Anyone Seeing Appraisals Coming In Short On Purchases More Than Ever?

      Anyone Seeing Appraisals Coming In Short On Purchases More Than Ever?

In the last 2 months, I have seen 4 homes appraise for less than the purchase price. 3 of them were over $20,000 short and 1 over $40,000 short.  At the same time, I have seen a few appraisals value the home a couple thousand dollars over the purchase price.

I'm concerned about the appraisal industry.  I know many local banks and mortgage bankers are using their own "panel" of appraisers to appraise all of their homes.  Many of these appraisers are being contacted by the loan officer via text or phone calls stating the value they need for the home.  If I wasn't mistaken, this was one of the biggest problems that caused the crash we just experienced.  Why is no one catching on?

The wholesale world (aka "mortgage brokers") are held to the highest standards when it comes to appraisals.  As much as I want to kick against it, I believe it is for the better for the consumer and the economy overall.  I'm glad to see the checks and balances of the wholessale mortgage appraisal world.  To see a home come in short when the appraiser knows what the purchase price was, means that someone is doing their job and not afraid to be hated.  That deserves respect and not hate. 

Some background:  It is called the HVCC - "Home Valuation Code of Conduct".  There is to be no collusion between appraisers and the client and/or affiliated parties such as the realtors and or mortgage company.  Appraisers are supposed to give an unbiased and independent opinion of the value of a given property.  Mortgage brokers are required to order their appraisals through 3rd party companies called AMCs - "Appraisal Management Company".  They are independent of the bank and and promote ethical lending, as no one involved in the transaction has any say in who appraises the home and there is no divulging of the contact info for that appraiser until after the report is completed, reviewed, and given to the bank.

Mortgage bankers nationwide, however, are using their own panel of appraisers that are hand selected.  Literally a local bank I know of has 5 appraisers on a list for 100's of Loan Officers. That means you have a 100% chance of your appraiser getting the job, making the line very gray as to whether or not collusion is going on.

As much as I envy more deals closing, I am even more jealous for the long-term stability of the mortgage lending world.  I am also jealous for my client to get a fair assessment of their property, especially when we are all giving disclosures stating that this is the case.

"There may be pain in the night, but joy comes in the morning".  Sometimes you don't get what you want. Maybe your home doesn't have enough equity to pay off debt or maybe you can't sell your home for as much as you want to. We are all mature adults and know that delayed gratification is the best kind.

Here's to a healthier and stronger Real Estate and Lending market!

I'd love to hear your thoughts on what is happening with appraisals in your backyard.