Why Do Bad Appraisals Hurt Buyers/Sellers???

I am a St. Cert. REA and have been an appraiser going on 25 years.  I started out in the Wash. D.C. area as a staff appraiser with a large mortgage company.  As a salaried employee, being pressured for value was rarely an issue.  If the loan officer questioned my appraisal we would calmly sit down and discuss it.  There was never any fear of where your next meal will come from. 

When I moved to Fl. 20 years ago I became an independent contractor.  I really don't recall experiencing significant pressure to attain certain values in those earlier years in Florida, however, things have drastically changed.  Most notably in the past 6 years as our housing market boomed and is now experiencing a harsh correction.

In just the past 3 months or so I have had an LO refuse to pay for an appraisal done for his client for the proposed construction of an SFD.  The contract price we'll say was $240,000, the appraisal came in at $242,000.  The LO, with no explanation, demanded a value of $280,000!  The builder was contacted and he had no idea as to why.  Do you think that fraud may be involved?

Another case was for refinancing.  The owner's estimate of value was $340,000.  When I called to make the appointment she proceeded to give me what she thought were the best comparables.  The appraisal came in at $260,000 using 4 comps. Three sales were within the subdivision and one from a competitive subdivision within .72 miles.  The lender immediately forwarded a copy of the report to the homeowner who immediately called me.   She wanted to now why I did not use one specific comparable she had told me about.  I explained to her that I was quite familiar with the recent buyer of that house.  He is an investor with a well known history of finagling financing to walk away from closing with a substantial check.  There were 3 sales of similar pool homes, such as the subject, in the subject's subdivision in the past 6 months.  One sold for $260K, another for $265K and the one the homeowner liked, "The Investor", sold for $290K.  That particular home was originally listed for $270K in 8/05, reduced to $260K and finally expired in 2/06.  Then along came the investor who paid $290K in 1/07.  All this in a declining market.  With further investigation, the "investor" sale was not considered to be an Arms-Length transaction. There are currently 4 similar homes listed in the same subdivision which range from $259K to $265K and one expired listing at $258,900.  When I explained this to the homeowner she really lost it!  She told me that I am not allowed to considered what anything is listed for in her neighborhood and that I have to use the "Investor" sale, and that I could not legally use this known information about the "investor" sale and decide not to include it in the appraisal.  After she explained this to me she said she would give me the opportunity to reconsider my position and if I chose to not change my appraisal, she was going to "TURN ME IN"!  It took me about 3 nano-seconds to respond with "You must do whatever you think is best because I am not changing it!"....."Have a nice day!"

And..............I did an appraisal on a 3500+ sq. ft. home in a popular area developed with many individual PUD's.  A refinance again.  The owners estimate of value was $603K.  The appraisal came in at $670K using 4 comparable sales.  Two active listings, although not weighted, were also included.  The underwriter demanded that I lower the value to $600K by giving consideration to only one comp which was located in the subject's subdivision.  This comp sold for $599K and had 2400 sq. ft. of living area!

What's a poor appraiser to do?

I am seriously considering changing professions.  I believe that I am as cooperative with my clients as possible.  I do not get offended when a Realtor, and or, homeowner presents me with comparables to consider and am appreciative for any added information they may expound, however, I do not respond well to those who apply pressure to meet values.  It is illegal and I have signed petitions with those who are pushing for strong disciplinary action against those LO's and alike who attempt to press appraiser's for fraudulent values.  Those appraiser's who succumb to such pressure, and you know who you are, should also be disciplined as well.

 THE END!  Thank's for the opportunity to gripe!

Tis funny, every one loves to blame someone other than themselves for the foolish things they do!

 Remember the days when all purchasers had 20% down?  The market is now responding to recent rise in 1st time buyers who have NO MONEY DOWN, they have refi-ed their home several times over the past few years, oh, then they amortized the Mercedes in the garage over 30 years too (you know the one they will only have for 5 years because they can't afford the insurance and upkeep).  These borrowers have low FICO scores, no savings and more consumer debt than the last re-fi.  Now that their teaser rate is gone (the rate in which a lender qualified them for this loan), their house is now worth less than last year.  Gee, surprise, they can't afford the new payments.  But it doesn't matter, they would have rented anyway.  At least they wrote off their interest.  They have no money in the property, real easy to walk!  No equity!!!

 Looks to me that they were severely under-qualified for the loan in the first place.  Blame the bank, greedy for the interest payments (remember, these are all interest only loans), stop blaming the appraisers, do you really think that we are willing to loose our state licenses for a $375 job?  It is the LOAN JOCKEYS (non-licenced loan officers that are un-knowledgeable of appraisal and lending laws) who are PUSHING VALUE.  Oh, you know that they make about 5K per loan and have no state license to risk?

 Appraisers are hired as dis-interested third parties to value property.  Sure, go ahead and point your finger at me!  But I have a work file filled with statistics and facts to back up each and every report that my signature goes on.  I vote that all involved in any federally insured transaction to be licensed by the state.

Lucky,

 As I mentioned previously, never would I allow anyone to push my values, I do not alter nor will I change my opinion for no one.  Value is what it is.  My constituents and I sleep well at night, with no fears of retribution as never have we provided bad appraisals.  The Nation just finished one of the longest running increasing markets in history.  Real estate has always been circuitous; anyone old enough to sign a note has seen the highs and lows of the past 20 years.

 Remember, it is the Donkey who pulls the cart behind the carrot that he can never have!  Every one loves to blame someone other than themselves for the foolish things they do!

Robyn