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2 out of 3 Appraisers

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Mike Simpson

Thread Starter
Senior Member
Joined
Jan 30, 2002
I got a phone call a few years back from a borrower worried his Loan Officer had "raised the value of his home sooo much that he no longer had any equity." Naturally, what this individual was trying to say was; did my lender & their appraiser inflate my properties value to make a loan, and if so do I have any equity left.

"You were the first one out here Mike, and you seemed to be the most knowledgeable--I respect your opinion," he said. He went on to tell me his lender sent 3 different appraiser's (including myself) to inspect his property, and he suspected the lender had "gone with the one who appraised his home for what the lender needed (to make the loan)."

I explained to him that although I hadn't been paid yet, his lender was my client, and as such I couldn't disclose any information due to client confidentiality. However, considering his concerns--he could always hire an appraiser himself to determine fair market value for his property. He should look in the yellow pages and preferably for an SRA named ____ ____ as this appraiser had an impeccable reputation and was beyond reproach in my opinion.

This phone call came around the same time Freddie claimed "appraisers were always hitting the estimate" and alleviated us for many transactions, which also--coincidently--was about the same time their stock price was taking a dump! By the way--where do you think Freddie got this information--from the lenders or the appraisers???

My point is; this scenario happened to me more times than I care to admit (until I got smart), and it's played out everyday, in every major city throughout the country. Appraisers aren't "always hitting the estimate," the lenders are sending as many appraisers as it takes to get their number, and penalizing the honest appraiser by not paying them, and rewarding the dishonest appraiser w/volume orders.

If entities insuring mortgages want to alleviate professional unbiased appraisers let them do it, and be honest about it--to raise their stock prices & revenues by grabbing what's traditionally been the appraiser's fee. Just--please don't feed us copious amounts of mushroom food by telling us the wolf says the rooster is doing a lousy job in the hen house.

-Mike

Footnote: The borrower knew exactly what was going on all along, he just wanted to know after he got his loan--if he could go after his lender for damages. Lovely individual!
 

Steve Owen

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified General Appraiser
State
Missouri
Mike, sounds to me like a story that needs to be forwarded to your congressman.
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Mike,

Your 'two out of three' observation of appraisers that push values to make the deal is just about the norm in my area. That is about how many homeowners hand me older appraisals from the past year that were more than a little high at the time, and the homeowner expects me to at least meet those numbers or better them. A scarcity of sales in the past year, coupled with a glut of active listings (at markedly lower prices than a year ago) is chewing up what little bit of equity the homeowners had left. There are few recent sales to justify the older numbers.

A strange phenomena is occuring in my area that I never would have expected. You know how most appraisers just love it when they get orders to do an appraisal on a home that they've done in the past? A sizable part of the work is already done, and it's a slam dunk when you can clone the old report and simply add any changes along with newer comps. Well...the value pushers are treating their old reports like hot potatoes now.

Over the past couple of months I can't tell you how many times a loan officer has called and told me that the last appraiser 'doesn't have time' or is 'booked out for weeks' and can't do a new appraisal. In the LO's mind, this must be a very good appraiser, after all, they have so much work! Every single time I accept one of those orders I soon find out why. Those jerks KNOW they blew out most of the homeowners equity on the last appraisal, and they don't want to touch it now. I get to be the bearer of bad news, therefore I am the 'bad' appraiser, and the other guy gets to remain the hero. Arrrrrrrrrrrrrgggggggggggghhhhhhh!!!!!!!!!!! :evil:
 

Mike Simpson

Thread Starter
Senior Member
Joined
Jan 30, 2002
Dee Dee -

I love doing an appraisal on a property I completed a previous assignment 7 months earlier or more! I did my job right the first time around, and can, therefore, finish the report at light speed.

I have a clientele I can work with...it's taken years, but they actually listen to me when I tell them an estimate is too high. No arguing, no complaining, no"well I'll be taking my work elsewhere." My clients tell me on a regular basis how much they appreciate me, and I tell them often the value isn't there (secret is I also tell them why, and they obviously know more about Guidelines than most L.O.'s)!

How did I get such a valued class of customers? Simple--I changed my mindset--I began looking at potential clients as if I were entering any other kind of relationship. I began scrutinizing them as people, rather than as entities. I also like em young, while they're still trainable (by the way my clients are some of the highest producers in their offices).

On those assignments completed by other appraiser's--I tell them do you realize that's an increase in value of $2,800 per month since the last appraisal/purchase. When you break it down for them like that it's easier for them to digest...later they start doing the math before they call you.

Steve -

Forward this story to my Congressperson??? Representative "Baghdad" Jim McDermott resides in my state...he's too busy bashing the President and singing the praises of Saddam Hussein.

No thanks--rather than be culled from the herd--I'd just as soon add my voice to the chorus!

-Mike
 

Dee Dee

Elite Member
Joined
Jan 16, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Steve,

Alas, I am finding that some of the clients that I once thought were good ones are now turning out to be 'fair weather friends'. An occasional value estimate that came in lower than what they had hoped for used to be okay, since they had plenty of other irons on the fire. Nothing like a bit of trouble in the real estate market to find out the true colors of your clients.

Believe it or not, it's getting easier for me to work with out-of-state lenders than with the locals. At least they have prospects in areas of the country that aren't getting hit as hard, whereas those who work with homeowners and buyers who live predominantly in my market area are starting to realize that they may be eating a lot of maccaroni and cheese if they can't keep the deals closing.

Oh well....just gotta keep on doing my job the best I can and ride it out.
 

Terrel L. Shields

Elite Member
Gold Supporting Member
Joined
May 2, 2002
Professional Status
Certified General Appraiser
State
Arkansas
I'm taking the heat now over a cheap o place. Owner said she will replace siding @ $6,000 and carpet obviously needs replaced. last appraiser was $10K (18%±) over my appraisal 18 mo. ago and called the siding and carpets "average". What can I do about it?
 

Monica Otto

Freshman Member
Joined
Mar 1, 2002
Professional Status
Certified Residential Appraiser
State
Florida
There are always going to be appraisers out there that make the numbers. I dont think anything will change until commissioned LO no longer call the shots on who gets appraisal work. It's such a HUGE conflict of interest, and such an obvious one. I dont understand why this practice is allowed. I guess as long as things are going along good with property values its not an issue. But most of us were doing this work in the 80's with the S & L crisis, and we are the ones that utilmately took the heat. In come state certification, USPAP, everything else, and none of it makes any difference as long as this LO's order the work. We need to get back to apprisals being ordered from Quality Control/Underwriting and most of the number pushers with poor quality work will fall by the wayside. I agree with Dee Dee, you used to be able to come in low a few times without risking loosing a client, its getting tougher.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
It seems that when Quality Control has a problem, they call me, often after the fact. When you open up a report and it's obvious that the sales are superior to the subject just from the photographs and no comment or adjustment is made, you wonder how it got past underwriting. (O.K., so I also believe in Santa Claus) Don't these guys realize that if it goes bad, they're going to get reviewed? It's just not worth a $300 fee to lose you license.

Roger
 

Leon Stewart

Member
Joined
Jan 15, 2002
Monica:

You hit the nail on the head, but just transferring the ordering process to another department with the same Lender will solve nothing. The Loan Approval Process and the Appraisal Process has to be done by two separate and distinct entities.

You are right there is an obvious conflict of interest, but the powers that be has known that all along. It's the entire structure of the Loan Processing System that has to be changed, not just one part. You can't have a Loan Officer handing out Appraisal Assignments when his/her Fee's are based on the results of those Appraisals. That's a no brainer.

leon
 

Head Surfer

Administrator
Staff member
Founder
Moderator
Joined
Jan 4, 2002
Professional Status
Retired Appraiser
State
Florida
When I first became an appraiser in 1984 this problem existed and was what all the "old" appraisers were talking about then. They said then:

"As long as the person who has control of ordering the appraisal is someone who has a financial interest in the transaction, there will always be potential for abuse".

Unfortunately this abuse happens often. A commissioned loan officer usually has "control of ordering the appraisal" however often the real estate agent (also on commission) has enough influence with the loan officer (i.e. they give the LO lots of business) and has control of ordering the appraisal. Agents have a list of their "good" appraisers also who always seem to "find" the value they need.

Times just don't change.
 
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