Pointing the finger at appraisers, reviews & low fees

There was an interesting article in the Sacramento Bee a couple days ago entitled “Home appraisers work under tougher rules“. There were some good points made overall, and I think the author was fairly well balanced, but I wanted to respond to a few things.

Finger Pointing: There are many recent articles lately about how appraisers are to blame for the housing crisis. There is certainly some blame to accept if an appraiser misstated the market, and I am not minimizing that at all, but it’s important to keep in mind that the appraiser is absolutely not always to blame. During the housing boom there was certainly mortgage fraud, but let’s remember that prices really did rise to ridiculous levels, buyers were willing to pay those prices, and lenders had extremely loose standards where almost anyone could purchase a home – whether they could afford it or not. For instance, I had a friend who bought in the Natomas area of Sacramento and didn’t have to show any verification of income to borrow more than $400,000. Maybe the appraisal on his loan in 2004 was bad for some reason, but one thing for sure is that there need not be an automatic finger pointed at the appraiser in an instance like this.

Appraisal Reviews: The article quotes a loan officer saying he used to have so few appraisals reviewed, but nowadays the bulk of his appraisals have to be formally reviewed by the lender at a cost of $125 a pop to the Borrower. I’m not saying there aren’t really bad appraisals out there, but had lending guidelines in 2005 been what they are today, this loan officer may have experienced just as many appraisal reviews then as he does now. Lenders are requiring more of Borrowers these days, and even more work from appraisers too. If you are in the lending industry or in the process of obtaining a loan, I’d be curious to hear your perspective.

Low Fees: The article discusses the “middleman” and how appraisers are hired by neutral third-parties nowadays called Appraisal Management Companies aka “AMCs” (for loan appraisals only – not other types of appraisals). I think the article did a good job describing this process. There are some solid AMCs out there who treat their appraisers well and pay them decently too, but there are also some really bad ones. Here is an email I received a couple weeks ago verbatim from one of the “bad guys”. This was a blast email that went out to numerous appraisers for a property in a semi-rural area with VERY limited market data. I have never worked for this company because of their low fees. Based on their email, do you sense they are interested in obtaining a quality appraisal report?

We are searching for an appraiser to do a Drive by appraisal. The standard fee is $175.00 . Please let me know if you are currently employed through an AMC. We must get special approval to have you complete if that is the case.

Please let us know if you would consider this appraisal request for our standard fee. If you require a different fee, please specify by responding to this email with your fee and turn time. If the fee requested is higher than the standard fee, we will note it in our system and continue our search.

DO NOT PROCEED WITH THIS ORDER, THIS IS AN INQUIRY. You will not be paid if we do not send the formal order and obtain your acceptance.

If you have any questions or a need for an appraisal or consulting in the Sacramento area, give me a call at 916.595.3735, send me an email, catch me on Facebook, or see my company website at www.LundquistCompany.com.

Comments

  1. says

    Ryan,
    I have also gotten these email “blasts”. My wish for 2011 is that all of the bad AMC’s will dissappear and the good ones will prevail. I don’t think that the use of AMC’s will diminish so we must make sure that the ones that are around must be regulated just as we are, and that they pay the appraiser a fair fee for their work.

  2. Michael Bolton says

    Ryan,

    I’m just glad I’ve made a conscious effort to move towards doing more non-mortgage related work. The unintended consequences from all of this still haven’t come to fruition. The industry should be very afraid of the attrition that’s taking place, because all of the good appraisers will seek other areas for work. In the end the industry will get what they pay for.

  3. says

    As always Ryan, you are really able to bring a great perspective to some of the appraisal issues of today. As I said on another blog post, this one is going on my list of favorite blog posts in 2011.

    • says

      Thanks, Bryan. My suspicion is there will be a real hunt for appraisers in coming years, so it’s important to talk about these issues. Hopefully some mainstream attention to the issues will also be seen. The industry needs that.

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