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Three Critical Shortcomings

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Frederick

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Senior Member
Joined
Nov 2, 2005
Professional Status
Certified General Appraiser
State
New Jersey
Three Critical Shortcomings the Fannie/Freddie Agreement fail to address:

1. The Appraisal Fees ; A number of appraisal management companies have been born from joint ventures between existing appraisal management companies and lenders, utilyzing the AMC's existing appraiser panel and fee schedule. This has essentially resulted in "price fixing" of appraisal fees. This is why we see a standardization of fees across broad geography that has never existed prior to this.

2. The public has been hoodwinked into believing that the fee for appraising their property is much greater than the amount actually paid to the appraiser. There should be a requirement that the borrower be informed of the net appraisal fee paid to the appraiser. The add-on fees of the appraisal management company should appear as a separate item. The public has a right to know what fees they are paying.

3. Lenders should be required to have a specified percentage of appraisals completed by "Certified" appraisers with a minimum of 5 years experience so that the practice of "bottom fishing" for the cheapest, least experienced and most vulnerable appraiser is stopped. This will create an incentive for appraisers to seek greater credentials and knowledge. This too will protect the public by ensuring that they are assigned a valuation professional who is qualified to appraise their property in a way that will protect their assets and those of the GSE and lender.

Other areas of concern are the fact that Appraisal Management Companies have no way of defining a complex appraisal problem other than giving an assignment a value point above which is defined as complex. This of course is in violation of USPAP but practiced on an everyday basis by AMCs. Complex assignments in reality have little to do with a value point but are more likely attributed to the lack of homogeniety.

Value is not the only way an appraiser is pressured. Turn-around time is used to pressure appraisers into completing substandard and incomplete analysis for fear of losing their income stream.

Identity Theft and fraud in sending unsupervised trainees to complete appraisals with the supervising appraiser signing as "has inspected". Provisions should be made to require a photo ID to be worn by the licensed or certified individual. The homeowner has the right to know that the person they are allowing to enter their home as required by the lender is qualified and their background appropriately vetted by the licensing and certifying authority. In cases where a trainee is accompanied, the borrower/Realtor/or other appropriate party should sign an acknowledgement that a photo IDed person has accompanied the trainee. In the limited cases where that cannot reasonably be accomplished the appraisal should be accepted with the exception noted. A high incidence of these exceptions will serve as a signal of concern.
 
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Greg Bell

Senior Member
Joined
Jul 7, 2006
Professional Status
Gvmt Agency, FNMA, HUD, VA etc.
State
Louisiana
It's illegal to charge a client more for a credit report than it actually cost the lender.How do we get in on those deals for appraisals?..
 

Tudor

Member
Joined
Aug 15, 2006
Professional Status
Certified Residential Appraiser
State
Arizona
Frederick,

Very good points, please forward them to Pam.
 

Mike Kennedy

Elite Member
Joined
Sep 28, 2003
Professional Status
Certified Residential Appraiser
State
New York
The biggest shortcoming.......

the language DOES address prohibition of supplying ANY advance estimates of value, minimum value, range of value - however -

the BIGGEST BULLSEYE IS STILL THE "SACRED GOLDEN CALF" .....

Contract Price remains "untouchable".

"okay okay.....we can no longer give you hints but we sure as hell can tell you EXACTLY what number to hit" .........

"JUST GIMME THE DAMN $$$ NUMBER" reigns supreme.
 

Michael Tipton

Senior Member
Joined
Sep 25, 2005
Professional Status
Certified Residential Appraiser
State
Florida
The American Way of contracting out the appraisal and due diligence obligations to AMCs at the cost of the service provider, the appraisal firm completing the report, is the issue.

I agree with Frederick that all appraiser's should be contacting HUD to address this issue. The attached link is HUD's comment link for public comments for RESPA reform.

http://www.HUD.gov/utilities/intercept.cfm?mailto:[email protected]
 

Kevin Mc

Elite Member
Joined
Jun 7, 2004
Professional Status
Certified Residential Appraiser
State
New York
Great Post Fredrick.

Hpoefully these ideas get presented and stick.
 

JFulmer

Sophomore Member
Joined
Dec 28, 2007
Professional Status
Certified Residential Appraiser
State
Washington
3. Lenders should be required to have a specified percentage of appraisals completed by "Certified" appraisers with a minimum of 5 years experience so that the practice of "bottom fishing" for the cheapest, least experienced and most vulnerable appraiser is stopped. This will create an incentive for appraisers to seek greater credentials and knowledge. This too will protect the public by ensuring that they are assigned a valuation professional who is qualified to appraise their property in a way that will protect their assets and those of the GSE and lender.

I agree with all of that except for #3. Or course I am newly licensed so it is easy for me to be biased but Time does not always equal Experience. I know of many appraisers in our area that have 10+ years of experience that are out of touch with adjustments and what competes with what. I saw a file the other day that another appraiser was working on (desk review) where the appraiser noted the existing site improvements to be $5,000 for the subject. No mention anywhere of the $12,000 impact fee that one would have if it was a new construction home. I think $5,000 might get you sewer and water hookup. I also see many "experienced" appraisers go way to far away for comparbles in an obvious attempt to push the value up.

My .02

-J
 

Thomas Fiehler

Senior Member
Joined
Jun 2, 2003
Professional Status
Certified General Appraiser
State
Ohio
JF-I also think 5 years should be a minimum. I hope you recognize that the 5K you mentioned is for "contributory value" and not cost new! Most of the reviews I come across that are below standard are by appraisers that are fairly new to the industry. It seems like they believe once they have a license that they need to start their own company. When they have a question then they have no one, except for their trainees, to bounce it off.
 

Kevin Mc

Elite Member
Joined
Jun 7, 2004
Professional Status
Certified Residential Appraiser
State
New York
I agree.

And while there is no doubt in my mind there are some awful appraisers out there with many years under their belt, more often than not experience and exposure makes for a better appraiser.
 

JFulmer

Sophomore Member
Joined
Dec 28, 2007
Professional Status
Certified Residential Appraiser
State
Washington
JF-I also think 5 years should be a minimum. I hope you recognize that the 5K you mentioned is for "contributory value" and not cost new! Most of the reviews I come across that are below standard are by appraisers that are fairly new to the industry. It seems like they believe once they have a license that they need to start their own company. When they have a question then they have no one, except for their trainees, to bounce it off.

Thats why instead of punishing new appraisers that do good work all new appraisers should not be able to have trainees for 5 years. Make it impossible for E&O carriers to insure trainees for appraisers that have not been licensed for at least that long. Also make the state boards that issue such licenses monitor new appraisers work for a few years to check the quality.

-J
 
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