Posted on 07/05/2009 3:05:32 AM PDT by TigerLikesRooster
New appraisal rules under fire
Critics charge that a new system is fostering the use of appraisers willing to work for low fees and who are willing to conduct home appraisals far outside their typical areas of activity, leading to low-ball appraisals that can hurt builders, real estate agents, consumers and lenders.
By Kenneth R. Harney
Syndicated columnist
WASHINGTON — It's by far the hottest controversy in real estate this summer and it could directly affect the value of your house — probably negatively — by tens of thousands of dollars.
The issue concerns lowballed valuations and the new rules guiding appraisers in both price-depressed and rebounding markets. Consider these snapshots:
• In San Diego, Steve Doyle, division president for Brookfield Homes, is trying to close out the final 20 houses of a 120-unit single-family subdivision. Prices range from $340,000 to $350,000.
But recently there's been a major hitch: Appraisers assigned by banks are coming in with valuations $60,000 or more below Doyle's selling prices. The appraisers, who Doyle says are unfamiliar with local market trends, inexperienced or both, are using foreclosures and short sales of existing houses as their "comparables."
Some of the distressed properties are in poor condition, and all of them offer fewer amenities, Doyle said.
• In Wilmington, N.C., a loan applicant with an unblemished payment record and a house in excellent condition sought to refinance into a 4 ¾ percent mortgage. She had purchased the property four years ago for $160,000 and made about $20,000 worth of improvements.
(Excerpt) Read more at seattletimes.nwsource.com ...
Ping!
The old system was corrupt and was a contributing factor to the bubble as they erred on the upside routinely ,,, people aren’t happy with the comps because the short sales and foreclosures are the only properties that are selling... well guess what ... that is all the appraisers have to work with ,, not fairy tales of “but my house is worth more..” ,, you can bitch and moan that the comp that came in 50k below your personal estimate needs repairs but those repairs can be done cheap ,, much cheaper than the 50k you’re moaning about.
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“• In Wilmington, N.C., a loan applicant with an unblemished payment record and a house in excellent condition sought to refinance into a 4 ¾ percent mortgage. She had purchased the property four years ago for $160,000 and made about $20,000 worth of improvements.”
It’s funny how the low appraiser is always the wrong appraiser. She could have the old appraiser do it again. “What’s that you say? The guy that did it the first time does not have his license anymore?”
Don’t talk to me about “local market trends”.
Talk about what the average wages are in the area, the employment figures, that sort of thing, what people can truly afford.
“Local market trends” (and greedy appraisers and lenders( is what got our azzes into this wringer in the first place.
The appraisers are ding there job. The sales out of foreclosures are real, such homes are still available to purchase and therefore are valid options for the home buyers. Dropping 20% market values right now seems reasonable in many markets.
Part of the housing fiasco was the sweetheart arrangement between appraisers and lenders that resulted in shacks in CA being valued at half a million dollars.
We will be relocating, and yes, we will get an outside appraiser to value the property before we make a deal.
The $160,000 was her appraisal value, what she figured it was worth, assuming that it had a magic ATM that would dispense cash to her. Lower appraisals are from people who do not see the magic ATM machine. I do not care about people who overpaid.
If home values are being used for tax-collecting purposes, a reduction in the perceived value of a house is a good thing.
On the other hand, as far as the actual monetary value of a home, an appraisal is only an educated guess. Only the actual sale of the property will determine what someone is willing to pay. In other words, the market ultimately determines value.
If Cap ‘n Trade is adopted and Obama gets his gov’t home inspectors (another branch of ACORN) then the value of your home and the amount of work required to “green” it will include a factor based on your political views/voting record.
BINGO!!
Please provide a bid proposal for the following assignment. FIRREA, USPAP, OCC Regulations and NONAMEBANK’s appraisal requirements, govern all assignments. A NONAMEBANK Self-Audit form must accompany the report. The proposed fee quote below must include all costs and expenses to complete the assignment per the RFP. The Bank requires: (READ THE INDEPENDENCE STATEMENT BELOW) 1) An executed engagement letter returned upon acceptance of the assignment; 2) Appraiser contact with property contact within three (3) days and a completed Appraiser Information Request form returned within seven (7) days of the engagement; 3) A PDF copy of the report and completed Self Audit; 4) Two (2) bound and one (1) unbound hard copies of the report delivered by the proposed delivery date; 5 Copies of all data collected from the Bank or Property Contact included in the Addenda section of the report. 6) A copy of the engagement letter must be included in the Addenda section of the report.
Independence Statement: By providing a bid for this assignment, I acknowledge that I have never [NEVER] prepared an appraisal/appraisal review report or any consulting assignment indicating a value conclusion directly for the borrower or related entities on the property subject of this RFP. ,
"Never"... Well, NEVER is a long time. This is a just a foot race to the bottom staffed by least qualified personnel.
The housing bubble has been discussed to death but let me add that appraisers weren’t the ones to blame for this housing bubble. CRA, lax lending standards,people lining up for lotteries to buy homes they couldn’t afford lead to the bubble.
Everyone loves the appraiser in an appreciating market. They blame the appraiser in a depreciating market.
If the foreclosures and short sales are in the area, of similar square footage, age, etc., then they are indeed comparable. If foreclosures are a big part of the local market, then that's the market. If the bank underprices a foreclosure when it puts it on the market, it gets bid right back up via multiple offers. I've seen that a dozen times this year.
I will add the old adage that the value is what people will pay. If you list your house for 300,000 and the same model is available down the block for 225,000, who is going to look at your house?
Foreclosures and short sales are driving the price because they ARE the comps.
Appraisers have gotten away with murder, nobody calls them out, just those evil greedy bankers.
The most recent WSJ stats show the mortgage mess was not caused by subprime lending. The greatest contributing variable was lack of equity.
To get 100% financing, you needed an appraisal to come in just right. Appraisers knew if they didn’t bring in the value, the lender won’t use them again.
I can tell you as an insider, appraisers routinely inflated values. Underwriters relied on these fake values & made bad loans.
Somehow, they never get blamed for their signficant part in the meltdown. I deal with appraisers all the time in my business & very few have impressed me with any degree of intelligence or integrity.
I am not WRONG, WRONG, WRONG. You are WRONG, WRONG, WRONG. You’ve got to be high to think appraiser’s control and can stop “the appropriate” appreciation rate. Appraiser report on the market, they don’t make the market. It was no big secret that values were appreciating at extraordinary high rates. That is exactly why even more money was being pumped into the market. High return. Everyone wanted a piece. Give me a break.
Also, I have no intention of trying to explain all the dynamics of the housing market in a post on this message board but suffice to say as far as California (ground zero) goes there were all kinds of things brewing to make the perfect storm.
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