Shopping the assignment
Often it's a phone call that comes after the order is placed for an appraisal. "Before you start, do you think you'll be able to get me $210,000 on this?" If the answer is "I don’t know until I do my appraisal," which is the honest, ethical answer, the broker says "then don’t bother." Repeat until you find someone willing to play ball.
Back in 2004, while writing about whether the Owner's Estimate of Value belongs on the Fannie Mae 1004 or not, I heard from an appraiser who told me one of his lender clients admitted that he routinely sent appraisal requests to two different appraisers at the same time, to see which one believed he could come closest to that magic number. That one got the assignment, the other didn't.
"I need at least $X" when it accompanies an appraisal order is pressure to conform a supposedly objective, dispassionate opinion to what will make the loan work. Appraisers who properly refuse lose business. Ones who don’t do more appraisals. Is that good for the housing economy?
Being overly "helpful"
There's nothing wrong with asking an appraiser how he arrived at his conclusion. There's nothing wrong with asking why comparable sale such-and-such wasn’t used, or offering your own, before or after the report is completed (for reconsideration, in the latter case). But some appraisers are pressured to lie when someone with a commission at stake provides new "comparables" after the report is turned in that are not comparable at all -- and asks the appraiser to add them and adjust his value accordingly. Consider this scenario posted on Appraisers Forum:
My subject is in an area of declining values. This was explained and proven in the report. My sales were all in the subject’s exact subdivision and all within the last six months. One sale was the exact model with very minimal adjustments and had sold 10 days before my effective date. This sale was most similar and most recent and was given the most weight in value consideration....The lender comes back and says the borrower supplied a few sales as possible comparables and provides them. Then they say if comparable please add, if not write addendum. Lender is asking [for] a value of XXX - which is considerably higher than my opinion of value. The sales provided are 9, 10, and 12 months old. All of their sales prices are higher than current active listings of the exact model of the subject in the subject's subdivision. This to me is undue pressure. They are looking for a value and trying to get me to change my report using sales that are not even within their own guidelines.
Like I said, I have no problem reviewing my report or explaining why a sale was not used if there is new information or something that may have been overlooked. But to send sales that are older than their own guidelines permit and asking if you can get a higher value, well that is undue to me.
Withholding pay
Appraisers are contracted to receive a fixed price for completed work, regardless of whether the loan or sale closes. But when the loan "doesn't work" because the appraiser "came in too low" – which is a positive result, for underwriters, who don’t loan good money on a bad deal – many appraisers have trouble getting paid. The grass roots appraiser “deadbeat clients” site DeadbeatListings.com catalogues (as of this writing) more than $1.2 million in appraisal fees owed by clients who got their report but didn’t pay for it.
Blacklisting
When an appraiser asserts her independence and refuses to lie on her report, often she is "blacklisted" in her market – put down on a shared "do not use" list. "Blacklisting" is as pleasant a thing as it sounds to an honest appraiser's livelihood, but the real loser is the home buyer. Honest appraisers are stigmatized as "deal breakers" and brokers use more malleable appraisers to get their deals done. The threat of being blacklisted is pervasive, and few are the appraisers who can afford to be cavalier about their chances of winding up on a "do not use" list.
Ken Verrett is writing about appraiser "do not use" lists at Appraisal Scoop, and I wrote about them for The Communicator last year. Businesses generally have the right to work with, or not work with, whomever they choose, for any reason or no reason. What makes the appraiser blacklist issue an important one to the housing economy is that represented on them in disturbing numbers are competent, brave appraisers who "shot down" someone's commission – never mind that in doing so they prevented a bad loan from being made. Those aren't the kinds of appraisers we want on blacklists, they're the kind we want being used more often.
The author is Communications Director with mortgage technology company a la mode, inc., the leading provider of appraisal technology with more than 50,000 users of its appraisal products.
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