In Search Of One Brave Appraiser
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Did anyone mention that appraisers work gets reviewed and if that review doesn’t agree with the value, they can make that appraisers life hell to the point of that appraiser losing work and even having to answer to the appraisers board. No one in the entire real estate and lending industry is held to as high a degree of accountability, to say nothig of appraisers fees being minimal, E and O insurance, keeping licenses up, it goes on and on. No one knows all that….
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Own something a tad more specific? To illustrate, comments or perhaps blog posts with
regard to appraiser. Could I subscribe to your content?
There are a couple of issues with our ‘current format’ of appraisal reports:
1- Reports are almost entirely ‘retrospective’ in value perspective
2- Some lenders have extremely conservative lending policies
#1 is because of the way current forms are designed, and policies of the GSE’s, primarily, because they buy (or guarantee) most mortgage loans.
#2 is because lenders are so afraid of future buy-backs that they have instituted policies that cannot always be accommodated by available sales data, and they refuse to budge even if there is enough supporting additional data and buyer/owner resources to justify a loan. (I’m currently involved with one like this.)
So until #1 & #2 are modified to bring a sense of common sense and more relevant market data into the appraisal, nothing will change …. and unfortunately appraisers will continue to be blamed for holding back the recovery.
Nice, huh?
Definination to a Mortage broker – Brave equals = break all the rules so the all the people involved in the transaction can make more $money$, except the appraiser. Brave to an appraiser,= tell thier client what the real market value is, and probably lose a client. Is this 2006?
God I miss mortgage brokers calling me every hour of the day (and night). Always the same question: “Are you a GOOD appraiser?” “Good” being the code word for stretch artist of course.
Glad to see they’ve finally changed the term “Good” to “Brave”. Perhaps this will help give the mortgage brokerage industry a facelift until the next collapse comes about.
And that just about says it all. What Frank and Brian really want is a group or institution that is willing to take that greater risk for the current \reduced\ reward. If you are still appraising in this environment you are brave by definition.
Valuequestor
Cost Section is never worth the time it takes to fill out here in California.
The cost to build a home looking back at my last appraisal was $132,473. The cost appraoch was only completed as the lender required it due to the house being in a flood zone (one that would never flood).
Of the 3 MARKET SALES in the area the highest sale was $74,000 and the other two sales found were $60,000.
Now lets look at this. Would you loan on the $132,000 if for some reason you had to take the property back and could only sell it for $74,000 later? I don’t think so.
As an Appraiser I think the Cost Appraoch should be removed from the forms all together. Also, it requires a Site Value, lol. This is a value that 95% of the time we back into and it just gives us a fake value. Take my example above. If the Cost to build is $132,000 and the property is only worth $70,000 on the Market, then the Site Value is -$62,000, got to love that Cost Section vs Market Sales
Try the Harris Company, REA/C 310.337.1073
WE KNOW HOW TO APPRAISE MARKET VALUE!
AND WE DO NOT HIDE IN THE SHADOWS! HTTP://WWW.HARRISCOMPANYREC.COM/BLOG
Appraisals are the most over rated part of our busines.
Value of a home can change in one day.
If a client is well qualified don’t bust the chopps of an appraiser. It’s an Opinion of value anyway…..
What everyone is missing here is the fact that the BANKS have been controlling the market. Appraisers rarely can come in at high market,even when justified by several comparables. The banks will just cut the value. I see this everyday. This is why the the bank owned AMC have thousands of staff appraisers. They work cheap and do what the AMCs and Banks want. The banks, thanks to the fully bribe FRB, now have their appraisal departments back. The AMCs have now become appraisal shops. The appraisal industry has warned against this and now it is happening. STOP BLAMING THE APPRAISERS AND LOOK AT THE REAL PICTURE!!!!!!
When a market is truly increasing, truly increasing, not wishfull thinking on the builder’s part because his costs have gone up, a low appraisal value is not a problem, because there are sooo many buyers just waiting to buy this home, that someone is willing to pay CASH! You can pay above appraised value for a home because you really, really really want it! BUT YOU HAVE TO USE YOUR OWN MONEY! YOU CAN’T DO IT WITH THE BANK’S MONEY! You have to pay the extra with cash. Why should a bank be on the hook beacuse you really really want this house, when an existing house just down the street is selling for less? In 2009 when things were skyrocketing so fast, people were so hot for certin homes in certin neighborhoods, they were comming in with cash offers waaay above the listing price. There would be 3 cash offers all bidding against each other. Thats what a truly increasing market looks like. If you can’t get borrowers to pay cash, then tghe builder is going to have to suck it up, and cheapen the prices, even though cost does not equal market value. If a borrower wants it, they will get it, but they are going to have to pay for it with cash.
So let me see if I get this right…. We should start appraising houses for high values, not because they are worth it but because at least ONE person will pay that. Then with these high appraisals we will HELP??? Americans by assisting them in borrowing money against something they don’t even own for another 30 years so they can go out and buy stuff that they don’t actually HAVE THE MONEY FOR after paying the bills and mortgage that they have now? That will help America because we will epmploy the guy who sells televisions and chevys since he can sell more product. Hmmmm I am not buying it. Also did I mention that if the house was worth that $10,000 more that you want then some cash buyer would put up the extra cash to buy one that I can use as a comp for the next guys appraisal.
As long as the banksters keep feeding firewater to the indians….they will drink it.
Yes, you are correct. I am 70 years old and have been an appraiser for 46 years. I’ve been through 2 of these down cycles and well remember the first when I was chief appraiser and a member of our loan committee. But when our loan committee had poor quality loans to push it often found a way to meet without my presence. I eventually by- passed our administration, did my own audit of our loan portfolio and my report lead to a large loan loss reserve and a downsizing in which I was targeted by an all new administration and let go. I met with our bank’s regulatory supervisor to tell them I was optimistic about the bank’s ability to survive if they followed a more conservative policy than had been used by the former administration. But 2 years later I found the old policy had been followed. I called to ask why the regulator had let it happen. Within two weeks of that call the new administration and board had been fired, some blacklisted from ever working for any federally insured institution and the bank merged with another. I was by then established as a fee appraiser and handled a great number of major commercial foreclosure and workout problems for both banks and regulatory agencies. But when the economy turned upward again the same old problems emerged, and the lenders went to the appraisers who would always comply with lender needs. I could see the pattern emerging several years before the 2007-08 market crash and I quit accepting lender work altoghther. This advice for Brave Appraisers is again, the tip of the same old cycle we experienced in 1979 and again in the early 2000′s. Legitimate appraisers will again have a tough time becasue of the Brave New Appraisers who WILL emerge to fulfill lender (and yes, builder- developer) appraisal requirements. Roll- over at the regulatory level will allow it to happen.
Well I think that the response here among appraisers is pretty well represented and completely answers your questions. 1.) AMC, 2.) AMC, 3.) AMC and 4.) lack of understanding by commissioned sales people on what an appraiser/appraisal is.
That being said. I have considered your offer since Friday and can offer my appraisal services under some conditions.
There will be no “pre-determined value point” high or low. The fee will be $500,0000. This will cover the costs of lengthy, tortuous back and forth requests from the AMC and explanations on why I did not make concessions adjustments, consider specific sales as contained in their AVM, provided a appraised value over predominate for the area, did not bracket sales, by a myriad number of criteria, or did not use sales by other nearby competing builders, made adjustments on $ for $ cost amount rather than a market derived adjustment for energy efficient or other items of amenity. This fee will also include consideration for my being removed from that AMC approved appraiser list, my name being forwarded to Fannie/Freddie, HUD and the ASC to be added to the “Appraiser Exclusion or Do Not Use List”, my defense costs for the pending state appraisal board investigation,(or other civil or criminal proceedings both State and Federal), my Errors & Ommisssions insurance premium now doubling or more (if even available), and the susequent lost wages for the next 10-15 years due to vaporation of a career or incarceration.
Given the Scope of Work and Nature of Assignment I think this is a reasonable fee request. However, I understand if you may want to shop around and find an AMC that will provide you this service at a greatly reduced fee. If you look for just any length of time I’m absolutely sure one will hook you up.
Bravo!!!!
Nice. Well done! It’s all fact. I’m working on one of those appraisals now. It was an inspection in June, now Sept and I receive another “please give indepth comment on, and provide additional data for, explain why there are no additional comparables to support your opinion, explain why you wont just reduce the value like we want it…ok not the last one.
Really?? Id say $500K is just about right.
Well-thought out, well-said, and sadly true.
Price is never a issue when the buyer pays cash. He takes all the risk. But if you are going to use my money I take all the risk. 4.5% interest for the risk you might decide you paid to much and walk. No way. I would put my money in a index fund less risk. You brokers and realtors sound like a bunch of whinny little kids that get your way on the playground. Grow up. Life is tough and nobody is going to trust you with their money. You are going to have to do a lot better than 4.5% to get me to risk my money on you little whinners.
Quite an amazing number of respones on this hot issue. I made it through only 25% of the most recent postings. Unfortunately, I do not have time to do more. So here is my request … for the sake of progressive vs. serial discussion, could you guys distill the array of comments down to a manageable size for discussion?
To make just a few comments, I would suggest the following:
1) Demand and Supply: Appraisers and realtors need to be tracking listings and sales by category and income target groups. That is, inventory of properties: 1) OREO foreclosure sales, Short Sales, Regular Sales, etc should be tracked to understand the remaining supply of these properties per category and probable absorption of this supply (in mos); and 2) based upon different ranges of income brackets, these inventories should be divided by likely income brackets.
2) Financing: Present interest rates (especially arms and interest only products) will not be maintained in the long run and purchasers should base their purchase price offers on what they can afford based on typical 30 year amortization loans and terms. Paying down principal needs to occur in order to supplement property appreciation. Real estate prices are suppose to hedge inflation (typically 2%+) but real appreciation is the price increase above inflation. Obviously, increasing income is key but paying down the principal on an Interest Only or Arm increases one’s income even if job income barely keeps up with inflation. The key is price increases will result in these prudent practices by home buyers and they will also restore proper balances between the buyer’s equity risk and the lender’s loan risk.
Costs > Value: Currently, due to poor appreciation in pricing and hedging cost to construct inflation, value does not generally exceed costs though pricing with Arms and IO (Interest Only) loans would suggest that value (home price) could exceed costs. Price does not equal value. This is why appraisers adjust comparable prices (not comparable values) to indicate a value for the subject property.
Buyer is King: Buyers ultimately rule the market; however, lenders need to underwrite the deal with typical financing as the measure of prudence in approving the buyer. Lenders are obviously more adept at this than buyers. Lenders need to advise buyers accordingly so buyers can make good prudent decisions in budgeting for the expense of a home over buyer’s ownership term.
I hope this discussion can take a more progressive and objective turn in discussing and discovering the gems of people’s collective experience and wisdom on these topics.
FL Appraiser, Are you an appraiser, underwriter, or investor? Look at an amortization table of a 30 year fixed rate loan at 4.5% and report back to us how much interest you would collected as a ‘Percentage’ in the first 5 years, which coincidentally is the number of years the average American moves. Then tell us about risk/reward of a 4.5% mortgage rate when savings accounts pay 1%, without any whining please.
I think appraiser’s and lenders should put more emphasis on the “cost approach” value rather than comparable approach. The comparable approach only works if you use true comparables and homes sales that were open to the entire market of buyers, not just “owner occupants”. Appraiser’s love using the foreclosures as comps and lender’s requires them too. Since most foreclosures are only available to owner occupants the first 2 weeks on the market they are selling at prices much less than ones that are available to all buyers including the non-owner occupants / investors. These homes selling are not true comparable’s since only a portion of the market can buy them. In the past appraiser’s were not even allowed to use foreclosures sales but now it seems to be all that appraisers do use. As long as this continues values are going to stay down.
Without exception, every ‘occupancy restricted’ REO we have closed in the last 24 months has sold for well above listed price. THe last one (closed 2 weeks ago) was listed by FHA at $62,000. THere were 51 offers. Our borrower was the high bidder at $78,400. The property appraised for $78,500. We used a USDA loan. The property was on the market 11 days when sold.
We are closing another HUD REO next week. Listed for $115,000. 60 offers. Our borrower won the bidding war at $125,000. Property appraised at $130,000. Again, we used a USDA loan.
Just a coincidence that USDA was in play on both borrowers, one a school teacher, the other couple retired. We do far more conventional.
I represent lots of investors buyers, but 95% of the time they pay cash. NONE of them would have paid these prieces for either of these homes. If they ae flippers, they would pay about 70% of value IF the property needed little or no major work. If they are buying rental, perhaps 80%. So including ‘investor sales’ as comps is counter productive. Of course, they must be used, but only show up as ‘arms length’ IF they were listed and sold onthe open market. ()%+ of investors in my market are buying their properties at Trustee Sales, not through listed properties. THose saolel DON”T COUNT in the appraisal process. THey only get mentioned in the transaction history on the grid as a trustee or foreclosure sale. Cost approach is meaningless. Virtually every home on the market would cost considerably more to build that what it is being sold for today.
So do your home work and think it through before you post such crap.
This “crap” that you call my post is based on my area.. which is suburbs of Atlanta, GA. Just because you have seen a few sales exceed list price does not mean that they would have not gone even higher if investors could have bought/bid on them. In my area we are experiencing a lot of foreign investors with large hedge funds that are taking advantage of these low prices. These investors are buying based on the future and current rental market. They are paying more than what the owner occupants are trying to pay. So you might want to do your research before you accuse another person’s opinion “crap”. By the way, you must have dug deep to come up with the word choice to describe my opinion….good one!
Appraiser using REO’s as comparables: REO’s Do have an adverse impact on the Real Estate Market as a whole. REO properties typically have had their prices set by the use of a broker price opinion (BPO). BPO’S tell the lenders what they “think” the home is worth. The lenders then set the price slightly lower than what the “Real Estate Professional” has indicated in the BPO order to move the “toxic asset off their books” in order to move the properties quickly. This is the adverse market effect: Home owners now wanting to sell their homes must compete with the REO/BPO properties (PRICES SET LOW) therefore the owners must respond by lowering their listing/asking prices in order to be competitive in the market. The use of BPO’S/AVM’S is not helping the market recover. Banks/lenders use BPO’s to save money. Why pay an appraiser 300-400 when they can get a market indicated value from a “Real Estate professional” for 100-120. The sale is made and it becomes a genuine comparable. Set by a “professional” If banks/lenders thought for one minute that Brokers and/or realtors were “professionals” that know “value” There would not be an “appraial industry”. Why don’t banks just take the Brokers/Realtors word for value? Because everyone of your has a dog in the race. It dont matter if your the buyers agent, selling agent or the broker. You get paid based on a percentage. Appraiser don’t care if a home comes in at $6K or $6 million. We get paid a flat fee. We find the “real value”. Want apprasers to stop using REO’s? Quit doing BPO’s. Force the banks to use the “Real Professionals” as mandated by law. But this is a lucrative loop hole that wont go away. So buck up. Your are your own worst enemy.
Cost Section is never worth the time it takes to fill out here in California. The cost to build a home looking back at my last appraisal was $132,473. The cost appraoch was only completed as the lender required it due to the house being in a flood zone (one that would never flood). Of the 3 MARKET SALES in the area the highest sale was $74,000 and the other two sales found were $60,000.
Now lets look at this. Would you loan on the $132,000 if for some reason you had to take the property back and could only sell it for $74,000 later? I don’t think so.
As an Appraiser I think the Cost Appraoch should be removed from the forms all together. Also, it requires a Site Value, lol. This is a value that 95% of the time we back into and it just gives us a fake value. Take my example above. If the Cost to build is $132,000 and the property is only worth $70,000 on the Market, then the Site Value is -$62,000, got to love that Cost Section vs Market Sales
I am looking for one brave Don the Builder. When he specs out a house for a buyer, he needs to tell them that (1) it won’t appraise for that much and (20 if they want the house as spec’d they will have to pay the amount over appraisal. Makes sense to me. Then we would have a real comp to use on his next build.
It’s not pushing value when you have the sales there. It’s pushing value when you make representations about properties that may not be true or you go so far out of the neighborhood that it looks like value validation.
If the new homes industry is truly seeing a boom, then it needs to behave like the boom we left in 2007. Want this? Pay for it. Period, the end. There are a lot of people with money right now. With rates and 2.7-3.5%, they just don’t see the need to come off their bank accounts.
Appraisers aren’t key here. The interaction of the builder and the market will turn the tide, not a ridiculous appraisal based on thin air.
The whole premise of this video is that debt keeps the economy going… That is the kind of thinking which has created our downturn in the first place. If people are more out of debt they are more likely to spend real dollars which in turn stimulates the economy… yes the mortgage business would have a slow down, but people are always buying houses! The trend to pay off mortgages is a good one!
As far as the appraiser comments on the video… you stick to loans and we appraiser’s will stick to appraising “market value”. As someone already pointed out , “cost does not necessarily equate to value”. I always enjoy your guys’ videos but this one seems like wining.
First and foremost, thank you, thank you, thank you, for posting the link to the donation site for the Colorado appraiser’s family. They need all the help they can get.
Second, there is no good reason for appraisers to value high or low. There is every reason for a competent appraiser to accurately reflect what is occurring in the market. If the trend is increasing and can be supported, the tendency should be to appraise at the high end of the range rather than the middle or low end, providing there is good support.
However, as others have said before me, appraisals by their nature are historic in perspective and rely on sales that have already occurred. If appraised values are lower than the seller or builder perceived value of the home, then buyers need to do what they have done in the past and kick in a little extra. After all, having a little “skin in the game” is a good thing and may prevent another melt down.
Whether or not this current stable to increasing trend is here to stay is not predictable at this point and there is plenty of evidence that we are not out of the woods yet. We really shouldn’t expect the appraiser to be the canary in the mine shaft of uncertainty.
William McKnight,
First, thank you, for the having the courage to identify yourself. Most appraisers would consider this to be Herikiri [sic.].
“However, as others have said before me, appraisals by their nature are historic in perspective and rely on sales that have already occurred.”
Where this is true, now as it should has been, why were appraisers using listings and pendings, during the run-up?
Why do appraisers continue to use non-arms length salse and market comparables?
I don’t know were you practice but I hope your clients read this.
Oh! http://www.appraisalace.org/ Ace, Like Ace of …, AAA, or Ace hardware… Get my drift.
Thanks!
One of my wholesale sources is fixing the price that broker’s can charge on a Lender or Buyer paid loan. It is actually higher than what my current LP fee is so I am not too upset but it is much less that what some of her broker’s were charging. As much as .625%. The rational behind this change was because the Lender was fined by the Dept of Justice for unfair lending practices because all brokers were not charging the same fee on LP paid loans. I found this interesting but confusing because I was under the impression that this was negotiable between the lender and broker per Dodd/Frank. They also mentioned that this was one of the reasons that Wells Fargo exited the Wholesale business. Any comments would be appreciated, maybe you could check it out and it could be a topic for one of your videos.
I would do it. However the amc’s and their redicilious reviewers would never approve an honest appraisal like that. Plus any appraiser who would do that type of thinking and extra work can’t do it at amc fees
Yay! Honesty. Love it.
By Dodd Frank’s logic, shouldn’t we have, “Application Management Companies”, so LO’s don’t succumb to undue influence from applicants, who otherwise would go elsewhere causing LO’s everywhere to lose business as a result! Read that again to realize how silly the justification for this legislation is! And how about “Campaign Contribution Management Companies” so legislators won’t succumb to undue influence from their contributors!
It’s not the appraisers fault, it’s the foolish legislation that put them in this position. If these jack rabbits knew there were bad appraisers out there, why didn’t they convict them? Instead their flawed thinking mandates an intermediary which turns professional appraisers into order takers who get paid less to do more. AMC’s take half of the fee while quality suffers and consumers pay double, so nobody wins. There was no thought in this legislation other than it would be an easy ‘fix’ to add to their ‘legacy’ (note the name and the rush to get it pushed through) while helping the big AMC’s profit and eliminating the little guy at the same time…just another nail in the coffin of opportunity in this country.
This constant grinding away of efficiency costs the economy more and more. Who cares if your taxes are lower if you can’t earn any money?!
I think all Brian and Frank are trying to say (not trying to put word in their mouths) is that at some point there must be one appraisal that indicates appreciation. Otherwise, by the logic of some here, expect more foreclosures because once depreciation starts it can never stop and there will never be higher sales because historical values make a higher value impossible. Most of us, with the exception of Barney Frank, know that an appraised value is not a scientific absolute and bringing in conservative values is easier. Of course let’s not forget the refinance applicants who lose a refinance by $2,000 in appraised value, then choose foreclosure, leading to lower values, which exacerbates the problem, happens every day, who wins?…the AMC!
Comp Ben Cons.
You sound either Young, New,Naive or all of the above.
Until the NOD and foreclosures are resolved there will be no acceleration. As far as your theory of depreciation, Yes it can stop and NO it does not go on forever.
Hi Nick, None of the above. You missed the point. Obviously, in order for the data to support higher prices there needs to be sales at higher prices. Knowing the vast majority of buyers across our vast land use financing, how will this occur if only previous lower historical values are used to appraise a new purchase? In essence, at some point property must be appraised higher than any previous sales or there will be no turnaround in the market, hence the title of the show ‘In Search of One Brave Appraiser’. While the show was specifically referring to new construction costs vs. appraised value, the point can be applied to the entire market as the conversation on the board has expanded to.
Comp:
I agree with you if it was prior 2010, HVCCs, AMC’s.
The timing and regulations were specifically put in place to curtail price inflation with little or no consideration, New or Re-sale.
I suggest directing your point(s) to an Andrew Mark Cuomo then A.G. New York now Governor and ask him “What the Hell was he thinking when he gave birth to this red headed step-child.
I know Frank and Brian personally delivered boxes of petitions to his office to no avail and the shocker is that N.A.R. and M.B.A. supported him.
Otherwise I do respect your opinion.
“how will this occur if only previous lower historical values are used to appraise a new purchase?” BY PAYING CASH!!! Why do people think the lender should be on the hook for the extras people want?
I think it is important for you to know that mortgage brokers are on the hook as well as appraisers. Maybe even more. Prior to DOdd Frank legislation a broker could make YSP.IN reality it is our risk so why can’t we be rewarded based on this risk? ALthough it is clear that this now belongs to the borrower in the form a borrower credit. The rate and program offered are because of the broker’s track record and relationship. Recently a client paid off a loan before six months and I was sent a bill for the borrower credit. I did not get the benefit yet I had to pay this back. Not our fault the buyer inherited money and did not want to be in debt.Next time someone whines about how little they get and that there is tremendous culpability remember we are all in this together.
Hey guys here’s an interesting factor you might want to include next time you get the idea to “push” prices … it’s called income.
http://wjmc.blogspot.com/2011/09/us-real-income-trends-downward-since.html
Bob the Builder wants to charge more, and homeowners asking prices are still at unreasonable prices but real wages havent risen in over a decade. So who is going to finance these robust prices without Alt-A type of products that allowed prices to be jacked anyway.
My thoughts entirely.
If another bubble is to be avaoided at all costs, lending needs to reflect real incomes. Yes we need to get the ridiculous comps up to true value but until wages start going up, true appreciation based on Frank’s ‘pent up demand’ point cannot happen.
Income varies from region to region. We are in South Carolina in the heart of the BMW corridor. THis area has not suffered as the rest of the Country has. In fact we never saw the appreciation that everyone in FLA and California did and have not benefited from and cashed out on. SO that being said why should we have seen a downward appreciation when the average income did not drop in this Region?Programs put out by the OB administration just made it easire not to work. Although there were plenty of jobs available at 10 to 12 an hour it was easier to collect assistance and let the rest of the country pay for it. That is why generalities that are not localized have hurt the Real Estate market. This coupled with the fact the AMC’s have become rich and lessened the quality of appraisals (to say nothing of scaring appraisers into not giving consideration for appreciation when the market calls for it ) has been one of the factors homes are not given adjustments upward for time. Even when the market can justify same.
This is one of those “who’s to blame” scenarios. Most appraisers have had their confidence sued right out of them. When the market crashed and lenders we being forced to buy back loans, the first person that was sued was the appraiser. Now appraisers purposely appraise conservatively to protect themselves. Can’t say I blame them.
To me, the solution is to make sure you are hiring a top notch appraiser. If you can’t pick your own, make sure you are working with a strong AMC. We have switched to a company called VTS, and the difference in quality is amazing. Not saying to use them, but make sure your company has done the research to pick a strong, local AMC or appraiser.
Is there any Realtor that has had a Buyer come to them and say, “I want the most expensive property with the smallest house, needs the most work and has the fewest amenities?”. Highly unlikely, so why are appraisers asked to reflect historical market values in this manner and “Push” the value? The buyer wants as much as they can get for as little as they can pay and appraisers have to consider that. If the buyer can purchase a like-like comparable in a cookie cutter subdivision for a lower price, how do you justify stating that only higher prices are the value. The Realtor/Developer/Underwriter wants the highest price for the highest commission. The appraiser wants to provide a legally supportable and defensible report that pays $400-$450 (for a typical 1004, nothing complex) and allows at least 3 days after site visit to provide so we can manage our time, any unseen delays, financials and multiple clients. Value is created by documented data, not what the buyer will pay, as clearly, the buyer will pay less if someone educates them….
Buyers are very educated now a days. What also seems is an issue is that the consumer is the one that has paid for the “protection”. Instead of appraisals running $300 to $350 and maybe $400.00 they now run up to $600. It seems odd that since an AMC has ordered an appraisal that this apprisal could not be used in FNMA or FHLMCC transaction? Hmm- Also is it possible the bank has “some” indirect interest even though they swear they don’t. Maybe not the same principal but most certainly a spouse or a relative. The big four just want to distance themselves from liability and become a secondary market participant. They are the ones with big pockets that the”justice department can” bilk”.There has been price fixing and attempts to fix and regulate every art of this industry when the clowns themselves can’t even set up a budget. If you were a Realtor and you had an Escrow account you would go to jail if you wrote checks to yourself or for your “interests”.
Damn, you hit a nerve on those delicate appraisers out there. Blame is just too easy to pass on to the other guy, and the real estate industry has lots of other guys involved. Shame, Shame, Shame on all of us for that, if nothing else.
Isn’t what someone is likely to pay the most probable price, in the absence of artificial constraints?
Because no one has EVER overpaid for an item, ever. If this were true appraisers in any form would not exist, even mechanics become appraisers when you bring them a (used) car to see if what your paying for is worth it. No jeweler or used car sales man has ever attempted to swindle people out of their money, ever. Oh wait, we should all buy brand new and trust the builders and sales people who never lie or inflate prices with artificial upgrades like, “its the biggest lot, so $10,000 premium is required”. Yeah, that never happens. Builders push, sales people are paid to push to sell more and higher, buyers want to trust but buy with emotion. They would not get an appraisal if the bank did not require it. But show me any investor in any endeavor that unless they are well educated in what they do and do the risk themselves, would not hire an expert (the answer is none). How would any of you feel if I said “most of you sales people dread smart educated buyers you can not scam”. But its OK for you to say “we need brave appraisers” to not do anything illegal but push value. Brian please speed thru school zones but don’t get caught or kill anyone. Give me a break. By all means, lets lend on what everyone is willing to pay for. LEO will you give me 100,000 grand, trust me I know what I am buying and I am willing to pay it (and default) with your money, I promise to pay you back (until I don’t want to any longer because strategic defaults never happen). I’ll sign anything you want(as long as I can still walk away). Make that check to cash please. I am so sick of what a willing buyer is willing to pay. These same people would not lend anyone a dime of their own money but would have no problem walking away from their own debts with excuses like “well, they should have never given me the money, or “Oh, I can afford to pay for it and agreed to pay for it, but I don’t want it anymore”. Trust me, it is not the appraisers that are the problem-its all of you that agree with F & B and blame others because you can’t work or expect others to work within the rules. All appraisers are not the problem, most of you who agree definitely are though.
Frank & Brian, why don’t u explain your ideas to Fannie & Freddie…they are the powers that be who require an appraiser to utilize a sale(s) from outside the new builders subdivision and should also use a re-sale from within the subdivision, so when there are no market driven sales from within the new subdivision and outside the area is nothing but bank owned and short sales….what should the appraiser do, be brave / stupid or compliant? Blaming the reporter is the wrong way to solve this issue….blame the rule makers! By the way, I’m looking for a BRAVE LOAN AGENT who is willing to allow my loan docs to be non compliant…it would really help my economy, can I call one of you?
This debate starts and stops with the definition of an appraisal, which boils down to the {the most probable price}, which may or may not be the highest price. So while loan agents and realtors bitch at appraisers, if they were to realize the appraisers definition of an appraisal is vastly different than their {whatever somebody is willing to pay equals value} concept, the debate would be over.
First off – nice comments about Gordon Cowden. The appraiser killed in the Aurora, CO theater shooting. Never met the man but he had been assigned a few of our orders via AMCs and let me say that Gordon was a damn good appraiser. He had just finished and delivered a report for us just days before the tragedy and the homeowners were devastated to hear that he was killed. They had nothing but kind words about Mr. Cowden. May he rest in peace.
Now, anyone that’s been in the business for at least 10 years should have good understanding of how the appraisal process works. Not how we order the darn things, but what actually goes into an appriasers work. It’s close to the cheapest fee on a HUD and the fee that gets bitched about the most. These people are on the hook for significant liablity for around $400/report. I am not an appraiser, but am a mortgage broker that started at the VERY bottom(consumer finance). Older brother has been an appraiser here in Colorado for nearly 20 years. Needless to say, we have some serious debates about property valuation. Appraisers know there are poorly trained/qualified appraisers out there just like originators that don’t know the first thing about putting a good loan together, but make a living because they are good salespeople. Good, hard working appraisers have rules to go by and as soon as they appraise a home at the top of the market or maybe even a little over…..get the report “kicked back” to them for revisions or an internal review at the lender requires the report be adjusted. Drives me nuts to see appraisers be required to(in most cases) subtract seller concessions from a comp. Why? Because the comp sold for the damn price that was verified so why on earth can’t the sales price with concessions be considered??? Think about it, home sells for $100k with $3k in concessions then we have a refinance or sale on a model match but right out of the gate the comp with $3k in concessions knocks our adjusted price to $97k.
Folks, some of the guidelines that appraisers have to adhere to are inherently keeping values low. Yes, some appraisers seem to be grinding their ax or possibly have a lack of motivation to perform well when getting paid less that $300 from some AMC that only pays them peanuts and keeps as much if not more of the fee for themselves(MAJOR FLAW). But all in all, the guidelines pointed out by many of the previous commentors is spot on. Read your appraisals and see what those adjustments and comments from the appraiser mean. If you can’t even do that, then how do you call yourself a professional? Too many of us open an appraisal and go straight to the value. Read the damn thing. Understand what they are doing and we’ll have a much better professionall relationship.
In my perfect world, all appraisers would have to go by VA appraiser standards. Funny how an appraisal assigned to a VA approved roster appraiser is generally more sound and spot on. Yes, VA approved appraisers have been around quite awhile and have high standards put on them by VA, but i’ve ever had to “rebut” an appraisal then you would know that rebutting a VA appraiser is difficult because they’ve likely handled all angles in the report leaving no room for argument. Since HVCC i have rebutted exactly 5 appraisals. A painstaking task. Who wants to spend a half day prentending to be an appraiser??? Not me, when it’s warranted at least we know what the hell we’re talking about with respect to the soundness and quality of a report to begin with. Don’t assume an AMC has actually read a report in it’s entirety.
Frank and Brian – why stand up for builders? Lots of blame to share around the Real Estate world for what happened to our RE market, but builders overbuilt and methodically increased values to the limit during that timeframe. Cost does NOT = Value and trust me….they’re making money otherwise they wouldn’t be in business. I am honestly disappointed that new home permits is such a favored economic report. Especially now when buyers that are in the market could be buying the glut of resales. I don’t feel sorry for builders for 1 minute. I don’t feel sorry for them for having to pay a citizen instead of undocumented worker to pour concrete, frame, drywall, texture, etc, etc. Builders were a major part of the blame and have continued to skip out on any of the finger pointing. I realize the draw of buyers wanting new, but new housing permits is a silly way to guage our economy. I know it puts people to work, but to continue to focus on new housing permits….what happens when there are no longer places to build or water supply(a real issue in some parts of Colorado). Developers don’t give rats behind about any of that….just their profit margins.
Thanks for the support. You have no idea how many times rebuttal comps given to the appraiser are the same comps in our reports. Goes to show they never read any part of the report. HINT, make sure the comps you give to the appraiser to increase the value in the report are not already in the report. Is it so hard to check one address with another? seriously! AND please do not call us sloppy and lazy at the same time you hand over the same comps we already used, it really is pathetic
I am very impressed with your professionalism. When I pointed out that a home is worth what a buyer is willing to pay and that although part of FNMA regulations and FHLMCC regulations state that adjustments for concessions be utilized as a dollar for dollar reduction I was told that hiding these is a felony and I am a crook. Realtors that sell the homes , the buyers and the sellers and brokers/ bankers are the parties to this transaction and value should be determined in reality without a biased opinion. Concesssions should be reduced dollar for dollar if it is not customary for the market or area .Unfortunately appraisers are told by investors that they must do so according to Dodd Frank. In reality they are helping the bankers or investors hedge their costs by obtaining PMI when they shouldn’t or getting better yields.There is more to the story than needs to be addressed. Appraisers do not determine value the buyer ,seller and market do.They are there to protect the bank. No buyer will ever willingly want to pay less. There are too many safeguards in the industry that prevent this. Always adjusting for closing costs dollar for dollar prevents appreciation. Good job Dodd Frank.
Appraisers do not, and can not kill mortgage deals. Underwriters may kill them, but appraisers do not. Appraisers interpret the market and render an opinion of value. The underwriter determines what to do with the information provided. The commentary proves what I have said for years: Loan officers and agents have no use for honest appraisals – they just want rubber stamps.
Appraisers are not getting in the way of values going up, the market is. Purchasers are not ENTITLED to a loan (despite what Barney Frank may say) at their chosen purchase price. If the purchaser wants to pay more for a house than the market says it is worth, it will not hurt any appraiser’s feelings. Just belly up with cash in hand and quit griping about the appraiser. That WILL lead to market appreciation.
And I was worried the appraisal community would not respond! Excellent job guys and gals…..As somone who has been an appraiser for nearly 30 years and also originating commercial real estate loans, you guys are way off. To be right, you would have to conclude there was a “vast conspiracy” of appraisers conspiring to keep values down. Its impossible. The bottom line is that if the market supported these higher cost homes because of government mandated conditions, then the value would be self evident. You guys are too good and to sharp to be blaming the appraisers.
Scott,
How do you know who these folks are? I have gone through a number of the “comments,” and none of them are signed. Sounds pretty scarry to me!
P.S.
Conspiriters tend to do their best work in the dark.
Thanks!
Frank I will chip in for you to take an appraiser course. I promise/pledge $100 so you can actually understand how stupid you guys sound. You need to learn the things you say are from stretching of the rules of years ago. The same rules are now being enforced, There are no NEW rules. Anyone else want to chip in to pay for franks course and see his response to his own comments after he gets it. Or are you going to keep telling appraiser to be brave, risk license and getting sued, instead of seeing how childish your appraiser comments are, You sound like a child who lacks understanding and keeps asking “but why”. PLEASE JUST TAKE A COURSE on appraising to understand how lost you are. I beg of you. I think there are plenty of appraisers that would chip in just to see you finally “get it”. How about you being BRAVE like you ask of us.
Cost does not equal “market value” – period……..
What is wrong with a buyer paying more than “appraised” value?????
If they are so convinced the home is worth more than the others selling in the market – it is their risk – not mine and the banks.
Is this a harder sale?? YES – that’s why Realtors get paid big bucks and appraisers shouldn’t risk being sued over a $400 (or less) fee.
Builders are in a bind because existing home sales have dropped in value, (including spec homes) while expenses have not. Sad but true, it is just a fact of the current market. I have been telling builders NOT to sign a contract to build a custom home and that has to meet appraised value… if this “particular” buyer wants that home on that lot great – but he needs to be aware that there are 5 other comparable homes on the market at 20% less – then it is his decision to proceed – or not.
AND – just because a home is new – does not make it better.
ALSO – there is little reality in valuations these days due to AMC’s destroying all credibility of professional local appraisers. How have they done this? Because they only hire the lowest priced quote they can get and have no regards to competency when selecting an appraiser for the job. They will send someone from 100 miles away if they quote $5 cheaper than I do – no consistency – no respect – no reality.
But that’s just my opinions -and I am correct
100% correct NC appraiser!
Darn….why not get rid of appraisers altogether….that way the builder will be happy, the Realtor will be happy, the mortgagor will be happy and the mortgagee will be saddled with a home that no one will buy at a later date as its too expensive because they paid too much for it in the first place……..but who will they blame when the borrower defaults.???? Hmmmmmm let me guess…..and as for the 23% of borrowers underwater…..guess who the mortgagor is looking towards for redress against the defaulting borrower……. BINGO… you guessed correct both times…the appraiser…. for appraising it “high” in the first place. Brian, you mention that appraisers would appraise the property high if there was no one like an amc looking over their shoulder. Have you forgotten the rest of the authorities that also look over the appraisers shoulder. EVERYONE including the neighbors cat can report the appraiser to the State for ANY reason on an appraisal, and at the least….State licensing authorities are mandated to investigate EVERY complaint and if the complaint is founded….fine the appraiser.(There are typically 3,000 words in an appraisal report that is not boilerplate, a mistake is statistically probable on every report…NO mistake goes unpunished, they are considered reporting errors). There are no brave appraisers out there. Brave appraisers are now asking if buyers want fries with that order…..there are a lot of stupid people blaming appraisers for their misgivings and greed in trying to squeeze the last penny out of a purchase, without taking a proportion of the risk involved with someone else’s money. Perhaps if the builders and Realtors were also made liable for the time period, we as appraisers are held liable, the bitching about bad appraisals would probably dry up. I have been threatened with a law suit on an appraisal I completed 8 years prior….8 YEARS…..because the borrower who had been paying fine up to that point lost his job…..BOY as an appraiser I should have anticipated THAT scenario arising…..The mortgagor lost ,as I did a good job…..I still had to go through the rigmarole with the State which took up any time and money I had made on the appraisal report…a whopping $300 and which also additionally cost me lost time and wages defending my report and clients as I now have a claim filed against my name, which I am required to report in every approved appraiser application. I also had to immediately report to my insurance company that there was a prospective claim against me. The insurance company trebled my premium due to that unsuccessful claim( as it was a blot on my previously pristine record)…and I also have to report that for 10 years in my application to renew my coverage. So please don’t tell me the appraiser is at fault in the lowering of the value…the appraiser is doing his/her job in helping keep you out of jail for fraud….and for what we get paid…that’s pretty good value for money that Realtors, builders, and mortagor’s don’t pay for.
Thanks joe, you always make great points. I have been investigated 3 times (over 15 years, thousands of reports) in two states for guess what? The homeowners opinion for coming in too low. Each case dismissed as to no finding of fault by the investigators. And so you know, appraisers can be sued for coming in too low or too high. Brian, do you think that is the real motivation to come in just right, or should we keep “pushing” values for you, be “brave” or “aggressive” Too bad, both of you are pretty bright in all things but not appraising laws and rules.
We need Real Estate Brokers and Agents to do their job and take care of their sellers by meeting the appraiser at the home they are selling. Appraisers don’t see what we see and they don’t know the details of homes that we know. If an appraiser is just doing a drive by or looking at the limited number of photos online (you can’t smell the photo) they are not getting the “real” value of the home. A Quality Real Estate Broker/Agent knows the market, has seen the comps and should know the true value of the home. A Real Estate broker/agent who does not meet the appraiser is NOT doing their job to take care of their seller and the value of the home. This is one of my biggest rants and frustration with other Real Estate brokers/agents. I will stop everything I am doing to make sure I meet the appraiser for a home I am the seller’s Real Estate broker for so my seller is taken care of.
Thank you Wendi H, I rarely get a call back from a realtor much less meet them. I am told to call central service and use the lock box or supra, they only call me back if it does not make value. And most of my appraisals make value when the listing realtor has done their job and priced it according to the market. I like realtors/brokers like Wendi who, I will guess, prices her listings after listening to the seller, researching her market, and prices accordingly with respect to the sellers wishes. She sounds too professional to half ass it like many others. Wendi, appraiser do appreciate good brokers, thank you
So, what I’m hearing from our Realtor friends is that Granny Smith really likes that flower wallpaper in the bathroom so Appraiser X needs to adjust the value upward $5,000 for this “amenity”. Give me a break. The next Realtor that gives me any valuable information in a sale transaction will be the first. Realtors know what is valuable to ONE client at a time. Just because you have one client that thinks those prize rose bushes justify paying the highest price in over a year for a house in Subdivision Q doesn’t mean that rose bush is actually adding any MARKET value. I love the comment about just going over a mile away for a comp. It is you my fine realtor friend who has no idea what a “comp” is. To a Realtor a comp is any sale of any home anywhere that helps justify the price they are trying to get. Why would I go a mile away for a sale if there are 10 sales within a couple blocks? That is what I get 90% of the time when a Realtor is unhappy with a value. “Just use this sale”….ok no because it’s 30 years newer, 1,000 square feet larger and fronts a golf course. This is what we appraisers get from “Sales Professionals” all the time. I’ve been appraising for 20 years. Realtors who know what a comp is do not hassle me when I come in low because they know I’m right. Realtors who are just trying to put a deal together who don’t know what a comp is offer lists of homes that are apples and oranges comparisons…it’s obvious everytime!
They do not get it, If an appraiser passes 5 sales to get a higher sale, it is a violation of USPAP. Fines, risk loss of license, lawsuit against E&O, attorney fees and start looking for a new career. Those days are gone, we used to do it because it fell within the rules, 1 mile/12 months, no one had access to our data, they had to trust us. NOT ANYMORE, everyone has access to sales and 27 pictures of every comp you use, including plats, satellite and sales history. It like speeding with 3 cops right behind you, It is stupid to stretch the rules like everyone did in the past, sorry you do not like the new enforcement of the rules and pay attention that i said enforcement, they are not new rules like everyone here keeps saying. They are now enforcing the rules that were always there.
When values are high, blame the appraiser….
When values are low, blame the appraiser…..
When the values are right on, credit the agent and the lender for a great job.
Appraisers are basing the values on previous sales in the area and the competition it faces. Isn’t it ultimately up to the investor on how much to lend? You are so willing to tell an appraiser to take the risk.. Why would an appraiser \push value\ and put their client (the investor, not the pushy L/O) at more risk? So you can make your commission? Why doesn’t the investor take the risk? Doesn’t investing have risk? If the builder and/or the bank is not willing to take that risk to loan above the appraised value, than how is it the appraiser’s fault? \Appraiser killed the deal\. No, the investor did because the risk was too great. Seems so bizarre to me to ALWAYS blame the only person who has no interest in the outcome of the transaction?
I have an idea- Contribute a portion of your commission to make up the difference in sale price vs appraised value to help create a higher comp for the next appraisal? Yeah, I didn’t think so…..
It really is too bad that the Real Estate schools do not make their agents take a few classes that help them understand the appraisal process. It sounds like everyone thinks we just want to screw a deal and move on! We actually have guidelines we are to use, we can’t randomly pull numbers out of our @#%&* to make the agents happy and make their deal work. All I know is if I am purchasing a house, I don’t want to be the poor sucker who pays above market value, do you?
For you agents out there who think we are lazy and not doing our job, how about you guys putting in good (and dare I say recent) pictures and accurate descriptions of the homes you are selling. If there isn’t a picture of the kitchen, main living areas, bathrooms, front and rear of home what are you hiding??? I just assume the house is probably a POC.
We depend on your listings to help guide us to the best comps – ever think about that??? I ask agents all the time to provide me with any comps they would like me to consider. I don’t have a problem with that at all. But please dont give me crap though that is twice as big, on a lot that is twice as big and has been completely remodeled when my subject is none of those things and then tell me it is a good comp!
I have gone with another Appraiser and spoken to a Real Estate office full of agents. They were so happy to get the information we provided, it was helpful to them and to us. We are all in this together, we aren’t enemies! By the way, even though I do work for AMC’s (no choice – thanks Barney & Chris), I still put in the same effort and time, lots of it in to every report. After all, I am a professional and it is my job to put out good work!
You guys are on to something so get the 2012-2013 USPAP BOOK study it from cover to cover. Understand it like all appraisers are suppose to and do every appraisal by the USPAP mannual and I will help you guys shut the REAL ESTATE INDUSTRY sales down like a Frieght Train trying to stop for a car load of teenagers on the crossing. And I will expect you to be at my hearing in IOWA in regards to USPAP volations with your carmera crews to get some real insight to the appraisers dilemma in todays work place. Liscensed in the state of IOWA REALTOR 1978, Appraiser 1992. E Mail me for the time and place for this dilemma or attack that has been going on for three years by the IOWA APPRAISAL COMMISSION.
Here again, the rich get or stay richer and the middle class and the poor get screwed?
Cost does not equal value, but consumers recognize quality and will pay for it. That is market value, not lender value. Lender value is I don’t want to lend a true 80%, so let’s have the appraisers fix that for us.
The consumer protected by Dodd-Frank? Come on now, Dodd-Frank was to protect the lenders! Follow the money. Do you really think anyone cares about the consumer?
One thing clearly being missed here is the fact the the appraisal we are required to obtain represent the ‘value for lending purposes only’. The intended end use determines what regulations and oversight will be applied. These rugulations constitute ‘managed risk’. The HVCC process only applies when the sale is being financed with a regulated loan. If it is not, HVCC restrictions are not in play.
THe same appraiser would likely reach two different conclusions if one report was for the lender on a financed sale in todays market and one was for a builder looking for the top number for marketing purposes. My individual investor clients (flippers for instance) order appraisals from the appraiser of their choice to determine ‘true’ market value; what the property should sell for. If they sell it subject to a FNMA/FHLMC/FHA/VA loan, that appraisal consistently is lower – managed risk.
So it’s not the appraisers responsibility under HVCC to ‘push the value’. It’s the repsonsibility of the builder / seller to offer a product at a price that returns a profit if it’s likely to be sold subject to a new traditional loan. That’s just reality. It’s no different than if I have a home to rent and want top dollar. I don’t rent it under HUD Section 8, because the cap on the rent is less than open market value.
Like others have pointed out here, the percentage of cash sales in my area is consistent at above 70%. Buyers are paying what the market demands for a home. On the occasion of a financed sale where the appraisal comes up short, buyers are paying the difference if they want the home. In the last 3 years we have had only a few appraisals come in low; the cash sales have propped up overall values. In every instance, our borrower has paid the difference.
So from my perspective, just as a landlord where I apply the addage ‘if you want better tennents, charge higher rents’, if you want to avoid losing loans for a low appraisal, stop arm wrestling the BK Trustee for clients. If your borrower has no money, getting a gift or hammering a Visa for the down and needing the seller to pay all the closing costs, HE’S A RENTER!!
Roadking
Having just had 3 appraisals come in low on existing homes where there were multiple offers and in most cases with buyers who had over 20% down, I can attest to the fact that appraisers are artificially keeping the market down in my market area. I spend more time rebutting poor appraisals than I do selling real estate.
This was caused by several problems.
1. Appraisers do not know what a comp is. They do not go to truly competing properties because they would have to explain why they did that. (more than a mile from the subject, lack of truly competing sales in a specific geographical area.) This is caused by AMCs not paying appraisers enough to do a credible job so they are rushing through and taking the fastest way to completion.
2. Appraisers who have no idea of what consumers are willing to pay for in terms of amenities and quality. Since when is a dirt driveway and a $18,000 concrete and flagstone driveway equal in the eye of a consumer? Since when is a fully landscaped yard equal to a dirt and weed foreclosed home property? Since when are items affixed to a property not valued because a lender does not recognize them? Since when do AMCs and lenders know what competing areas are regardless of geographical boundaries?
3. Most appraisers have not sold real estate and therefore have not gotten an up close encounter with a typical buyer. Two years of sales with a minimum of 20 sales rquirement prior to appraising would solve that problem and allow them to know what buyers are really considering comps.
4. Mr. Frank was too distracted with wooing and diddling his now husband/wife to do a good job in writing the Dodd/Frank law.
As certified residential appraiser for 13 years now realtor for 14 years, I know a comp when I see one, I know what buyers are willing to pay for, and I have usually been in every comp in neighborhoods that I serve. I am much more qualified to determine value than any appraiser, and I have to believe the buyers are not stupid, and their experienced realtors who have shown them many properties prior to making an offer are not stupid either. It is time for time adjustments to truly reflect the market. The appraisers were quick to do those in a descending market, but not in an ascending market.
Get rid of Dodd-Frank, Get the lenders who own the AMCs out of the appraisal business, and let the appraisers do their jobs unfettered by government interference.
All of your points become 100% valid the minute dd92025 Mortgage agrees to fund the loan. Until then, work only with cash buyers.
Your comments regarding your expertise in what stuff is worth leads me to believe you have had several deals fall apart because you assured the seller a vaule that you could not reach. If that were not the case, you would have no need to post here. So Sour Grapes Realty needs to change it’s business model.
BTW, I’m offended by your gay bashing. Not the least bit surprised, but offended none the less.
Roadking
google ‘barney frank scandal’
OH MY GOODNESS! In 20+ years appraising I have almost never seen ANY realtor (even my good friends) who has a clue how to comp property. I’m a sales broker, so I know what that training and license entails… and I suspect every state in the union will license you to sell real estate without having a clue how to comp property, RIGHT? But it is at the very core of what appraisers do, to locate “market alternatives to the subject property”… so although some appraiser may not be the brightest bulb in the room, I doubt hardly any are worse than ANY realtor!
I am just a Realtor. But, it looks from here that Dodd Frank will perpetuate the AMCs and that will inevitably lead to AVM’s like Zillow. Appraisers will then be turned into clerks instead of professionals who know differences in neighborhoods and homes.
In regards to Item # 3. Most older, experienced appraisers got in to the appraisal profession from a real estate sales background. Yes,they are old. Probably with 20 years experience by now. The AMC’s hate them. These old guys try and negotiate fees, write long boring addendums and include other market evidence like charts and graphs that support their conclusions and its just to much to read in the 10 minutes allowed to review. You might want to consider the appraiser who carries the RAA/GAA Designation offered by the NAR. These appraisers ARE Realtors and have had some experience such that you have described. Just a thought…..
I couldn’t say it better! Of course question an appraiser and they throw throw Dodd Frank at you, call you unethicalor even a crook for posing a solution . Great viewpoint. Fact is you are either qualified from experience or not to determine value. Thank You.
Screw You – you are trying to put the blame on the APPRAISER AGAIN – SCREW YOU, your show and your F___ed Up opinion – Appraisals are based upon the Market Conditions for the specific area – any Appraiser still working does not allow AMCs to alter values. Any Appraiser still working has learned how to tell AMCs where to shove their opinions. So Piss Off Humpty and Dumpty – your slam on Appraisers just earned you less respect than you had prior to this show
As an appraiser who now sells real estate, I don’t think these guys are slamming you. You are basically a victim of the AMCs. You are not paid what you are worth, and have to swim against the current with one arm tied behind your back. I think what these folks are saying is just let you do your job as a professional and get rid the the AMC layer that is probably owned by the lender so that you can get paid more. If the lenders want to lend on only 30% of value, then say that, don’t make appraisers the bad guys!
Hi Guys! Love your show.
Really?? Are you truly advocating homeowners use the equity in their homes as a debit card? Do you really think high debt ratios are good for homeowners? Thanks again for your show!
Glenn
Ahhhhh……This is the old “Countrywide/Landsafe” approach to value. Make it happen or lose the work. Here we are 8 years later and its still “make it happen or lose the work”. Just the other way around. What is really be advocated here is a return to “independent appraisers and appraisals”. Yeaaaaa…..thats not going to happen. Appraisal Manipulation Companies including their TBTF Banks and corporate partners like this system of additional unearned profits. Its generated fees like crazy for them without any financial risk at all.
Individual appraisers have little to say anymore. We have been beaten down to a point a very little fight left in us. Its plain to see that independent mortgage brokers ranks have been decimated. Independent appraisers are in process of being made extinct. Soon Realtors will see the attack on their commission structures. Of course, they can make that up a little by doing BPO’s for these vulture lenders.
I don’t see much change ahead. A nation of renters and landlords. Sad.
Pushing value is not an adjustment on a settlement sheet. The adjustments used to be called “adjustment for time”. It was an adjustment for a comparable was several months old and pro-rated an annual appreciation rate. I haven’t seen one of those in more than a decade.
The new Dodd-Frank legislation will make things worse holding appraisers accountable now to a national data-base of comparables. It’s one step closer to Zillow-style AVM appraisals. Please tell your congressmen to repeal this provision or the whole bill.
I called appraisers the new “Soup Nazis, like in the old Seinfeld show in this blog article. http://www.larryhotz.com/blog/news/soup-nazi-appraisers
I have seen time adjustments downward in a trying to ascend market. Here again, the lenders don’t want to lend on actual value, so to keep their risk down, they are using rules to keep values artificially low. Just say you want 30% down. Don’t make the appraisers the bad guys.
Your blog sucks and you’re clueless. Have a great weekend
Equally as important is the fact that there exist substantial avenues for finance. Currently up waiting for Senate approval is a bill amending the 2010
Census findings to allow for USDA loans in over 900 Counties throughout the United States. The Senate Agriculture Appropriations Bill includes a one year grandfathering clause. Senate Farm Bill(S.2340) includes the text of Senators Nelson(D-NE) and Johanns(R-NE) amendment to Grandfather communities and increase community population threshold to 35,000.
Available finance that is self sustaining and better performing than FNMA FHLMCC and FHA is a critical component to this nations recovery.Bicker all you want about the borrower being better performing with an equity position but facts show this program to be better in every way for buyers that fit this criteria.Incidentally this allows for 100% financing with a 6 % seller concession.If everyone places their energy in contacting the Senate for their approval before September30, 2012 you will actually have done something productive instead of wasting hours informing the world that the Dodd- Frank legislation is there to protect the public.
You guys openned up can of worms with that video.
An appraiser would do what your asking as soon as you, start putting your own money on the street, financing “NO Income verification” loans with credit scores of 500-610.
Seriously? You just went there with how appraisers now have such strick regulation?
I have a solution to your problem. Go to Corelogic whom has thousands on their approved appraiser list. (by the way Chase bank is the largest client of Corelogic) and I am sure one of them would be happy to help you. Oh by the way, Corelogic charges the borrower over $400 for the appraisal and pays the appraiser $190-$200. Then once Chase reviews the report they are likely to file a complaint with the state. Yes, in several states, Chase bank files the most complaints against thier own staff. Just call them.
Phil
Frank and Brian, man you guys are short sighted on this one. The appraiser gets an order to appraise a home which is not yet finished. The home is selling at a base price which has been raised several times within the last 6 months. REQUIREMENTS: The lender and USPAP require the appraiser to use historical sales to support value. These sales do not support the new base price. The lender also requires a re-sale outside the development to support value. The re-sale is taken from a home where value is still reeling from a fallen market. The re-sale does not support the value either. Do you see the problem? The market needs to come back GRADUALLY or it won’t be sustainable once interest rates go back up. I am an appraiser and I am offended by your statement that the appraiser is primarily concerned with losing an AMC as a client. We worry about being sued my friend. That’s right brother, we get sued when we don’t follow guidelines set forth in USPAP and we go along with the herd. I empathize with “John the builder,” but you guys missed the mark on this one.
Gary you must be joking…. I’ll like to see you slide that credit on the settlement statement past anyone.
Not talking about the credit being disguised. I am talking about not entering this information into the MLS after closing. Technically the only the individuals that are a party to a transaction are entitled to this information. IN reality if the comps used have already been adjusted for concessions taking the subject down again might be considered a dual adjustment. Lastly you represent the borrower as a lender(speaking from experience)the Realtor on the listing side says” how much did the property appraise for? In reality it is the property of the buyer. Why should I as the lender or Realtor be obligated to divulge this information to the other side? Second point is that since appraisers are using information off of MLS there is NO LAW that says I have to be proactive in entering every bit of information after the loan closed. Especially when lenders and appraisers will use this information to further decrease values and adjust downward for dollar for dollar when in fact( depending on the finance) that dollar for dollar is ONLY appropriate when the concessions are abnormally high for the market. Many appraisers missed the point and were too quick to call someone a thief and a liar. Shame on you all!
Im a lender and I agree with Divedude. If the builder or Realtor is so damn sure of the value let them finance the difference. Otherwise get off the appraiser’s back! Cost does NOT equal value, basic BUSINESS principle. No amount of whining is going to change that.
So what’s the problem? Remember the consumer is protected by Dodd Frank. Appraisers are the most regulated professionals in the country. We can’t get hired by, paid by or in some cases talk to our clients. If you want to fix appraisals take them out of the hands of the big box lenders and their AMC. Problems arise when someone who is supposed to be independent is controlled. Managed appraisers produce managed appraisals not independent opinions of value.
Uncle Sugar created this issue. This is a classic government over regulation and over reaction to a problem. We will continue to have short sales until the market starts growing in value. I have never seen so many adjustments for improvements on appraisals as I’ve seen in this market. I believe they are doing everything they can. In our market we’re seeing shorts of homes purchased in 2008 & 2009. If your searching for work to survive you may have to make a move. The market has no growth and your FHA 3.5% down payment, the source of your current equity, isn’t enough to get you out no matter how low interest rates are, your only answer is to short sale. Perhaps the answer is a standard adjustment for current market demand or maybe more highly upgraded homes to sell?
appraisers are NOT more regulated than Lenders. Don’t kid yourselves.
You hit this on the head! Lenders and brokers are just a liable for fraud and even half to buy back or pay back the borrower credit if they pay off early. Even if we didn’t benefit from the credit.
Being in the business for 14 years I have seen the jumps and hoops that appraisers have been forced to abide by get bigger and bigger. As was mentioned in a previous comment, perhaps this issue should be a topic for the Raz Room. Get an appraiser to stop by for a chat so we can all understand a little better their process and if we can help.
Maybe the demand is due to the price and the artifically low lending rates. When the lending rates rise another housing bust. So lets make the builder make more profit while the appraiser still gets peanuts. If demand is high as you say then buyers will take money out of there pocket and make up the difference. There is no problem with the appraisals it’s just buyers don’t want to put their money at risk when you just can give the house back and suffer very little damage to your credit. I live a high end market where approx 75% of sales are cash. Values are not a problem because there is constantly new sales to support the higher values. Land prices have doubled in the past 2 years. Short sells and foreclosures have left the market for the most part.
I have an appraisal background and am licensed in several states. FACT is a home is worth what a buyer is willing to pay. ALlowing the banks to determine what the value is is such a violation of numerous laws and skirts the Realtors should do is “fail to disclose the closing costs” . Onlly parties to the transaction should have access to this information. SInce some banks require to reduce “dollar for dollar” on any sales concesssions , they are once again violating the true law. Fact is Fannie and Freddie ONLY require that an adjustment be made if and only if it is not conducive to the market. The lenders reduce all the time. If all Realtors stick together and put N/A in the seller paid concessions there will be no way to reduce something they shouldn’t be. I am talking from 33 years experience freal estate and Lending and oh yes ” a background of years of education and life experience”. Fellow Realtors and Brokers/ Bankers I saw this one coming a LONG LONG time ago, but everyone was tooo busy trying to keep their doors open to “buck the system”.
So, Gary, are you an advocate for real estate licensees to report misleading information, or conceal transaction details when reporting sales to their local multiple listing service?
Gary, Fact….a home is not worth what an individual buyer will pay. You need to get up to speed on the definition of market value (what appraiser’s are required to base their opinion on). Franks’ reply is also on target.
In a market with multiple offers, I know that a home is worth what multiple buyers are willing to pay! Anything else is a trumped up funny value that has nothing to do with the market! Lenders are trying to keep values (and therefore risk) low. The government does not want values to rise because the homeowner interest is a tax write-off. Follow the money and the self interest. It is balanced in the favor of lenders and government.
We don’t wish to cover up any information but when the investor or lender tells you you have to adjust for sales concessions the fact is that it is only needing to be adjusted if it is on excess of the customary closing fees paid. Therefore it is not any violation of USPAP. Lastly the sales concessions (if wrongfully being adjusted) and if customary for the area and transaction are really no one’s business other than the parties to the transasction for which are all fully accountable.I totally gree with the government and BANKS wanting to keep values down. They don;t have to lend out against equity and can further damage the economy.
“FACT is a home is worth what a buyer is willing to pay.”
Really, there are still people out there this clueless? Have you heard of the term “Short sale”? These people were “willing to pay” an amount for a house and it is no longer worth that amount. Buyers if given the financing opportunity. In a cash transaction, you’re right. People are able to make poor decisions if they want to. But you are way off and I highly doubt you have a real background in appraisal. At least I am hoping you don’t.
I did short sales in the early 80′s and had my designation in that time period as well. I have been an REO Manager and more familiar with the politics that you claim to be the expert of than you would care to know. I am well familiar what you are require to do and not sure how long you are doing this. Well familiar with Frank Dodd and the new appraisal requirements. No fraud is being committed.Parties to the transaction are responsible for the information and maybe you should read this rule in it’s entirety. It says adjustments not customary to the market and area should be adjusted downward dollar for dollar. I am not telling you we would commit fraud or involve in a cover up but when you have to listen to everything the lenders tell you have to be done to get paid or removed from their list it is a sad state of affairs. Not sure how long you have been doing appraisals but I had my designations and am grandfathered in several states.
You don’t know what you’re talking about and you’re sure not a licensed appraiser in any state! Concessions are a legal material fact and purposely hiding cash concessions in order to overvalue real estate is felony fraud. There is a standard national definition of “market value” that FDIC, OTS, FNMA, FHLMC and nearly everyone else relies on and it says that concessions are required to be deducted from the sale price! All residential appraisal forms are based on this definition and since 99.9% of all Sellers will accept the sale price minus amount of cash concession, then THAT is PROOF that the true cash price of the sale and price minus cash concessions, at a dollar-for-dollar adjustment.
The REAL FACT is this.. loans are based on appraised value, NOT on what some clueless buyer that’s being mislead by a greedy hungry unscrupulous sales person convinces them it’s worth. I’m a 20+ year certified appraiser and licensed real estate broker and I can show you hundreds & hundreds of local sales that continued to decline by 25% and more since 2008, yet their sales person obviously didn’t make one mention that we anticipated declining values for years to come! I realize this is happening every time I appraise a 2-year old sale for a refinance and it’s already 20% less value (underwater) and I drive away thinking there’s another family that’s probably gonna lose their home!! Real estate agents/brokers who think acting as a fiduciary doesn’t mean they have to share declining market value info with your clients, is a thief….
and doesn’t have a clue what it means to act as a “fiduciary”.
Wrong again.I am not “just some greedy buyer agent” You can quote what regulations til the cows come home. I agree with you with regard to a refinance, in that borrowers shouldn’t be pulling cash out. Who the heck do you think you are that you and the banks and the Gov’t are going to control the world or at least the largest asset that Americans have built wealth in and utilized for tax benefits. I sir,had my CREA in 1978. You were probably on your hobby horse or playing with dolls at that time. I don’t need to defend myself. Fact is that we are not going to sit idly while you and these newly created entities decide to further damage the economy. When a sale is consumated there are comparables that are utilized in determining value. The buyers on the other hand are well protected. The banks pull 4506_T’s to verify income,the lenders, brokers and bankers due their due diligence and have tremendous culpability. The appraisers are there to determine value for the lender to lend. In fact if you really wish to define value without a predetermined value than you shouldn’t have a contract at all. What you recite unfortunately is what you must adhere to or what the LENDER tells you to do. They all hide under the Dodd Frank ACt however it seems Banks get to play by different rules. There is a “total lack of disclosure to the public ” when they disclose what the APR is. Lenders and banks play by the rules that their lobbyists have been able to make law for them. It is only a matter of time before we would be able to appeal the Dodd Frank. The brokers go through rigorous testing, continued education, credit and background checks. If current regulations require you take both a Federal and State exam and can undergo the scrutiny that brokers have had to deal with than I guess you might be close to the same playing field. How is it than an appraiser when supposed to be independent can mysteriously come up with a value on a property that is almost EXACTLY what is owed when the comparables and market conditions support hundreds of thousands higher. They actually assisted in the bank committing a fraud on the public by substantiating false data.Mysteriously the appraiser arrived with a value that was so far off the mark that it enabled the bank to fail from renewing a balloon mortgage from a qualified borrower. So please explain to me why you are entitled to priviliged information that is and should only be applicable for the buyers, sellers and party of this contract. If the adjustment is in excess of the norm for the industry or area than and only than should the adjustment be be as a dollar for dollar comparison(When referring to FNMA or FHLMCC).It seems once again there is no guideline or government regulation for a commercial transaction. When the Bank wanted to make the transaction they told the borrower it appraised for 100k more than they paid. They also made representation that although this was a balloon mortgage that there should be no problem in renewing this loan as long as the credit standing , and finances were the same or better. The borrower specifically told the banker that they were NOT to disclose the contract price ass they wanted a true value. Furthermore such valuation was used to determine whether or not they would go through with the transaction. When the bank wanted to make the loan they followed one path when they later wanted to “Steal this parcel” from the poor consumer the appraisal mysteriosly came in for exactly what was owed .EVEN though active 3 to 6 month comps existed supporting Hundreds of thousands more on the same block with the same if not better the bank and appraiser are being brought up on charges and as party defendants to this great injustice.This is now a matter of Law. Truly if you want to tell me what a home is worth it should be done without anyone being provided with the facts surrounding the sale or reason for the appraisal. Would you as an appraiser give a property less or higher value if you knew someone was selling because of balloon mortgage or foreclosure? No doubt you as an appraiser have a responsibility to the lender to protect them but should be done without a biased opinion. You have tremendous potential exposure and are torn every way while at the same time must give the lender exactly what they tell you or they will cease to use you.To ad insult to injury the Dodd Frank Act initiated this AMC that was supposed to protect the consumer. All it did was drive up costs and took from your pocket. The laws state this is wrong and I can’t agree enough with this. Many a time did I do “hundreds of appraisals” for lenders and they would pay you when they got around to it or not at all. That is wrong. But I say this in all sincerity I am an advocate for the consumer. I do not and would not mislead the public. But you are seriously on the wrong track when thinking about what you should be allowed to adjust for. I understand these guidelines. Guidelines that were supposed be there to protect the public. In all reality all it did was give lenders and bankers a serious advantage. You can’t tell me that Jamie Dimon sitting on the Federal Reserve Board doesn’t have a bit of a conflict. Although in his very words losing NINE billion wasn’t a big deal. After all “he still made a profit”.
I am usually on board with what you guys say but this show was just ridiculous! To blame appraisers for pretty much all things negative in housing is just irresponsible. I have been an appraiser for 9+ years so I was around for when things were really good and was appraising during the crash. People should take a little time to talk to an appraiser and learn what actually goes into it and what kind of problems we are facing. How do you expect us to show a higher value because you claim “demand” is there? An appraisal is based on historical data, if we do not have sales then how can we prove the value we are giving? I know that one leads into the other but lets also not ignore the fact that when things go bad “crap” rolls down hill and everyone seems to make sure that we are at the bottom. Lawsuits have become almost common place for appraisers because we have E&O and have become sitting ducks. My E&O has tripled over the past 3 years and I have never actually been sued. I expect a more educated opinion from you guys and this show is just completely wrong!
…so in summation, there will never be higher sales because once depreciation starts it can never stop because historical forces make it so…(!?) I think this illistrates what Brian and Frank are trying to say. Most of us, with the exception of Barney Frank, know that an appraised value is not a scientific absolute.
A scientific absolute? Certainly not.
The best appraiser in the world develops a range in value , it worth between 5 & 10.
Quit trying to finance 12.
That’s only because the value came in at 90%. It’s a lot easier to justify a low value and still get paid, isn’t it?
Develop , support….JUSTIFY there opinion thats what an appraiser does…what an appraisal is.
Some people justify there opinions , some just have 1. Help me out….the value came in at 90% of someone elses opinion that wasnt nearly as creative as they thought?
An appraiser reports the market…they dont make the market.
Still get paid? You really wanna go into appraiser compensation?
Appraisers are not TRYING to kill your deals.
An appraiser reports the market , they dont make the market.
I put MOST of the blame of continued depressed housing prices squarely at the feet of the current bulk of the appraisers and the AMCs. Sure there are the rare brave appraisers who give a real and fair value but most of them dumb it down to the zillow value or use only the surrounding foreclosure values or the purchase contract value and go no further. I call them the cowards who are not willing (or have the knowledge) to stand up and defend their values & positions to the lenders until the lenders accept them as right again. My favorite appraiser in the world here in ATL does it all the time & wins! She’s brave! Sadly I cannot use her because I have to go through these stupid AMCs and get the lottery of random appraisers.
Gee guys, are we heading for another 2002-2008? With gas prices at an all time high, grocery prices at all record highs, and still in an uncertain economy, the last thing we need is runaway home prices…again. Didn’t we learn anything from the last go around? Let’s let the real estate market stabilize so the middle class can catch up and save some of their money. I am sure that Don the builder is doing just fine, that is, if he saved some of his inflated profits from the last boom market…
Blaming appraised values for a lack of sales is a lazy cop out and it’s getting old. When builders are convinced of a higher than appraised value, why don’t they finance the difference? How much can it be? This will put sales on the board and if they did this on a few builds a month, there would be a nice cash flow to cover their labor issues. A local builder who is a good friend of mine does this and is one of the most sucessful in the area. You just have to be organized and stick to a good business model.
Build a smaller house.
Does the market bare the cost of improvements?
No , not in the instance described.
Textbook overimprovement.
Creative financing does not mean let the appraiser accept the liability.
1 cash buyer or buyer with greater skin in the game provides a piece of data the appraiser can use to develop his NEXT market approach on his NEXT appraisal in the area.
As noted , a competent appraiser will develop his cost approach in this instance with a higher value than his market approach.
In reconciling his market approach & value conclusion the appraiser
must consider does the market bare the cost of the improvement?
If the factors sighted , higher cost of labor ect are truely in play it should be a short perhaps painful period of market correction before the market bares the cost of the improvements & the appraiser has data to develop & support there opinion.
Everyone has an opinion , theres only 1 insured opinion when it comes to the value. Brave appraiser waiting to be abused by sales staff.
Lenders loan on market value from sales comparison and not cost approach. More cash needs to be brought to the table to increase market value.
Cost approach that appraiser used:
$15 million to build or replacement cost plus land at $10 m then the appraiser says add those numbers together and get $10 million. No REALLY ! That is what they did.
Cost does not equal value , basic appraisal principal.
Not only is Paul totally correct but why would any appraiser, in their right mind, stick their neck out when we all know, but afraid to admit (denial), is being almost totally run by insane regulations made by this current administration.
I do new home sales here in Washington County, Yes seems to be pushing the numbers a bit but fully justified, All you need is a larger home to bracket the price… to comply with the “bracketing” requirements. I’ve had no problems. Even with the market drop, building materials did not drop, actually increased. And I agree with first comment, check the cost approach, if the appraiser is actually using REAL numbers and Marshall Swift along with inflation of materials cost, the cost approach verifies and supports a higher value on new built homes.
As always, any value estimate has to be proven in the marketplace. Pushing a perceived value is typically done by realtors especially if they are also the general contractor by overstating features that have limited market reaction. The next time you see an appraisal report, check the Cost Approach. And what a coincidence. We appraisers are looking for an AMC that can actually read an appraisal report.
amc’s don’t read appraisal reports. They use an algorithm which ensures that the figures in the report conform to their statistical standards and bracketing. When there is a difference they require explanation.(even to the extent the # of fireplaces are to be bracketed) Any additional script in the original report is not read until the algorithm is satisfied and the reasons for the difference is explained. The amc then reads the added comment. I actually had one amc reviewer ask me where in the report the additional explanation was, when I told him he said what line? I told him to read the report. If I have the time to write it, he should take the time to read it as he is reviewing my work. He then said I don’t have the time to read the report, just tell me where to find the explanation….THAT’S why I don’t do amc work…