Does a Quid Pro Quo from Appraiser Taint the Appraisal Process?

Any real estate agent or lender who's been in the business more than a few months has probably experienced a disappointing appraisal on a sale or listing.  This is even more likely under the new appraisal regulations which require a lender to use a third party source, known as an "Appraisal Management Company", because there's apparently no rhyme or reason to the assignment.  No local expertise required... just an appraiser's license.  We all know how relevant that is because of our own limitations - we know that all real estate is local and there are some transactions we're just not qualified to participate in.

If you've read any of my tweets over the past few days, you've seen my comments about an appraisal that came in last week for one of my sales that was filled with factual errors and reflected the non-local appraiser's ignorance of waterfront valuation.  I won't even get started on that rant here, because I don't want the topic of this post to get lost in those unfortunate details.

'Fast forward to yesterday when the appraiser contacted the listing agent to offer a quid pro quo.  The appraiser told her he would change the appraised value IF the appraisal contingency was removed from the contract.  The appraiser expected the listing agent to contact me, the Buyer's Agent, and tell me that the only way to get the "value we wanted" was to pressure my client (who has a mind of his own) to drop this "standard" contingency and then get the seller to sign it.   If the agents and clients don't cave to the appraiser's pressure, he won't correct the inaccurate factual details or make appropriate adjustments to comparables which may or may not result in a different valuation.

No, the listing agent did not misunderstand or misrepresent this request...  The appraiser re-iterated his demand to the underwriter, explaining that the absence of a "standard" appraisal contingency would lessen his liability for accuracy.  This morning, the appraiser AGAIN phoned the listing agent - this time he wanted to discuss his repair requirement on page 2 of the appraisal, after saying on page 1 that the property is not in need of any repairs.

Accuracy, objectivity, and integrity are the very core of the appraisal process.   The clients, agents and lenders can respect a disappointing valuation if it is based on these core values.  If any of these are missing, what good is it?  Do the new federal regulations require the lender and borrower to accept such an appraisal?  If so, I think a change is needed.

In my opinion, this appraiser's offer of a quid pro quo taints this appraisal irrevocably.   The facts are wrong and now both the objectivity and integrity have been compromised, as well.  Shouldn't the lender and borrower have a reasonable expectation of an appraisal that reflects accuracy, objectivity and integrity? 

And what recourse do they have if it doesn't?  What do you think...  Am I over-reacting? 

 

P.S.  I couldn't resist including these photos which represent just one of the many questions raised by this appraisal before it was tainted by the appraiser's attempt to influence changes to the contract terms.

UPDATE 4/3/09):

• Appraiser Code of Conduct (12/2008)
• Guidance for Lenders and Appraisers (3/2009)
• Appraisal and Property Report Policies and Forms - FAQ (4/2009)