"...At the extremes, in 121 instances, the appraised value was more than double the sale price, and in 132 examples, the appraisal was less than 70 percent of the sale price. It is like a game of horseshoes and throwing grenades,” the authors wrote of the results. “This study confirms what many of us have thought but heretofore have only known anecdotally: that appraisals are not very accurate. Close is good enough".
Wow. The NY Tiimes released this detailed study of appraisals completed on commercial loans that went bad. It's very alarming as the "help" from Washington continues to do little except to cause trouble. The horror stories of appraisal issues on the residential side continue to flow like a raging river; the creation of AVM's have driven veteran appraisers away from the retail side of the business. Looks like the same nonsense with shopping for fees instead of expertise is entrenched in the commercial side.
John Cicero, a managing principal of the appraisal firm Miller Cicero, said: “It is a broken profession in a lot of ways. The appraisal industry has become commoditized, where lenders see appraisals as simply a commodity to be purchased by a vendor and where more emphasis is placed on the price of an appraisal than the expertise of the appraiser.”
For example, Mr. Cicero said, in the past lenders would often have long discussions about the project and the appraiser’s qualifications before hiring. Now, it is more common for lenders to use an online bidding system, where they issue a request for proposals from appraisers and often choose the least expensive. “They actually refer to us as vendors submitting a bid, not educated professionals who are providing an important service,” he said.
It amazes me that nothing is being done despite the obvious and clear adverse impact of AVMs. It seems clear that on the residential side, AVMs have resulted in nothing positive. On the commerical side, the article intimates that the next shoe to drop could be the size of one that Shaq would wear.
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