Appraisers "FUDGING" The Wrong Way Court Banks At Public Expense

By
Real Estate Agent with Rocky Mountain Realty Co.

  "INSERT EQUITY HERE!"

We all know there has been some terrific controversy concerning some of the less reputable appraisers that inflated values during the recent market in order to obtain value that just wasn't there.

There are some appraisers that are still riding that last wave until someone stops them...AND THEY WILL. I see several license suspensions on the Colorado Department of Regulatory Agencies web site for both licensed appraisers and real estate professionals.

If I were an appraiser, you can bet that I would be as fair as I could by using viable comparable and actual, documented information pertaining to the properties that I was appraising...now more than ever because there may be some undue scrutiny of even the most experienced, reputable appraisers.

This is the case also in the Real Estate and Mortgage industries as well. The point I want to make is that I feel it is EQUALLY disturbing that this new trend of "low balling" to be on the safe side is popping up lately in the deals that I've seen in my office.

We are small and have just 7 agents, all active to some capacity, so I do have involvement in each of their deals. I notice that the last two VA Appraisals we had have come in EXTREMELY low when they are held up to recent comps of the EXACT SAME model and square foot home ON THE SAME STREET and in the SAME NEIGHBORHOOD. No comps over 6 months old...and in one case, the subject property had been COMPLETELY remodeled and came in at 5k less than it's 4 month old sister-comp directly across the street that had NOT been remodeled.

ISN'T FUDGING THE WRONG WAY TO SAVE THE APPRAISER'S UNCOMFORTABLE SCRUTINY JUST AS DISHONEST AS OVER-VALUATING A PROPERTY? It should be...and perhaps MORE so because everyone is talking about how the former appraisal practices have cost the banks millions of dollars, but the latter practice is costing THE GENERAL PUBLIC and PRIVATE CITIZENS millions of dollars in valuation. Why is this ok? Is anyone else seeing this?

Comments (11)

Mark Horan
Resident Team Realty, LLC & Toni's Property Management LLC - Saint Cloud, FL
"The Resident Chef" - Resident Team Realty LLC &
Lania- I have seen that as well. Nobody wants to step up. They want to play it safe.
Jan 16, 2008 05:32 PM
Lania DeMers
Rocky Mountain Realty Co. - Colorado Springs, CO
Broker, Rocky Mountain Realty Co.
Right Mark...and in this case "playing it safe" is low balling equity. It's just as wrong as inflating equity. It's worse in my opinion because it's taking value that IS THERE away from someone for no good reason.
Jan 16, 2008 05:35 PM
Alisa McKeel Willson
Appraisal Pros in Texas - Huntsville, TX
Certified Res. Appraiser

Lania, I am an appraiser and I only speak for myself on this (or any topic).  I can tell you that I do not fudge the wrong way, below value as you are suggesting.   I try to do my home work on each property and come up with the most probably sales price the subject would command as compared to sales in the subject's market area....the theory of substitution.

 Right now with so many markets declining we are seeing lender guidelines changing often.  Many of the banks are asking for at least two comps of the 3 closed sales to be less than 90 days old and we are being asked to provide at least 1 or two pending sales or active listings that support the value. 

In many cases I am seeing better indication of value from the active market than from closed sales especially if the closed sales are 4 or 5 months old.  If the market is declining then value is more likely to come from the lower range of value indicated by my comps rather than the high side. 

Am I trying to be conservative? No, not really, I am trying to give my opinion of the most probably price the subject will sell for and if the market shows a downward trend well I have to take that into consideration.

That said, I am sorry you have had trouble -- it is not easy these days. 

 

 

 

 

 

Jan 16, 2008 08:28 PM
Lania DeMers
Rocky Mountain Realty Co. - Colorado Springs, CO
Broker, Rocky Mountain Realty Co.
Alright Alisa...I'll give you that, but if you and everyone else does what you are describing, won't it be virtually IMPOSSIBLE to ever see the values go up again? Someone has to "take the leap" and actually say what the value of the home is based on other factors as well.
Jan 17, 2008 03:18 AM
Lisa Hill
Florida Property Experts - Daytona Beach, FL
Daytona Beach Real Estate
I think that unfortunately, there was a lot of pressure put on the appraisers during the housing boom. Otherwise, how could people have possibly bought the houses at those prices?
Jan 17, 2008 03:30 PM
Alisa McKeel Willson
Appraisal Pros in Texas - Huntsville, TX
Certified Res. Appraiser

Lania, not impossible at all.  This is not our first downward trend and prices managed to escalate to stellar heights after the last cycle.  Those prices were brought about by many things including multiple offers.  Once the market turns around then prices will start rising again and the trend will be recognized and reported by appraisers.

Jan 17, 2008 04:45 PM
Lania DeMers
Rocky Mountain Realty Co. - Colorado Springs, CO
Broker, Rocky Mountain Realty Co.

Alisa...I know that and I was being facetious. Multiple offers STILL have to appraise if they are not cash offers and WHO are these appraisers who use the approach YOU described and are still able to come in at those values? It would be virtually impossible using the data you just told me you use. Someone has to put on their thinking cap and evaluate the amenities and the upgrades, the situation and size of the lot...YOU KNOW, THE ACTUAL VALUE OF EACH PROPERTY.

I think you hit the nail on the head. "Once the market turns around then prices will start rising again and the trend will be recognized and reported by appraisers."

THAT'S my point. Real Estate Brokers and Salespeople recognize and report market trends. That's what a CMA is about. It's a rough guestimation of what a Seller can market their house for or what a Buyer can expect to pay. You don't need a Certified Residential Appraiser or a Registered Appraiser to do that. The reason for having such a designation is that it is supposed that an appraiser has the knowledge, education and tools needed to calculate the actual value of a property using more than MLS comps. Heck...we can do that...

Jan 18, 2008 02:52 AM
Alisa McKeel Willson
Appraisal Pros in Texas - Huntsville, TX
Certified Res. Appraiser

Lania, sorry I did not catch your sarcasm.  Please, I did not once say that I ignore upgrading and amenities.  I take them into consideration with every property I evaluate and I don't know of any appraisers who don't.  The ones who ignore them and do not adjust for upgrades may end up in trouble in the long run.  ( And if you are an agent who is very descriptive in your listings and include a lot of photos of the interior and exterior then I say "thank you"... )

We do use more than MLS comps to determine value which is why market trends come into play....paired analysis of comparable sales, adjustments for location, gross living area and amenities, external factors such as nosie detriment from freeways, busy streets, airports, etc., ...these are all considerations and just a part of the process in addition to segments already mentioned.

My original comments were not describing the entire appraisal process but were offering a point of view as to why an appraiser might give a lower value than a model match comparable sold 4 or 5 months earlier. 

 

Jan 18, 2008 04:01 AM
Todd Clark
eXp Realty LLC - Tigard, OR
Principle Broker Oregon

It took me a month to find a new brokerage after a year with my first company. I left because I was showing a home that was listed by an agent in our office and I clearly saw the square footage she had listed and was reality was different. I even measured to make sure.

When I brought up to the other agent, I was told to mind my own business and let the bank decide if the home was worth what they had it listed at and she wasn't about to change the square footage.

I brought this up to my principle broker and they just told me to find a new home for my clients and move on. At this point, I knew that if they were will to go along with fraud, then this wasn't the kind of company I wanted to work for.

Feb 07, 2008 04:24 PM
Lania DeMers
Rocky Mountain Realty Co. - Colorado Springs, CO
Broker, Rocky Mountain Realty Co.

Congrats Todd! You don't want to be affiliated with an operation like that! They will reap what they sow for sure. You keep your integrity and God will bless you! Best in all you do!

 

Feb 08, 2008 03:07 AM
Richard D. Ferris
AmcAppraisalsinc.com - Clermont, FL
Florida State Certified (FHA) Appraiser

Many times - appraisers who are trying to be "conservative" just boils down to appraisers not really knowing what they are doing!  I cannot tell you how many times I have reviewed apraisals for condominium units where the units are selling for $250-$300 per square foot - and the appraiser adjusted the comparables at $20 per square foot.   Why?  Do they think that living area contributes 10% or less to the sale of those units?  Or is it, "well..that's what I was trained to do..."

Challenge your appraiser on the "WHY" of the adjustments.  Why was the gross living area adjusted at only $20 per square foot?  Why was a 1/2 bath given a $1,000 credit in a market which typically shows $8,000 of added value?   

Values shouldn't be HIGH or LOW - they should be substantiated by comparbale sales, active listings, and pending sales - and adjustments should be supported within the market by sound, logical reasoning. 

The next time you think an appraiser is being "conservative" or "low balling" - look over the appraisal and see if there really is clear reasoning for the value - or just fear leading to unsubstantiated adjustments.

Richard Ferris, AmcAppraisalsinc.com
Clermont, FL
Fl St Cert Res RE Appraiser 

Aug 29, 2008 02:11 AM
Anonymous
Brad Henry

Alisa:  My question in regards to being fair is this:  If over the past 90 days the only close sells of property were sold by banks and or the HUD Housing,  Short sales and what have you on a home that has been badly neglected,   in total disrepair,  most missing everything from the appliances to carpet, doors, and even the heating systems.  How in the devil do you do a fair market appraisal on a nice home amidst all this?  Somehow the lenders need to take this into effect in these declining markets because not all the properties are in this catagory. So is the seller better off to wait it out and sell when this passes,  and if that person can't wait it out it turns into another short sale?  Something is wrong with this picture.  

Aug 29, 2008 09:07 AM
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