Good morning, AR!
Inflated appraisals during the hot Real Estate Market. I'm sure they occured here in Chicago, and in your market area as well.
Many experts blame these overstated valuations for a big part of the weakness in the Real Estate Market today. Overstated values led to phantom equity, which quickly disappeared after things turned sour in housing all over the U.S.
Many homeowners now owe more than their home is worth today, as the amount of their mortgage loans were based on their supposedly-inflated property appraisals. Adjustable rate resets compound the problem, as refinancing no longer becomes an option, and selling the property outright, with enough proceeds to pay off the mortgage liens, very tricky, if not impossible.
For as long as I can remember, lenders who order the appraisals give the appraiser a copy of the contract, highlighting the purchase price. We at Dean's Team always meet the appraiser with a copy of the contract, again with a yellow highlight over the price, plus a few sold comps to substantiate our own opinion of value. Both our Team members, as well as the lender, agree that it is our duty to help assure the transaction will appraise for at least the contract price, so the transaction sucessfully closes.
The appraisers, of course, need to research their own comps, complete their own analysis of comparables nearby, and finalize their own property valuation independently.
But are the actions of some lenders, some Realtors, and some homeowners to "persuade" on price valuation going over the top?
Sara F. Schwarzentraub, president of Inter-State Appraisal Service of La Mesa CA., mentions one client left a message on her office phone complaining that, "If you didn't know you couldn't hit what was needed, you shouldn't have taken the assignment." The number needed by the mortgage company employee was $50,000 to $60,000 higher than comparable values in the area, Schwarzentraub said.
Michael Tsourounis, president of Calvert Appraisal and Realty Services, Owings MD, recently inquired about doing appraisal work for a mortgage company in his area.
"The office manager asked me directly: 'If I sent you out to appraise a million-dollar home and the comps only came in at $800,000 ... but in your heart you knew it was worth a million dollars, what would you bring it in at?' "
The intent here, according to Frank Gregoire, immediate past chairman of the Florida Real Estate Appraisal Board and an appraiser in the St. Petersburg-Tampa area, "is really to find out: Will this guy play ball? Will he be cooperative when we need him?"
According to Bill Garber, Government Affairs Director for The Appraisal Institute, "Absolutely appraisers continue to get pressured" to hit valuation number needed to assure a transaction will close.
Gary Crabtree, of Affiliated Appraisers in Bakersfield CA, is concerned about new rules for U.S. Foreclosure Refinancing, to go into effect on October 1st of this year, will require lenders to write down the value of distressed homes to 90% of their market value to help borrowers refinance their home. Appraisers may be under pressure from lenders to "inflate property values," Crabtree fears, to minimize the lender's potential losses - although Housing Relief Legislation expressly forbids that.
The Immediate Past President of the Florida Real Estate Board, Frank Gregoire, feels the climate of property appraisals will only change if government regulatory officials crack down on appraisers who inflate their property appraisal reports. That may be starting to happen, he sees. Many state regulators are cracking down on appraisers who inflate their property reports. Also, the new Federal Law authorizes the U.S. Secretary of Housing to impose fines and disciplinary action on those who write inflated appraisals.
Folks, what issues have YOU run into with property appraisals - especially, this year? Do you feel appraisals for properties you list and sell are being unduly pressured to "appraise out," more than before? Or, is this whole thing being blown out of proportion? Please share!
For more info, see our post from yesterday evening @ BlogChicagoHomes.com, along with links to Kenneth R. Harney's article in last Sunday's Chicago Tribune.
DEAN & DEAN'S TEAM CHICAGO
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