Bob Ipock
Elite Member
- Joined
- Jan 15, 2002
- Professional Status
- Certified Residential Appraiser
- State
- North Carolina
http://www.dsnews.com/view_story.cfm?id=620
Haley Settle | 11.15.06
Inflated home valuations were rampant during the housing boom, but now that the boom has lost its bang and market values are no longer catching up, these inaccurate appraisals are not as easy to ignore.
For hundreds of thousands of homeowners who bought their homes with little or nothing down or who used their equity as a line of credit, questionable appraisals have left little financially security against today’s rising interest rates.
If these homeowners want to sell, they will likely have to lower the asking price. Refinancing can also be difficult, if not impossible, because they have less equity than what was expected with the high appraisal. But consumers aren’t the only ones hurting; if a homeowner defaults on a loan for $200,000 when the true market value of the property is only $100,000, the lender faces a huge loss. Today, with real estate values heading south, these types of losses are expected to continue full throttle.
The Highs...
Exagerrated appraisals are one sign of mortgage fraud, which resulted in $546 million in losses in the first half of 2006 alone, according to the Federal Bureau of Investigation. Accurate appraisals could stop much of this fraudulent activity, but often, the appraiser is either taking part in the fraud or not doing a thorough report on the property and market.
But valuing a home properly, whether by BPO or a formal appraisal, is becoming more difficult for sellers with the changing real estate market. Rising interest rates are bringing to light an inherent conflict of interest for appraisers. With the slowing housing market, brokers may be more inclined to pressure appraisers to close more deals. But with more defaults on the horizon, lenders are working diligently to ensure the quality of their loans.
Pressure from brokers, which is often ignored from originators and securitizers, is not a new complaint, according to John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC) and a founding board member of the Center for Responsible Appraisal and Valuations (CRAV). According to the 2003 National Appraisal Survey, 55 percent of appraisers had encountered pressure to falsely raise a property’s value. CRAV is now pushing for reform of the appraisal process with the support of many real estate professionals.
And the Lows
On the opposite end of innacurate appraisals are the ones that are too low and underestimate the true market value of a property, which can put the brakes on home sales. “Deflated” appraisals are often the result of factors such as abundant foreclosures or properties in the area and vast home improvements not common in the neighborhood, among others.
Realtors were presented with strategies for closing the deal when a home’s valuation was lower than its market value at the recent National Association of Realtors (NAR) conference in New Orleans during the November 10 session “The Low Appraisal: Recourses and Remedies.” The panel promoted a proactive approach for appraisers, urging Realtors to provide the appraiser will any and all information about the property that contributed to the original asking price, as well as details about any plans to rectify problems with the property.
“Realtors, appraisers, and lenders must work together to support the fundamentals of the lending process and to ensure that housing remains a good investment,” said Thomas M. Stevens, president of NAR.
About NCRC and CRAV
The National Community Reinvestment Coalition, one of the nation’s leading consumer groups in the housing marketplace, created the Center For Responsible Appraisals and Valuations to deal with the problems associated with overvalued appraisals. Some of these problems include honest appraisers having their businesses damaged or destroyed and certain lenders, as well as the entire secondary mortgage market, getting defrauded out of billions of dollars. For more informaiton, visit www.cravonline.com.
About NAR
The National Association of Realtors is America’s largest trade association, representing more than 1.3 million members involved in all aspects of residential and commercial real estate industries. For more information, visit www.realtor.org
Haley Settle | 11.15.06
Inflated home valuations were rampant during the housing boom, but now that the boom has lost its bang and market values are no longer catching up, these inaccurate appraisals are not as easy to ignore.
For hundreds of thousands of homeowners who bought their homes with little or nothing down or who used their equity as a line of credit, questionable appraisals have left little financially security against today’s rising interest rates.
If these homeowners want to sell, they will likely have to lower the asking price. Refinancing can also be difficult, if not impossible, because they have less equity than what was expected with the high appraisal. But consumers aren’t the only ones hurting; if a homeowner defaults on a loan for $200,000 when the true market value of the property is only $100,000, the lender faces a huge loss. Today, with real estate values heading south, these types of losses are expected to continue full throttle.
The Highs...
Exagerrated appraisals are one sign of mortgage fraud, which resulted in $546 million in losses in the first half of 2006 alone, according to the Federal Bureau of Investigation. Accurate appraisals could stop much of this fraudulent activity, but often, the appraiser is either taking part in the fraud or not doing a thorough report on the property and market.
But valuing a home properly, whether by BPO or a formal appraisal, is becoming more difficult for sellers with the changing real estate market. Rising interest rates are bringing to light an inherent conflict of interest for appraisers. With the slowing housing market, brokers may be more inclined to pressure appraisers to close more deals. But with more defaults on the horizon, lenders are working diligently to ensure the quality of their loans.
Pressure from brokers, which is often ignored from originators and securitizers, is not a new complaint, according to John Taylor, president and CEO of the National Community Reinvestment Coalition (NCRC) and a founding board member of the Center for Responsible Appraisal and Valuations (CRAV). According to the 2003 National Appraisal Survey, 55 percent of appraisers had encountered pressure to falsely raise a property’s value. CRAV is now pushing for reform of the appraisal process with the support of many real estate professionals.
And the Lows
On the opposite end of innacurate appraisals are the ones that are too low and underestimate the true market value of a property, which can put the brakes on home sales. “Deflated” appraisals are often the result of factors such as abundant foreclosures or properties in the area and vast home improvements not common in the neighborhood, among others.
Realtors were presented with strategies for closing the deal when a home’s valuation was lower than its market value at the recent National Association of Realtors (NAR) conference in New Orleans during the November 10 session “The Low Appraisal: Recourses and Remedies.” The panel promoted a proactive approach for appraisers, urging Realtors to provide the appraiser will any and all information about the property that contributed to the original asking price, as well as details about any plans to rectify problems with the property.
“Realtors, appraisers, and lenders must work together to support the fundamentals of the lending process and to ensure that housing remains a good investment,” said Thomas M. Stevens, president of NAR.
About NCRC and CRAV
The National Community Reinvestment Coalition, one of the nation’s leading consumer groups in the housing marketplace, created the Center For Responsible Appraisals and Valuations to deal with the problems associated with overvalued appraisals. Some of these problems include honest appraisers having their businesses damaged or destroyed and certain lenders, as well as the entire secondary mortgage market, getting defrauded out of billions of dollars. For more informaiton, visit www.cravonline.com.
About NAR
The National Association of Realtors is America’s largest trade association, representing more than 1.3 million members involved in all aspects of residential and commercial real estate industries. For more information, visit www.realtor.org
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