1. Excessive Micro management of the appraisal industry. Now instead of sending a piece of paper directly to an appraiser; a third party company gets my order and sends it to an appraiser. This has increased turnaround times, cost, and quality of the appraisal. Appraisal Management Companies (AMC) are up charging for an appraisal without providing any real service.
2. Increased fees to borrowers. Did you know the fee for an appraisal has jumped from $400 to $525 overnight? How many borrowers have paid for 2-3 appraisals when 1 appraisal would have been sufficient? Every piece of legislation aims to decrease borrowing costs to homeowner and yet this is allowed to happen. A recent transaction of mine the borrower had to pay for 3 appraisals.
3. Dictatorship of the independent appraisal industry. How would you feel if someone began to dictate to you that you must wear certain clothing, carry an email capable device in the field, return calls within two hours, return emails within 1 hour, and then told you how much less you will receive for the work you previously charged more for? This is criminal what has happened to the appraisal industry.
None of this addresses the real issue: Responsibility. The entities who are selling pools of loans to investors should be responsible for the quality of the investment. If they are relying on another 3rd party to tell them their collateral’s value then they have just created another degree of separation. Which is pretty smart if you thing about it. The next time the house of cards come down the banks will simply be able to point to the AMCs and blame them for their mistakes.
I offer two simple solutions.
1. Make banks, brokers, and correspondents use their own personal rolling appraisal lists. AND enforce it in audits.
2. Make banks read appraisals and review them internally.
That’s it. No extra cost to the buyer. No headache to brokers and real estate agents; just plane shifting of attention to what is important.
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