OHHHhhhhh.....this blog is going to ruffle some feathers...trust me! This is my biggest complaint with the "Appraisal" Industry and that is, they don't appraise anything and, you can quote me on that one.
Ok, so the appraiser gets and order to go out to a home and appraise it. Well, on the paperwork he got from the bank, the borrower's requested loan amount appears. That is why it happens that the appraiser's appraisal numbers always match exactly the loan amount, which is obtained directly from the Purchase and Sale offer. So, I have to ask, what is the appraiser appraising?
This also happens in the reverse. When a bank has a REO, they send over the appraisal order which so happens to have the remaining balance and or lowest net amount the bank is willing to take hence, why some banks price their REO's way under value and get multiple offers immediately.
Now that you understand that, it gets worse. So, lets say Johnny Home Buyer goes into a bank and gets a loan for $150,000.00 however, doesn't want to spend that much so he goes and puts an offer on a REO that was priced under value at $100,000.00. He finds out that the home has multiple offers so he submits his final and best at $130,000.00, he really wants the home. He got that number from the Selling Agents comps, which showed the home was worth $140,000.00 so, even though he is paying more than list, he is still getting a deal and feels really good about his offer.
So the banks appraiser (buyer's bank) goes out and appraises the home at $120,000 due to a variety of factors, (pick whichever ones you like because every appraiser that goes out finds something different each visit) condition, location, upgrades or lack of, noise pollution, migratory bison, predatory lions, asteroids and close encounters of the third kind.
Either way, the deal is shot, it's dead, no where to go now so the Realtor is left with trying to save a deal by proving to others that the appraisers were all screwed up and bank policy is fraudulent by any self respecting, self governing, litmus test. Well, this doesn't settle well with the bankers involved because they don't like you pointing out their problems and they go about defending their appraisers.
The best part of all this, no one ever calls the appraiser or the appraiser won't return any one calls but the banks and, they are not calling. The banks makes the excuse that they are just too busy to follow up for accuracy on each deal and rather than fight to save the deal on the table, they move on to the next one because, THEY GOT MULTIPLE OFFERS!!!!!!!!!
Ok, so love it or hate it, the game is a foot.
FYI: this is one reason why I don't deal with Countrywide. It's scandolous.
Weichert Realtors Appleseed Group, 2043 Richmond Ave. S.I.N.Y. 10314. office phone 718-698-9797, Appleseedhomes.com... - Staten Island, NY
NYS Licensed Real Estate Salesperson
My experience is that they do a good job where I am. But that's just my opinion.
Jan 12, 2009 07:02 AM
Sonja Babic/PRIME Realty NC, LLC - New Bern, NC
New Bern NC, PRIME Realty NC, LLC
Some very good points! It makes you wonder how it always appraises ate contract price?!
Jan 12, 2009 07:03 AM
Chicago, IL
I am going to challenge you on this one and ask you if you had first hand conversation with the banker who said "they had too much going to follow up"?
This one will not ruffle my feathers because a bone fide, certified appraiser who is affiliated with the Appraisal Institute is accountable for how they obtain their information. While there were multiple offers and the selling agent's comps said that the home was worth $140K in value .... I dare to challenge that that agent reached out to the Listing Realtors of the properties that closed and got all the detailed information on the property, size, location, utility, room count, finish, basement, master bath, age, modernization, consideration for overimprovement?, relocation, type of financing, any concessions, and because "God" the listing agent said it was worth "x" amount then that was the final say. I bet that the Listing Agent didn't go inside the comparable sales or even measure the house to find a better square footage or even obtain that square footage from the listing Realtor on these comps.
Ruffle? Nah. It's your opinion based on unfounded information. You have that right. However, appraisers never used to get he selling price or the loan amount and that's where you find good appraisers. They know the market. They are representing a bank and there information is based upon factual and not "reading into a listing sheet". Big difference. The value came in where it came in because of FACTS. Dispute it with documentation to support that selling price. The buyer has one shot at it, but don't think that that appraiser hasn't done his research.
Value is based on similar market time, similar seller motivations (arms length transaction), short sale to short sale, condition, location, external obsolescensce, cul-de-sac?, modernization, over improvement?, basement - full, partial - exterior access?, The list goes on and on.
My hat is off to the appraisers who have lost business because of the threats of not giving values to make a loan. I salute appraisers who disqualify themselves when they do not have a good grasp of the market place or may not be fully qualified to appraise in a certain area. I am proud that people put down appraisers for not making value. You know why? Because they are doing their job.
Now, if the listing agent had the comps that were reliable and founded, the value would have been there. Bottom. Obviously not.
From a woman who reviews unfounded appraisal values for banks.
Jan 12, 2009 07:23 AM
Liberty House Realty LLC - Nashville, TN
Turning the American Dream into Reality
"appraisers never used to get he selling price or the loan amount and that's where you find good appraisers."
What used to happen and what does happen are 2 totally separate issues. I did not write the blog with some nostalgic look at the past and how things used to be good when but, instead I was commenting on my direct observations and conversation with the people directly involved on a colleagues deal I helped with.
Fact, it was confirmed by the banker that they do provide the appraiser with the loan amount taken directly from the Purchase and Sale Offer.
Opinion, I think this is a really bad practice and should be stopped.
Fact, I was on the actual first hand call between the banker and the involved agents where the banker said, "We (talking about his department) can't follow up with appraisers because they don't have their contact information". Now, we may have gotten a really bad bank rep or they may not have been trained but, the supervisor had the same response to the agents repeated request to confirm the findings with the appraiser.
As for arguing that bone-a-fide appraisers affiliated with the Appraisal Institute are accountable and inferring thus they don't make bad appraisals or are infallible is less than honest. The argument about appraisers using a scientific approach and listing out all the many things they consider in their analysis is like calling the Psychic Friends Network for lottery numbers and asking them for a money back guarantee if you don't win. Even the USPAP (Uniform Standard of Professional Appraisal Practices) says,
"...a type of value, stated as an opinion, that presumes the transfer of a property (i.e., a right of ownership or a bundle of such rights), as of a certain date, under specific conditions set forth in the definition of the term identified by the appraiser as applicable in an appraisal."
As for what the Realtor did or didn't do, not exactly sure how that has anything to do with anything considering, it wasn't the offer price or listing price that killed the deal.
Yes, I agree, if you can find an appraiser out there who doesn't bow to the extreme pressure that the banks put on them in order to make deals, great, you have found a good appraiser however, ask any Buyer, Seller, or Realtor out there who has been involved in the buying or selling of a home in the past 3-5 years, and more than not, you will find appraisers who aren't appraising but, simply completing orders to the satisfactions of the banks who lend money solely on credit scores and down payments vs. market value and price.
Make no mistake, I think we (America) has some great people working in the appraisal industry however, it has plenty of room for improvement which I fear is only going to be made if the government steps in and enacts more regulation.
In order to be fair, I can find just as much wrong with Realtors, of which I am one, as I can find with any other industry. It's just this blog focuses on Appraisals because I just happened to be involved with a deal that went south due to a bad appraisal.
So, before any goes out on personal attacks of me and says things like, "stop picking on appraisers" go read some of my other blogs and look at the standards I hold my own profession to. You will quickly realize, appraisers got off easy.
Jan 12, 2009 08:13 AM
Chicago, IL
An agent has the right to question the appraisers qualfiications at the time of the appraisal. Bottom.
As far as the Appraisal Institute is concerned, if such bad practice is going on, there is accountability and that is totally different then the "hey, let's get an appraisal license because the money is easy", type of appraiser. I totally agree with you. There is a difference for instance, in the State of Michigan on accountability for appraisers. from what I am told by my brothers who are appraisers and have been and are affiliated and regulated by the State of Michigan as well as the Appraisal Institute and their conscience, that if and I say if, an appraiser is involved or is employed by a company or someone within the company that does illegal activity and doesn't take the USAP seriously, they all can loose their licenses. Serious as it may be, it is.
One of the first companies that I worked for as an appraiser, the owner/appraiser wanted us to "make the value" and I refused. So, I got very little work from him. However, within two years, this same man was charged with 2,100 counts of blatant misrepresentation but because Illinois hadn't adopted USAP at that point, he only got a fine!
Attack you. Nope. Jessee, there are alot of uneducated people out there in the real estate industry and I agree with you that the ropes need to be tightened in ways that accountability is more regimented, if I can say that without making anyone angry.
I wasn't doing nostalgic. I was laying the foundation for there are alot of Real Estate People that don't have your knowledge that are reading this post and I was setting the stage to say for understanding why you have an argument and they should understand how things have changed because of "deregulation". When the stage is set, then those who don't understand will understand your points.
Deals go south, it happens.
Illustration: People have operations and they die. I have a mother who needs a new heart valve but she is high risk. We have reached out to every source to give her and my father the information so that they can make a decision. That decision is their choice. That choice may be wrong and my mother could die. I cannot fault a doctor and he is not God. A doctor can only do his/her best. the same holds true in life. Certain people have certain levels of accountability and others don't care. We are not living in a perfect world, with a perfect society. I don't like it any better then you do.
But whether it be a market where the bank may think it's a risky loan (not talking about the file above) because there are 14 short sales in the back yard and there is very little money done with borderline credit or history all the way to understanding the research and time that is involved that a good appraiser who applies the market approach based upon the facts that are given to them from real estate agents, the county, from contracts, etc. It is a scientific approach and while it is an opinion of value, it is an opinion.
I do not take offense to your "physic friends network lottery for numbers" when it comes to appraising because you are looking at it on the emotional level right now. Let me lay this question out to you: How much money have you cost your clients, or I, anybody, by doing a market analysis that led to a price $50K below the original listing price? $250K below the asking price? The market prices are still falling but carrying costs remain steady and strong. How much money have any of us cost our clients because of a "lottery type opinion of value for marketing"?
It's not just about appraising, it's the whole arena in real estate. It must be taken seriously and to point fingers at appraisers when there are plenty of fingers that should possibly be pointed in other directions as well, is pointless. It's looking at this whole entire mess and looking for a platform that will work to benefit the best of the people, to protect them, their rights as buyers, sellers, owners.
In no way was I attacking you but illustrating to those who may not have your knowledge what was, what is and what should be. I talk about this alot before hundreds of Realtors and they all are shocked. You are one step ahead of them when it comes to understanding. All I ask is that you take your knowledge and turn it into something that would make change so that buyer's, seller's and owners are protected.
I have run into some lawyers that have left the closing table because they didnt' think the file would close. I got it closed. I have heard the words from a real estate agent telling me that she committed fraud because she wanted that property and now is finding it hard to make her mortgage payments. The homeowners that lied about how much they made because they wanted to have a good party for their father who was dying and they are now a short sale. When I responded to you, I spoke and challenged you for growth. You're brilliant.
I agree with you that there is room for improvement. If an appraisal is bad, then challenge it for pete's sake. Learn and qualify appraisers when they come to the appointment. Bottom. I'm sorry it happened but you could have challenged the appraiser and the appraisal.
Jan 12, 2009 09:43 AM
Rainer
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Liberty House Realty LLC
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