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Who should order the appraisal?

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Dan Leggett

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Mississippi
In another post Pam said <span style='color:red'>"Yes.... lender control of the Appraisal Order is STUPID"</span> and I agree that in today's environment such is true many more times than not.

But what is the best solution? Someone from the credit side of the bank? What about residential mortgages sold in the secondary market? The typical fly-by-night AMC?? Please say no!!

I have a few good clients that really want an appraisal ("You just do your job appraiser-boy. Your appraisal is only part of our loan making decision. And we make that decision, not you.") and I love working for them. They actually read the reports and are quick to call about cap rates, adjustments, contributory values, worst case senarios, etc. I would hate to take them out of the appraisal ordering process. And there are some AMC's with like attitudes.

This is a huge problem that needs a fix but I have no idea where to start. I know several of you folks have a practice that seldom deals with lending related work but in my case I couldn't survive without it. Don't hold back on me, fire all guns at once. Maybe this forum can provide a real world solution.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Using the secret appraisal manual opened only with an appraisal decoder ring...it says ...."who ever needs the appraisal and agrees to pay for it".
 

Jeff Horton

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
Alabama
I have thought long and hard on this one and have to admit that I don't have a good answer. The best one I have come upon is the rotating list like they do for a judge in the law suit. It's just the next person the list. I think FHA did that? Since I just got approved (well pending) I am not sure.

The problem there lie's in how you make the list. If the lender gets to pick then it's the same ole thing. Just the number hitters will be on most lists. The only other alternative is that every qualified (has a license or certification) can apply to be on the list. Then again that has it's draw backs too. But at least it would level the playing field.

One thing is for sure. Anyone working on commission with nothing to loose but their commission is the wrong person to choice!!

If there was someone in a company that was had to answer for the choice of an appraiser like the Bankers do that would be the person. The one with his job on the line. Problem now is there is simply no accountability on the LO part.

One thought that has often crossed my mind would be rating system for Appraisers. I have no idea how you could do that accurately or what criteria you would use that would be fair. But it would be nice if appraisers were some how held accountable. If there was method to rate them make the number hitters and under-appraiser stand out.

Yea I know. Dream on.

Hope someone has a better idea than mine!!
 

xmrdfghap

Senior Member
Joined
Jan 15, 2002
Professional Status
General Public
State
Florida
I've said it before, but one appraisal isn't enough to make even a dishonest appraiser cheat, while 10 a week can make a strong person think about it.

Who should order the appraisal? I think the seller should have an appraisal, the buyer should have an appraisal, and the lender should have a review of both of them performed.

In Refi's, the borrower should have the appraisal done and the lender should have it reviewed.

Appraisers should advertise in the papers, on TV, in magazines.....just like lawyers and other professionals. Let market forces decide who succeeds and who doesn't......don't make success contingent on a willingness to commit fraud.
 

Restrain

Elite Member
Joined
Jan 22, 2002
Professional Status
Certified General Appraiser
State
Florida
HUD fraud was much lower when the FHA panel existed (prior to lender select). You worked for FHA, and they ordered the appraisal. There was 0 lender pressure. The buyer/seller couldn't even talk to you about the report - the lender was not allowed to give out your name or number. Your job was to verify the home for FHA.

If this returned and there was something like this for conventional loans, it would give enough work to everyone and take the pressure off.

Roger
 

Mike Simpson

Senior Member
Joined
Jan 30, 2002
There is a very simple answer that many don't seem to have fully explored. Dan even hinted at it in his post: I have a few clients who really want an appraisal. Therein lies the answer. You may not have the desired clientele at this time, however, that shouldn't prevent you from working towards that goal (hope for future achievement).

Goodpastures scenario, while idealistic, is highly unlikely. It's far more practical to shop your wares to a different kind of customer.

-Mike
 

Dan Leggett

Senior Member
Joined
Jan 15, 2002
Professional Status
Certified General Appraiser
State
Mississippi
Excellent points Mike. But let's face it, how many loan officers or mortgage brokers can you name that have been in the business as long as you have? I can't fill two hands with a head count. They come, they go, they don't care about bad loans, your reputation, or the health of the investor's portfolio. Management tells them to "book their market share of the business or we will find somebody who can".

Remember, management reports to the stockholders. If the Lender A / Appraiser A combo repeatly loses loans to the Lender B / Appraiser B dealmakers then something has to change and simplest solution is to change the appraiser.

Roger, you are so right. FHA blew it when they changed to lender select. It could still be a good working model for correcting today's ills. What kind of system would be fair to the lenders AND the appraisers. And who could be trusted to administer such a system?

Listen folks, we need to be ahead of the curve on this. Once the 'big wind breaks' and big time portfolios are valued at $0.60 on the dollar the Feds will step in with a reaction. What we need is a plan of action, not a reaction. We need something on the ramp.

This forum has close to 3,800 registered users and maybe 5% are regular posters. What about some of you lurkers out there? Appraisers, commercial lenders, mortgage brokers, real estate brokers, whoever. Throw your comments into the pot, let's see what bubbles up.

The first step in an appraisal is to identify the appraisal problem. OK, forget a solution for now, let's get a concise identification of this problem. I'll go first, some of the better wordsmiths can clarify.

The problem is....
"The person ordering an appraisal has a financial interest in a pre-determined value being reported."

I know that the collective minds of this forum can do this.
 
B

Bemis Pownall

Guest
My solution;

Like car facts(sp)
There would be home facts. On line service.
Car Facts checks the VIN# against a data base for repairs insurance cliams, prior owner etc, etc.

Home Facts would report to anyone licensed, or a memeber, for a fee
things such as
WHO THE LAST APPAISER WAS AND HOW MUCH!
Mortage CO
Loan amount
insurance claims
deed transfers
Building permits
Liens
and whatever else

It can be done.

There are at least 3xs the number of cars out there compared with homes/real estate
and the system works for cars.
Govmnt would have to be involved(FANNIE/FREDDIE ETC) and make it a requirement to register closing with data base.

Just an idea.
 
Joined
Jan 13, 2002
Professional Status
Retired Appraiser
State
Florida
Interesting...

In the auto industry, the auto appraisers that really know what they are doing make good money buying for the dealers and themselves. Of course, they never tell the consumer buyer what it's really worth.

NADA or Blue Book are used like an AVM but... NO auto dealer will buy anything WITHOUT actually seeing the vehicle in person. Or, they send their appraiser to look at it.

The auto appraiser doesn't make too many mistakes before he's fired and if s/he keeps on making mistakes, the word spreads through the dealers and they no longer can find a job as an auto appraiser.

Hmmmmm...... Let's see now..... the auto dealers are using their own money, aka as being personally responsible, so they make sure their auto appraisers really knows their job when they are purchasing the auto for resale. Then they have basicaly no responsibility when they sell it to the consumer. Banks/lenders are the ones being screwed and have thousands of auto loans that are way over the actual value of the vehicle because the banks/lenders use NADA or Blue Book. Ford Motor Credit is in financial trouble now with so many auto loans way over the value of the vehicle and they accepted shaky credit buyers. GMAC is not in as bad a shape (recent article) because they didn't do the 0 down/any credit loans.

Interesting parallels.
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Bemis.....Fannie/Freddie are not government, sometimes they think of themselves that way but they are not government. I am not in favor of more government involvement...actually I prefer less. It should be the lending industry that establishes the process for ordering appraisals and it should be taken out of the hands of anyone who has a vested interest in the final value determination.

Ask any lender which group of appraisers do they "dislike" the most. I think you will find VA appraisers win hands down. Why? Because the L/O can't influence them to the extent they can other appraisers. FHA once was that way, now it's a mess! Bring back the FHA panel. Establish one for conventional lenders too.
 
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