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Home buyers and sellers real estate tips ~ appraisals

By
Real Estate Agent with Calif Desert Realty

Many home buyers and home sellers don't understand how the appraisal process works, or how the hundreds of dollars they're charged for an appraisal are being allocated. Here's a quick overview:

In most cases, the appraisal fee isn't just going to the person who does the actual appraisal. It gets split up and sometimes your lender is getting a sizable chunk of the action. An estimated two-thirds of all home appraisals are produced by appraisal management companies, some of them owned in whole or part by big banks. While the overall appraisal fees have not come down, the amount being paid directly to the appraiser has slashed from what was traditionally $400 or $500, to $175 to $200. These appraisal management companies also require faster turnarounds, with complete appraisals delivered within 24 to 36 hours of the assignment.

Why should this matter? Many experienced appraisers are refusing to work for such low compensation and rushed delivery demands, as the reduced fee barely covers the time and expense involved in doing a thorough appraisal. Therefore, many appraisals are being assigned to newcomers to the field. In some cases, the jobs go to inexperienced appraisers who are willing to travel far beyond their home or local markets to get the assignment, and this unfamiliarity of a particular area, on top of the low fee and rushed turnaround is what is causing significant problems for both home sellers and home buyers. In the La Quinta, CA area, most communities are gated communities, each with different amenities. Some have golf courses and clubs inside the gate community and some don't. Some have key code access, while others have 24-hour manned security gates. Some are higher end homes while others may have more moderate priced homes. Even though these communities may be close to one another in proximity, relatively speaking, the homes inside them may vary significantly in price and values. In many cases, the differences are significant enough that some agents confine their real estate activities to a single community in order to market themselves as being a knowledgeable expert in that community. 

So now.... as if we didn't already have enough difficulties in the appraisal process broght about by foreclosures and short sales, we now also have additional problems created by out of are appraisers unfamiliar with a particular gated or non-gated community. Sometimes the bad appraisals undervalue houses by tens of thousands of dollars and kill sales or refinancings, leaving buyers, sellers and their realty agents sputtering.

Complaints about such problems exploded in many parts of the country after Fannie and Freddie adopted the Home Valuation Code of Conduct code last year, which resulted in low ball property valuations, busted home sale transactions and higher fees to consumers. Critics flocked to Capitol Hill to get federal appraisal rules changed. That appeared to be accomplished when Congress passed the Wall Street Reform and Consumer Protection Act in July. The law instructed the Fed to issue replacement rules for home appraisals - eliminating the Fannie-Freddie code - within 90 days after enactment of the legislation.

Will the new rules protect the consumer against inaccurate valuations produced by appraisers working for low fees who are unfamiliar with your local market? Many in the appraisal industry think not, at least in the proposal's current form. Stay tuned.....

Dawn Crawley
Dawn Crawley Realty - Pinehurst, NC
Find Pinehurst Homes

This is good information for the public to be aware of.  We have experienced up to 4 appraisers refusing appraisals because of the lack of compensation for one real estate transaction. Buyers are not being protected by all the new rules and regulations.  It is costing them more, and may cost the seller the value of the home because an inexperienced appraiser is handling the transaction.

Oct 29, 2010 12:15 PM
James Lowenstern
Castles Unlimited® - Newton, MA
Castles Unlimited. Newton MA Real Estate

hmmmm...no surprises here...just another way that banks can screw up everything and still make money without a care.

Oct 29, 2010 12:15 PM
Sherilyn M. Whistler
ERA Herman Group Real Estate-NoCo - Loveland, CO
Need a Referral, Call Me !

It simply amazes me how screwed up the banks and the government have made everything !

Oct 31, 2010 02:19 PM
Lori Bowers
La Quinta, CA
The Lori Bowers Group

We usually meet the appraisers or BPO agents at the home with the needed information for them. We all need to work together to make it easy flow to buy and sell homes now more than ever.

Nov 07, 2010 04:37 AM
Anonymous
shekhar

very nice blog

Aug 02, 2011 02:10 AM
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