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FDIC Sues 29 Appraisers!

By Michael S. Bolton

Real Estate Appraiser with Michael S. Bolton,Inc.

December 03, 2011 09:15 AM

FDIC is Suing Appraisers!

I've written a prior post about how appraisers aren't necessarily going to be sued over their appraised values, but how they've completed their reports. It's widely known in appraisal circles that the biggest current threat for appraisers is being sued by the FDIC. The Appraiser Law Blog has a great article on the newest round of appraisers being sued by the FDIC.

Reason appraisers are being sued:

What I find the most frightening about the lawsuit is some of the reasons that they're citing:

No detailed explanation of appreciation for comparable sales (remember this is from 2004-2007)
One comparable is 20 years old, and the others are only 1-2 years old
A comparable was on the market for 91 days, indicating that the market may be slowing
Comparable sales were over one mile
A property in CA increased in value 56% in 29 months

Try and keep in mind what the market was like in 2004-2007. I'm in no way saying that some, or maybe even all of the lawsuits aren't valid, the courts will decide that. But, if appraisers are going to held liable, and subject to this level of detail and scrutiny over their reports, you'll "continue" to see appraisal reports where appraisers aren't willing to go outside of the parameters set by the lenders.

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Shar Sitter

Rooms With Style - Minneapolis, MN

Home Staging and Redesign Minneapolis/ St. Paul, M

Oh wow. Scary. So I am assuming based on the severity they could just be fined or even lose their licenses, thus lose their jobs?

Dec 03, 2011 10:38 AM

Michael S. Bolton

Michael S. Bolton,Inc. - Zimmerman, MN

MN Appraiser

Hi Shar! This is much worse, they're suing to cover the cost of the mortgage defaults. We're talking about hundreds of thousand of dollars per lawsuit. Only the state can take away your license, this is a much longer arm of the law if you will.

Keep in mind that this is for only ONE bank that has failed! The FDIC has taken over 100's of failed banks, the floodgate is just getting ready to open.

Have a great evening!

Dec 03, 2011 10:48 AM

Jim Hale

ACTIONAGENTS.NET - Eugene, OR

Eugene Oregon's Best Home Search Website

The FDIC may be out of their senses now.

They were most certainly out of their sense back when all this was coming down.

Dec 03, 2011 11:46 AM

Marte Cliff

Marte Cliff Copywriting - Priest River, ID

Your real estate writer

This is just ridiculous. Someone looking to place the blame that rightly belongs with Congress and the big banks. Think Barney Frank.

I can see an "unintended consequence" to this - appraisers getting out of the business and doing something else with their talents. They're not paid enough to subject themselves to this kind of liability.

Dec 03, 2011 11:48 AM

Jim~It makes you wonder doesn't it.

Marte~There has been a huge exodus of appraisers out of the business already. And the ones that want to stay in the business are looking to do work outside of the mortgage world, which I've been working very hard at doing over the past couple of years.

The entry into appraising has become very onerous. My guess is the "unintended consequences" are going to get a lot worse before they get any better.

Thanks for stopping by, and have a great evening!

Dec 03, 2011 01:58 PM

Lloyd Binen

Certified Realty Services - Saratoga, CA

Silicon Valley Realtor since 1976; 408-373-4411

Michael,

I feel for you guys. Monday quarter-backing of appraisals and loans could be as damaging to the market as the boom was. I'm lucky; out here many purchases have big down payments, and even cash. Appraisals aren't deal makers/breakers. Besides, they're usually right.

Dec 06, 2011 03:09 PM

Lloyd,

Your market is way different then anything we have around here. The unintended consequences are going to be less "good" appraisers to do mortgage work. Sooner or later someone is going to figure-out how they're damaging the appraisal industry, but by then it's usually too late. Thanks for stopping by.

Have an AWESOME day!

Dec 06, 2011 09:57 PM