understand your points here, I am a Realtor as well as an Appraiser. It’s not an exact science, an appraisal is actually an “opinion of value”. Many times, the appraiser does not know the area as well as needed, but mostly because the work is hard to get, as the HVCC came to the picture. Appraisers are doing the work that they can get. Anyway, you could hash this out for years with all the different problems, but the bottom line is when the Bank lends their money, they say what goes. We tend to think that we have a right to buy a house with someone elses money. I’m sure if any one of us was lending out hundreds of thousands of dollars, you would have your own way of protecting it.

  15. Sue Rusch

    Paul, thank you for speaking up for all of us. I agree that there should be THREE appraisals (AKA opinions) with regard to value on a property. Since July 2009, I have had numerous appraisers who were unfamiliar with an area, under estimate and cause me to lose sales. NAR: Please do all you can to help us on this HUGE problem!

  16. CHRIS

    Paul you are right as long as the buyer is paying cash. Go ahead and let them determine the value. If you have been in the business as long as you say, you have seen Realtors who overprice homes and then get an uneducated buyer to write an offer for way too much. Most buyers do not care what they pay for the home as much as how much the monthly payment is. The Apraisal is for the protection of the lender.

  17. Toni

    An appraiser is a professional that has a college education. He has taken courses for 200 hours and must have 2000 hours behind him before he can even qualify to take a state exam. I am also a real estate agent so I am not dissing them, but the depth of knowledge in knowing how to make adjustments for time, lot size, GLA, etc. is much greater than the ordinary agent has learned. Most appraisers work within their own market area and therefore are very familiar with values. No they are not gods, but neither are real estate agents who just pull comps that seem to match what they are looking for without regard to number of rooms, etc.

  18. Corrinne Lane

    I think everyone got off course from the original question. The Appraisal Institute is an organization that has members much like the National Association of Realtors. For a long time now, the ones who had a “God” syndrone was The Institute. There were other organizations to belong to but The Institute was “the One”. Since more equality has come to the appraisers through licensing, the playing field has become more even. The Institute has really good educational programs as does other orgnaizaitons. They have as much or more lobby influence as the realtors associations do. I truly do believe that much power should be monitored more closely. Realtors and appraisers need to be operating under similar rules and appraisals will not come in low or requiring repairs. Be honest and when the roof is worn, tell the seller he will have to replace the roof or take less to make up for the buyer having to replace it. The appraisal protects the lender as they want to have a property that will last the length of the loan or if foreclosed on, will at least get most of their money back. The Institute is an organization to pay to belong to and in return an educational program is offered that is good. Our federal and state governing boards are doing quite well on policing the appraisers. Somethimes we have to learn our place in the system and this was one of those times. Nothing more and nothing less. We should not strive to be above the government that rules our nation. It should be taken in context as a lesson learned and move on to more pressing situations.