3/7/09
Dear Mr. President:
I hope this is one of the 10-20 letters that reaches your desk today because there is a large segment of professional, experienced workers who are being put out of business by the new stimulus package and the HVCC (home valuation code of conduct). I know you want to create jobs but it is doing just the opposite in this case.
The group of professional workers is the Real Estate Appraisers. Here is the real deal Mr. President. With the re-modification of loans; the lenders will need to know the current value of the homes in question. Many lenders and Fannie Mae are using BPO's (broker's price opinions) to accomplish this task. This will only add salt to the open, gaping wound of the housing market.
This is also against the law in at least 23 states. Why? Because Realtors and Brokers are not licensed to perform valuation of properties. If BPO's are used they will be violating state laws and FIRREA. They are acting as non-licensed appraisers in the valuation of property. BPO's are only legal when they are used to determine the LIST price of the home...period. Also you should know, BPO's are not regulated by anyone. Appraisers are regulated.
As a real estate appraiser who was also a real estate agent here in Georgia, I can tell you first hand that Realtors do not understand the valuation process. Sure they list and sell homes, but do you realize how many over priced listings are out there? Realtors also do not know how to apply adjustments to various amenities or lack thereof. I get questions from Realtors all the time asking what a basement is worth, a pool, garage or a 4 bedroom home vs. a 3 bedroom home, etc.
PLEASE, PLEASE pay attention to my plea. I assure you I am NOT alone in this feeling. I understand banks are losing money right and left and they want to find an inexpensive way to determine values on these re-modified loans. However, if you allow Realtors and Brokers to value property (who may also have a vested interest in these properties if they wind up listing them down the road) this will only cause more loss and further decline in the market. Now more than ever we need to hit a bulls-eye on property values not take a stab in the dark at them.
You may be thinking, hey the appraisers are the ones who got us into this mess to begin with. The low percentage of BAD apples has ruined it for the majority of us hardworking, honest and highly capable appraisers. Trust me when I tell you it is not the appraisers, it is the BANKS and the REALTORS who are commissioned professionals who have always put pressure on the appraisers to hit a number so to speak.
Everyone wants to blame the appraisers. We are only to blame if we succumbed to their constant pressure and we knowingly over-valued properties. But you need to know that banks made it quite clear that appraisers would not have a job if they did not do what they told them to do. I know because I lost work when I refused to give them carte blanche on dictating to me what the appraised value should be on a home! Banks never got their hands slapped for this activity, it was always the appraisers. Banks should never have had this kind of POWER over appraisers. But they did because all they cared about was the commission check at closing. They see appraisers as those who impede their path to the closing table. We are a necessary evil. When in reality we are supposed to be there to PROTECT the banks from bad risks!
If appraisers (who are highly trained to value property) were left alone to do their jobs, there is absolutely NO reason not do our jobs with the utmost accuracy. They have no vested interest in the properties in question and if they do, they must fully disclose this fact. Most banks would not allow us to appraise properties in which we have a vested interest.
Mr. President, you may be thinking the HVCC should take care of this problem of lender pressure on the appraisers. There will be independence and transparency between the appraiser and the client. Well I wish that were true, but there is one BIG problem. Banks are now starting to go to what we call AMC's Appraisal Management Companies to order appraisals. They are heading there in mass numbers even though it is not required for them to do so. They want to remove that lender pressure aspect and be in total compliance with HVCC.
Appraisers love the idea of no pressure but the devil is in the details as they say. First, in many states it is illegal for AMC's to order appraisal reports because FIRREA and state laws prohibit 3rd parties from ordering the reports. It must be ordered by the CLIENT, which would be the banks/lenders, not the AMC's.
Secondly, many appraisers are losing their livelihood as the long term relationships we have built with both Mortgage Companies and Banks are now going to be destroyed as the business will be funneled thru the AMC's who only use appraisers who do them for the cheapest fee. The AMC's shop appraiser's fees and they make no bones about telling you that you will not get work if your fees are not in line with what THEY want. They are dictating fees and I know this first hand, Mr. President.
Guess what? The AMC's are regulated by guess who? NO ONE. They have ZERO regulatory oversight, so they can do what they want. It was an AMC that forced Cuomo to negotiate a settlement with Fannie and Freddie to begin with. They were pushing for higher values and removing appraisers who would not cooperate in this regard. So even though it looks like Banks are doing the right thing by using AMC's, you need to take a deeper look.
AMC's pay cut rate fees to appraisers. Typical fees for a standard single family residential appraisal is anywhere from $300.00 to $400.00 per report. AMC's pay appraisers anywhere from a low of $175.00 to a high of $250.00. Most are in the low $200.00 range. They want the appraisals fast and cheap with no regard to competency of the appraiser. Let me repeat that... with NO regard to competency of the appraiser.
AMC's in turn charge banks MORE than we would for an appraisal report, so guess who wins, they do and everyone else loses. Most of the experienced, well qualified appraisers, including yours truly refuse to work for these slave labor fees. What the banks will wind up with are the least experienced appraisers who will be completing these appraisals as they will take whatever fees they can get and that is NOT what you want in this volatile market. You need the most experienced appraisers to determine values and understand declining markets, absorption rates, days on market, costs to cure, etc.
So I ask you Mr. President, please do not let lenders use BPO's to value properties, do not allow AMC's to order appraisals in the states where it is illegal and finally if AMC's are to be used, they MUST pay normal fees for our appraisal reports.
The old adage is very true.....you get what you pay for. AMC's are always complaining about appraiser's work and the errors they make...WHY? Because they are dealing with inexperienced appraisers.
Thank you for your time, Mr. President, feel free to contact me with any questions. I am very active in the appraisal industry. I blog frequently on Active Rain a well know Real Estate Based website. www.activerain.com/blogs/lakelanierappraiser I even wrote a blog about what the White House would appraise for. That one sparked a lot of commentary. I am also the North GA Examiner for the well known site. www.examiner.com
Respectfully,
Mary T. Thompson Certified Appraiser - 770-967-0753
cc: Honorable Timothy Geithner - Secretary or the Treasury
Honorable Chris Dodd, Chairman, Senate Committee on Banking, Housing and Urban Affairs
Honorable Richard Shelby, Ranking Republican, Senate Committee on Banking, Housing, etc
Honorable Barney Frank, Chairman, House Committee on Financial Services
Honorable Spencer Bachus, Ranking Republican, House Committee on Financial Services
Honorable James Lockhart III, Director, Federal Housing Finance Agency
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