Home > Blogs > Lewis Poretz > Annapolis Maryland - High Quality Mortgage Advice

How much is my house worth??

By Lewis Poretz

Mortgage and Lending with Apex Home Loans NMLS #369577

July 06, 2009 11:02 PM

Consumers, realtors and mortgage brokers continue to have deals killed because of the new HVCC appraisal compliance regulations. Inferior appraisals are now becoming the norm with no help in site. This program has come under serious fire and hopefully will be placed on hold very soon as refinances and purchases fall by the wayside with no appeals process that seems to work.

There is an alternative. FHA - if you are looking to refinance ask your mortgage banker if an FHA loan would make sense for you. FHA appraisals are still handled by the loan originator and comparables can be checked by appraisers for value before an order is sent and your hard earned money is cashed by appraisers simply looking to make a buck without the client’s best interest in mind.

Re-Blog

Comments(13)

Comment

Show All Comments

Sort:

Jim Crawford

Long & Foster - Fredericksburg, VA

Jim Crawford Broker Associate Fredericksburg VA

Thanks for the great advice. Have a great day.

Jul 07, 2009 01:29 AM

Jesse Skolkin

Independent New York State Certified Real Estate Appraiser - Fresh Meadows, NY

Lewis

In case you aren't aware of it, under the Uniform Standards or Professional Appraisal Practice (USPAP, which predates the HVCC and is Federal law) "comp checks" are ILLEGAL for ALL Appraisals under the Ethics Rule, which states:

It is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:

the reporting of a predetermined result (e.g., opinion of value);
a direction in assignment results that favors the cause of the client;
the amount of a value opinion;
the attainment of a stipulated result; or
the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose (Bold added for emphasis).

Advisory Opinion 19 of USPAP illustrates the types of assignment conditions which are unacceptable:

SUBJECT: Unacceptable Assignment Conditions in Real Property Appraisal Assignments

APPLICATION: Real Property

ISSUE:

All real property appraisal assignments involve conditions that affect the appraiser’s scope of work and the type of report. What types of assignment conditions are unacceptable?

BACKGROUND:

Many residential property appraisers report requests for service where the caller includes statements or information in the request similar to the following:

We need comps for (property description) that will support a loan of $___________; can you provide them?
Sales Price: ___________.
Approximate (or Minimum) value needed: __________.
Amount needed: ______________.
Owner’s estimate of value: ___________.
If this property will not appraise for at least ___________, stop and call us immediately.
Please call and notify if it is NOT possible to support a value at or above ___________, BEFORE YOU PROCEED!!!!

An appraiser is SUPPOSED to be impartial and not have "the client’s best interest in mind". This is the kind of behavior which has led to the implementation of the HVCC.

Jul 07, 2009 08:40 AM

Jeff Gay

1st Mariner Mortgage - Saint Leonard, MD

Ouch

Jul 07, 2009 09:07 AM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

So tell me Jesse - how FAIR is it to take $400 bucks from a consumer when you know from the get go the value is nowhere close. That is part of the problem. GREED..............

Jul 07, 2009 10:50 AM

Anonymous

Lewis,

Why would you even consider taking the clients money if you already know the value is nowhere close. I put that blame on you sir for doing that to the consumer. Just because you are thinking of doing and FHA loan you are not allowed to speak with an appraiser to see what the value may come in at. I dont agree with the system but you are not allowed to speak with the appraiser to do a comp check prior just because its and FHA loan. If you have paperwork saying differently please share it with all of us

Jul 07, 2009 01:18 PM

Jesse Skolkin

Independent New York State Certified Real Estate Appraiser - Fresh Meadows, NY

Lewis:

How FAIR is it for a loan officer to expect an appraiser to perform a free appraisal just to find out if MAYBE he or she can get paid for their work? It isn't GREED to expect payment for services rendered. I don't know before I research a property, perform an inspection of the subject and any potential comparable sales and listings and complete an appraisal report what the final value will be. GREED is expecting to get something for nothing. I only expect fair payment for honest services rendered.

Please note that I MUST comply with all applicable state and federal laws (please see USPAP quotes above) or potentially be liable for penalties which can include fine, suspension, revocation and incarceration.

Jul 07, 2009 01:38 PM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

Jesse - I hear you, i promise i do.... let me just give you this example.

Just booked a loan for a good friends girl friend. I questioned her every which way multiple times attempting to get a strong feel of how she came up with the value. Her estimated value was 450K.. Zillow has 287K as a value with a wrong bedroom count - i only use zillow as a guide period! - My DU approval had NO red flags for the collateral model....

Her brother in law is an appraiser. Her sister is a realtor. They understand true value for refinancing purposes. - For loan pricing purposes i dropped the value to 375K.... she needed a 300K cash out loan. Dropping my clients estimated value to 375K made the loan work. The appraisal came back at 275K less than what she owed on the property.

I realize appraisers are professionals who deserve to get compensated for their work, but at some point, before you go out in the field, before you complete the assignment, when you are looking at comps and see there is NO WAY the value is close.... well can't you charge a small fee and call it quits?

That is the flaw in the system. I am not talking about influencing or even stretching value - I am just talking about killing a make believe deal based on inflated values BEFORE the full appraisal is completed.

Jul 07, 2009 01:59 PM

Anonymous

Lewis,

The appraiser has no clue of the value you need to make the deal happen. Thats the whole purpose of the HVCC. You have read the HVCC manual correct? The blame doesnt go on the appraiser. The values have taken a beating and thats how it is. The appraiser gets an order and the address and who do to send the report to. Thats about it.

Jul 07, 2009 02:23 PM

Jesse Skolkin

Independent New York State Certified Real Estate Appraiser - Fresh Meadows, NY

Lewis:

According to Advisory Opinion 19 of USPAP, example 6 and 7 (see above), an appraiser cannot "charge a small fee and call it quits" - we are required to complete the appraisal.

If a borrower wants to see what the value is before ordering a full appraisal, there are other options available, such as ordering a desk appraisal or a drive by appraisal. These are options which can save your clients money and be compliant with all applicable laws. A desk appraisal would probably cost about $100-$150, a drive by appraisal would probably cost about $150-$250, depending on the market, property type, complexity of the appraisal, etc.

Jul 08, 2009 01:23 AM

Lewis Poretz

Apex Home Loans - Annapolis, MD

Business Development Manager

Jesse - please do not read into what I blogged and my comments. I am stating one fact and one fact only. THE SYSTEM IS FLAWED. You bring up an awesome concept. Maybe clients should be required to pay the "National appraisal companies" that have been developed since the inception of HVCC a $100 - $150 desk appraisal fee that could be credited to a full blown appraisal.

I have a customer that just left my office in tears because her appraisal was so low. Clients have always overestimated the value of their homes. But since the inception of HVCC, I can tell you the QUALITY of the majority of my appraisals are horrendous! I for one was never the type of loan originator that would push value. I have had relationships with just a few appraisers over the years. When I sent them an order in the past, if their was NO chance of hitting the estimated value and the deal was a make believe loan, they would call and tell me the value is NOT there. I would tell them thanks and move on.

Maybe I am different than most originators - I don't know. But i can't fathom why consumers get charged hundreds of dollars for a make believe deal.

With that said - I really, really think you may be on to something with an initial desk review order that could be transferred to a full blown appraisal. That makes sense.

Jul 08, 2009 01:54 AM

David Mescon

DAVID B. MESCON REAL ESTATE APPRAISER AND CONSULTANT - Kailua-Kona, HI

Lewis,

Unfortunately, you're not different than most originators - therein lies the problem. We don't work on commission like you do. We tend to be the most highly educated people in the loan process, yet we're paid the least. I now typically work for one third to two thirds of what I used to make. Ours is the only profession I know of that pays less per hour today than it did twenty-five years ago. Through the years appraisal assignments have become increasingly involved as we are now required to include numerous bits of trivia that were traditionally considered to be outside of our purview, but like all that other stuff, have rolled downhill and come to a stop upon those at the bottom - us. In addition to these few gems, we now have to attempt to quantify that which is often quantifiable - and then, when it can't be quantified to some glorified clerk's satisfaction, we have to explain in great detail, (without using too many multi-syllabic words), exactly why it can't be quantified. Imagine trying to explain to someone who doesn't understand the concepts why it is necessary for you to continue breathing, or eating, or drinking water. We are basically forced to waste vast amounts of our professional time explaining the inexplicable to people who are more or less incapable of grasping the explanations - because they don't have the requisite years of education and experience necessary to do so.

As if these things were not enough, we are also supposed to work for free - in violation of federal regulations and also state law, (in all fifty states) - by just guessing what the value will be before someone decides to send us work? Lets get real here - nine times out of ten, mortgage brokers were calling multiple appraisers and whoever promised to come in at the highest value was the one who received the assignment - you know it and we know it. You guys created this mess because you are greedy. Just as guilty are the many, many appraisers who, also out of their selfishness and greed were complicit in this game. I wish I could say these appraisers were the exception, but they were not - they were the rule. The old pre-licensure system worked much better, as it was self-regulating. If a broker made a bad loan, they had to buy it back. They had a vested interest in obtaining only "real" appraisals - not the made up stuff we have seen so much of in more recent times.

Please bear in mind that we appraisers don't just value properties for mortgage lending purposes. We also do estate related work, assessment appeals, a wide variety of litigation, and more. I have a great deal of litigation experience, and, since the 1980's have been beating up all kinds of other experts and lawyers in courtrooms. I have a 100% win ratio, have had a number of my cases make it to the supreme court, and have won stuff that has never before been won in inverse condemnation proceedings. I'm not saying this stuff to blow my own horn - I'm just trying to put some things into perspective here. Just because I don't usually need to use 9,800 of my 10,000 tools doesn't mean I don't have them - I do, and I have to know when and where to use each one of them. It takes years of training and experience to do what we do. You should be ashamed of yourself for even trying to get us to work for free and to do illegal things - this is just plain wrong.

Personally, I think the HVCC blows, but, selfishly speaking, my business has actually increased since its implementation, so my concern is more for my fellow appraisers here. Show some respect and just deal with the down market you guys have been largely responsible for creating. It's time you started acting like big boys and took your lumps.

Jul 08, 2009 05:55 AM

Tom Burris

NMLS# 335055 - Baton Rouge, LA

Texas/Louisiana Mortgage Pro - 13 YRS Experience

David

If a loan originator 'appraiser shops' to get value.... doen't that mean the appraiser who accepts the job is also GREEDY?

Or is this whole mess the originator's fault?

Yes, HVCC blows..... but that is only one of the many problems in this industry

Jul 08, 2009 07:32 AM

David Mescon

DAVID B. MESCON REAL ESTATE APPRAISER AND CONSULTANT - Kailua-Kona, HI

Tom,

In keeping with my theme of political incorrectness, I'm an equal opportunity crook-basher, and couldn't agree with you more. My previous comment stated "Just as guilty are the many, many appraisers who, also out of their selfishness and greed were complicit in this game. I wish I could say these appraisers were the exception, but they were not - they were the rule." The instigative force behind the majority of this was, primarily, loan originators - others then followed suit. Crooked appraisers were the second most prominent component. Complicity on the part of other industry players was also an essential force. No one group was solely responsible, and, even without any of these dishonest practices and influences, something akin to this would have occurred, probably around this time, anyway. Financial markets, including real estate, have been cyclical throughout history. What was typically an eleven year cycle in post-industrial America became unpredictable following the S&L "debacle" when things started crashing in the late 1980s. What we're experiencing now is just an exacerbated version of what we would likely be seeing anyway. Thanks for speaking up.

Jul 08, 2009 08:31 AM

Older Post

Newer Post

How much is my house worth??

Comments(13)

Lewis Poretz

Real Estate Resources

Additional Information