SOUTH FLORIDA:
Home Sellers Say New Appraisal Rules Make Deals Harder
Real estate agents, mortgage brokers and buyers, as well as homeowners who want to refinance their loans, are feeling the effects of rules designed to prevent inflationary appraisals that helped fuel the housing boom. Real estate professionals and their clients say the rules contribute to low appraisals, which jeopardize home sales and refinancing applications. They're worried that the recent uptick in sales could slow as a result. [Source: Sun-Sentinel]
This is my follow up on the above Sun-Sentinel story "Home sellers say new appraisal rules make deals harder". I am a Florida State Certified Real Estate Appraiser and practice in SW Florida.
The article focused on the low values received from Appraisers being assigned by Appraisal Management Companies (AMC). It mentioned two AMC's in the article. I would like to bring your attention to what Appraisers have to say about the two mentioned.
Elite Appraisal Management
http://appraisersforum.com/showthread.php?t=135572&highlight=elite
http://appraisersforum.com/showthread.php?t=145447&highlight=elite
Valuation Logistics
http://appraisersforum.com/showthread.php?t=150963&highlight=logistics
http://appraisersforum.com/showthread.php?t=154352&highlight=logistics
http://appraisersforum.com/showthread.php?t=149049&highlight=logistics
and most damming of all a VL rep tried to respond
http://appraisersforum.com/showthread.php?t=146234&highlight=logistics
I currently only work for one Appraisal management company and have been hesitant to take on much work from them. Appraisal Management companies have been around for decades. They initially started the Appraisal Management divisions as a loss leader to attract lucrative Title Work. These companies took a small portion of the fee and passed on the balance on to the Appraiser. In the day, the Appraiser could make it up on volume by working a smaller territory. The Appraisal Management Company (AMC) saved the lender money replacing their in-house staff necessary for the ordering process.
As competition expanded in the AMC business, there was a downward pressure for lower and lower fees and turn times.
Roll forward to today. When the typical AMC calls the only thing they ask the Appraiser is, "What is your fee and turn time?" with no question if the Appraiser is located in the area or competent to do the work. In the past many low fee appraisals could be completed within small geographic areas and keep the Appraiser happy. But things have changed. Reports that could have been completed in a couple of hours are now taking 6+ due to new reporting and client requirements.
Also gun-shy lenders are taking the stance that unless the sale is within one mile, closed in the past 90 days and a model match to the subject property then they want more data, more comparables, more added listings. Beginning in March the Appraiser must also complete an additional addendum the 1004MC. Depending on the marketplace this process can take from 10minutes to several hours.
In the mean time the AMC's have continued to put downward pressure on fees and turn times for markets where there a plenty of competing Appraisers. Good 'ol supply and demand, right? But just like the Boeing jet you ride in, the drywall you use in your home do you really want your valuation needs completed by the lowest bidder. How does the lowest paid individual make a profit at low fees? How did the drywall industry do it? Cut corners of course.
Most experienced Appraisers, myself included, refuse the AMC work for this very reason. A credible Appraisal Report takes much analysis to do properly, and very little to do poorly. And that is what I think you are seeing. Those reports where very little was done. It's easy to pull three recent closed sales, plunk them in a report and go on to the next. Just go to Zillow.com and type in your address. Unless you live in a very stable and homogenous community I bet you will be surprised just how far off the value is.
Why you ask would an Appraiser go 100+ miles out of their territory to complete an assignment for the AMC for 1/2 or less of the fee the borrower is paying? Frankly I don't know. I can only speculate. The report may be written by a clerk or typist at the office the 'Appraiser' will never actually see the final report. That the Appraiser uses vanilla language and boiler plate comments without offering any meaningful information. Use adjustments that kinda look right without any attempt to come up with market derived adjustments. Cost approach? Just make it up. (Yes, don't get me started here. But if your lender insists on using these figures to value your home for insurance purposes RUN!) They do not subscribe to any MLS or data services and beg borrow or steal the data from others. I pay $1,600 a year for access to MLS which is required by our Certification that I have it. They do not drive by comparable sales to see if they are truly comparable to the subject.
Since the implementation of the HVCC I am hearing reports of Appraisers traveling 100's of miles to complete and inspection, then calling the local Appraiser for help with comparable sales, maps, etc. They use sales that are from inferior or in some cases superior neighborhoods because they don't know the market well enough to know better.
I get offers for doing a full appraisal for $125.00 It may take me 8 hours to complete, less my costs for software $1,500/yr, MLS $1,600/yr, E&O Insurance $700/yr. You can see it does not pay for a PROFESSIONAL to take on this kind of work. If Professionals are not doing them, then who is? I have better clients than this, but then most of those clients do not handle Mortgage Origination loans. It is the Mortgage Originators who are required to utilize the AMC's and their Appraisers. That is what you are seeing, a retraction of the Professionals from valuation services for Mortgage transactions.
I will also suggest that these very same Professionals were not the ones that were succumbing to lender pressure that caused this whole mess to begin with. Remember Andrew Cuomo drafted the HVCC when he brought a case against Washington Mutual and eAppraisIT and AMC for pressuring Appraisers for value! So the AMC's were sued for pressuring Appraisers and as a result all the Appraisals must now be handled through AMC's. Defies logic!
For professional objective valuation services call me.
Kathleen "Kat" Bryce
State Certified Residential Real Estate Appraiser RD-4424
Fort Myers, FL
leecountyappraisals.com
Email: appraiserkat@earthlink.net
Phone: 239-940-2225
Fax 239-275-4130