The appraisers are back - and with a vengeance

The only people that are being made miserable by honest appraisers are those who are trying to profit from the ignorance of others: sellers with overpriced homes, real estate agents trying to get a quick sale (both on the seller's and buyer's side), and mortgage brokers who will resell the mortgage within weeks of the closing and have no fear of not being made whole.

Buyers are potentially being rescued from making a financial mistake of epic porportions and are "being made miserable"? I'd thank an apprasier if they saved me from overpaying!

I never understood how crown mouldings were a big deal for any buyer -- it's the easiest thing in the world to put up yourself after you've bought the place.

Scott - You are way off base here .The appraiser should be independent. The appraisers are in a large part responsible for this mortgage crises.
There are pending investigations of appraisers, buyers, and real estate agents in collusion, and I expect that there will be prosecutions . There are regulations that prevent the process that you suggest . The days of " What number do we have to hit ?" are past. The are recent regulations passed to create firewalls around appraisers .
BTW - Custom molding should have no effect on the appraisal , but a couple of hundred in cash will.

Not surprising that banks are clamping down on the appraisal process and doing whatever they can NOT to make loans in this environment. Put yourself in the their shoes: would you want to hold low interest rate paper collateralized by an asset that is losing value at 10-20% per year? It's a money-losing proposition and the banks know it.

Lending will be very tight until prices hit bottom. And we've got at least another 20-30% to go.

My father was a real estate appraiser in another state and has long since retired. After the S&L crisis and the appraisers in our state (possibly others but I cannot speak to them) had to have Errors and Omissions Insurance and have a certain number of professional continuing ed credits to maintain their license. He saw this as a good thing. I cannot tell you how many appraisals he turned down because the bank wanted a drive by and he would not do those. If he could not get into measure and look at a house he would not accept the job. There were many a picture of the outside of the house and it had great curb appeal but the inside was a dump, I know I was his secretary and typed up and included those pictures. He even took pictures of things that caused his appraised value to be significantly lower or higher than what the proposed mortgage amount was and included them with his complete report as additional addendums. His philosophy was to document everything and provide proof, ie the photos and then it was up to the banks to decide what they wanted to do. He always believed and I agree that the appraisal is an analytical tool, since he gets paid no matter what he didn't have a vested interest on what it sold for, he could be impartial and look at the cold hard numbers (room size, lot, location etc) there was no emotion to it.

Lets face it the world is made up of humans, some are good some are bad that goes for appraisers, bankers, wait staff, politicians etc. The bad ones tend to gravitate to each other, the bad bankers are going to use bad appraisers etc.

As for custom molding people like the way it looks and a lot of people will pay extra for it because "it looks nice", it gives the rooms a "finished and polished look", and it really is a lot of trouble to get the angles right. Ok will quit the sarcasm it really isn't that hard to get the angles correct it just takes some patience. I like the look of it but I am not going to pay a significant amount extra just for it, I can easily go to a lumbar yard and get the molding, paint, cut and install it relatively inexpensively.

I dislike the implication here that "low appraisals" are "bad appraisals." An good (by which I mean accurate) appraisal is an educated estimate of what somebody else would be willing and able to pay for the house. A "bad" appraisal either underestimates what somebody else would pay OR it overestimates it. Yes, an appraisal that is too low can prevent a buyer from obtainint financing. But an appraisal that is too high can lead to a buyer paying more than they need to.

Nick,
Crown moulding is not "the easiest thing in the world". It's relatively easy, but if you're not handy (most people aren't), it can be very tricky. You need to make tricky cuts and you need a nail gun (unless you're really good - most people aren't). And have you seen how much moulding costs these days? It can cost $200+ just to buy the moulding for one room.

But you're right, it shouldn't be a big deal.

On the way up, appraisers were enablers and on the way down, they’re deal busters. Many appraisers concede they helped drive the real estate bubble by producing inflated value estimates. They say lenders also were at fault for ordering abbreviated “desktop appraisals” and for perpetuating lax underwriting standards that allowed homeowners and developers to get loans they wouldn’t be able to repay if anything went wrong.

Much of the blame for the nation’s economic crisis can be traced back to overly optimistic appraisals of property values and poor decisions regarding the abilities of borrowers to repay their loans. The once-routine task of appraising properties continues to have important repercussions. Homeowners who hoped to cash in on low interest rates are finding they can’t refinance their mortgages because their home values are too low.

Because home prices are falling, lenders want appraisers to use only the most recent sales comparisons — ideally less than 3 months old. The comparison sales — “comps” — should be similar houses less than a mile away in similar neighborhoods. Appraisers are even giving lenders interior photos, which was never required before. Many buyers are finding that they have to come with more cash to make up the difference between the sales price and the appraisal – an amount of money many buyers don’t have. Many buyers are simply walking away from going through with the purchase or are sometimes able to get the seller to reduce his price, though that doesn’t happen too often.

In a neighborhood of 50-year-old houses – as many are around here - to comp a newer house is often difficult if not impossible. The problem for appraisers is that there aren’t enough recent buyers who have bought a home they can use as a comp. Many homeowners seeking to refinance mortgages either can’t meet lenders’ demands for higher credit scores or their home values have dropped to near or below their current loan balances. Therefore, a lot of refinancing loans are not going through.

Scott,

Appraisers are beholden to their license, they are independent. They are required to work within a very narrowly defined scope of adjustments and adjustment factors and adjustment percentages. All the appraiser does is evaluate data. Crown molding? I've never seen a line item adjustment on an appraisal for crown molding.

Try looking up USPAP (Uniform Standards of Professional Appraisal Practice) guidelines, and FNMA/FHLMC guidelines and see what appriasers are required to adhere to .

I think more thought and reserch couold have gone into this article, I'm disappointed.

Pointing out crown moldings is like telling the appraiser you think you're house is in a really nice neighborhood. Big whoop, that means nothing. Comps have to be no older than 6 months, within 10% square footage of the subject property, with no more than 10% adjustement per factor.

every time someone financed with seller-paid closing costs it caused "modest"
price inflation. Take a property sold a few times with this type of structure and you have consistent and significant "valueless" price inflation. I have a few friends in the mortgage brokerage industry who will only use one specific appraiser because he always "brings it in" or "hits the number". EVERYONE (lenders, govt. appraisers, realtors, attorneys, home-buyers/sellers, and of course congress) was in some form a party to this mania.

our appraiser did not even come in the home -- sent an underwriter to take pictures, and then signed an affadavit that he had visited. his appraisal was inaccurate, and off by $50K -- our house was not overpriced for the market, we had buyers who desperately wanted to sell, and a lender who had no intention of giving them a loan. we and the buyers wasted time, lots of money, and emotional energy working towards a deal that never went through. at that point we had lost our timing for the school year, and pulled the house off.
we wanted to move, but did not NEED to move or sell. everything is pretty screwed up out there. and it is not the buyers' market that buyers seem to think it is.

Tell me, what are they "pouring" over those minor details? Paint? Red ink? They are poring over the details. But I will say, spelling is easier than putting up crown moldings.

"It pays to get to know your appraiser????" News flash - come next month, nobody will even be able to speak to the appraiser. My ten year business relationship with a very professional, very ethical appraiser is going to be severed thanks to Andrew Cuomo, who has appointed himself the Mortgage Czar of the United States of America. It will replaced by an Appraisal Management Company that will institute a "spin the wheel" approach to deciding who appraises the home. The big winners: giant banks and the appraisal management companies which they own. The losers: the consumer, the small independent appraiser, and the small independent mortgage professional.

I've recently been told, by an appraiser, that banks prefer one of two comps to be a closed sale w/in 30 days, w/in 1 mile of proposed sale, and if the comp is a short sale, that's the comp and that's it.

Perceptive Listener ..... if short sales is the market, than that is what should be used. But only then.

I am a Certified Appraiser in Oklahoma and, in my opinion, the HVCC is the worst thing that could have EVER happened to borrowers, ethical appraisers and ethical mortgage brokers. Putting an AMC in between the parties is not going to work. In fact, last Friday I received my first "comp check" from an AMC (which is also called "dialing for dollars" ... the appraiser whose "guestimate" comes closest to the needed amount gets the order). There is not enough space here to go into details as to WHY this is so wrong, suffice to say that NO appraiser should ever participate in that. As appraisers we have USPAP which has been adopted as law in most, if not all, states. What should be done is enforce the laws that are already in place and ANY appraiser who fals for lender pressure should lose his/her license immediately.

All the HVCC will accomplish is that ethical lenders can no longer use their ethical appraisers and will now be of the mercy of whichever crappy appraisal report they get through this rotation method. Thanks, Mr. Cuomo! I am glad I stopped doing most mortgage work a long time ago.