We had a major headline this week that put appraisers on the defensive. Well some of them...because they felt a bit exposed. Michigan hit another dubious milestone as the 5th worst state for appraiser fraud.
Let me see....if you have mortgage fraud do you think someone else in the food chain has to help make it work on paper?
One of the interviews went like this....we are under tremendous pressure to hit a number to make the loans work. What? I was stunned to hear that statement....anyone listening?
What the appraiser was saying is the lenders are pressuring him to hit the loan number so they can issue a loan. Then a loan officer says....Realtors are putting pressure on loan officer to make loans so they can get a sale for their clients.
OK....where is the checks and balances here? I don't call an appraiser and say can't your do better with the numbers? Heck, I rarely know who the lender has chosen to do the appraisal unless they call me for help with comparisons.
Do I ask the lender if they have alternatives if the property doesn't appraise? If my client wants the property and they ask me to see if I can find a solution...I talk with their lender. I rarely get involved at all with the lending process or the approval process other that offering some recommendations for the buyer to pick from.
I do know that some Realtors are very aggressively involved with the loan process. That is up to them...I am not going to venture into the RESPA territory. I do not offer interest rates or loans. I do not do appraisals either.
So if someone else decides to bend the rules and I do know about it and I am certainly not a party to it...I have a clean conscience and so does my buyer. I don't like that they did it. I don't like that they implecated me and my buyer by default by just having us involved with the loan and closing.
Bending the rules to get more income isn't going to make it better for the buyer. If the appraisal comes in lower than the purchase price offered we need to look at lowering the sell price! That's the number...I didn't come up with it, my buyer didn't come up with it. The alternative is if the seller won't adjust the price is...the buyer can put more down out of his pocket to make up for the difference for the appraisal price and the purchase price.
Nothing illegal for a buyer to pay more than the appraisal. Also nothing illegal about the seller lowering the sell price to meet the appraisal or to negotiate a split in the difference.
I should also mention that I know some very ethical appraisers that would rather have less business than bend the rules to hit a lenders number when they were asked. That has hurt their lender business but has also gained them a very professional reputation within the financial community.
The industry has been plagued with these issues for years...someone just wrote about them. It is kind of like finding out where the cold comes from...everybody gets them...and nobody likes it.
Has anyone ever gone out of their way to hit a number for you? Change your purchase price or sell price to meet a number?
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