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Banks are gaining to much control

Posted on: 15th Sep, 2007 09:42 pm
This isn't your typical appraisal rant. I think that banks are overstepping there bounds with appraisers. Just like everyone blames brokers for trying to increase appraisals. (not counting the flip scemes that hurt the borrower) I am talking about legitimate times when a bank uses there own appraiser who constantly undervalues homes. When you are married to a Realtor and you see the comps available and the bank comes up with unreasonable comps.

I think this is just as bad and is not in their right to make home values. That has been and will always be a product of the market. Home buyers set the prices and I think over the past few years a lot of people are forgetting that.
Hi Livinginnky,

Nowadays, we come to hear about many appraisal scams. I think every homeowners should be aware of such scams before doing an appraisal on their homes. Many times, it is seen that a homeowner takes a loan against his undervalued home and faces many troubles at the time of selling the home.
Posted on: 17th Sep, 2007 12:45 am
Hey Eric,

I've never personally worked for a bank and have always been an independant appraiser, but have heard the complaints before.

I honestly don't know if its truly the appraiser undervaluing the property OR the appraiser actually doing their job and appraising it for what its worth since they are not being pressured by the lender on value. :?:

I can tell you by some of the new requirements by large banks, its obvious they are sick of appraisers over valuing property and will fire or not use any appraiser in the future if they don't follow their strict guidelines for comparables. Most national banks right now I work with require active lisings.

In today's market the appraiser should be including active listings or similar homes and giving them consideration on value opinion if the homes are in a decline. On the flip side of that if people are asking 400k and all sales are 350k, you know the drill...
Posted on: 17th Sep, 2007 09:34 am
"I honestly don't know if its truly the appraiser undervaluing the property OR the appraiser actually doing their job and appraising it for what its worth since they are not being pressured by the lender on value.

I can tell you by some of the new requirements by large banks, its obvious they are sick of appraisers over valuing property and will fire or not use any appraiser in the future if they don't follow their strict guidelines for comparables. Most national banks right now I work with require active lisings.

In today's market the appraiser should be including active listings or similar homes and giving them consideration on value opinion if the homes are in a decline. On the flip side of that if people are asking 400k and all sales are 350k, you know the drill..."

I think that a lot of appraisers are having a hard time doing there jobs because of the pressure from the lenders. My point is this actually pushes the values to the low end because, like you said, the appraiser is afraid of getting black listed.

I agree that all banks require active market analysis, but this is also my point they are actively pushing the market values lower, maybe unintentional, but are still pushing values down. This hurts a borrower who bought a house 2 years ago with an adjustable rate. If the market has staid the same they should be able to refinance to a fixed rate. Here is the catch they can't because the appraiser is scared to give them the true value in fear that he will get blacklisted from the lender. Every little bit counts and with 3 million ARM's coming up it is to the lenders advantage to keep these people from refinancing.

So you see I am all for appraisers doing their jobs but the lenders are applying pressure to the market that they just don't have the right to. And they are doing so not to protect consumers but to protect their investments in Adjustable rate mortgages. Most if not all Sub Prime lenders are owned by a real bank. And do you think that Bank A that owns subprime B wants to refinance a 11% rate to a 6% fixed. I don't think so.
Posted on: 18th Sep, 2007 03:22 pm
Hi Eric,

At first I did not agree with you. I gave it some time and really thought over what you were saying and now I see what you are saying. It's so backwards to what appraisers typically deal with (pressure to raise value) that it was hard for me to grasp. They are both pressure, however I would consider one direct and one indirect.

For banks they are making it very clear you better not over value any property, which I feel is a good thing. They want an honest value, which is a tall glass of water in the desert for an appraiser. The side effect of this is appraisers might feel if they over appraise a property; even on accident they will stop receiving work which could cause the appraiser to undervalue the homes. Point taken.

I feel pressure to "hit value" is still FAR more dangerous and is much more widespread. First off before most brokers send over an appraisal they want a "comp check". What typically happens when one appraiser’s comps don't look good is they go to multiple other appraisers and ask for comp checks. Not really looking for comps, ; they are looking for the appraiser who they feel will get them the highest value or will commit to hitting their. Similar to what they accused Rush of for Doctor shopping, this is "Appraiser shopping" to find one and it's fraudulent. How would you like to be the homeowner who has no idea that the appraiser about to appraise their property is going to over inflate the appraisal and the lender is going to loan you more money then your home is worth? Better yet, what are the effects to the appraisal industry when you have appraisers who will blindly hit a lenders value for their business? How can an honest and ethical appraiser compete?

Evidence of this and of the creative loan programs that bought people houses they couldn't really afford are starting to take effect now with all the foreclosures.

I'm not casting all brokers as unethical at all. I have met and dealt with many who were very friendly, honest and ethical, even when the appraisal came in lower than they needed. I say most because every single day I'm pressured via fax, phone or email if I want an appraisal and can hit this value I can get the assignment, so are my other collegues in my industry I speak with locally and in forums. I turn it down, which means it goes to the skippy appraisers who will give into the lender pressure.
Posted on: 19th Sep, 2007 10:26 am
Exactly and I don't know about your area but were I am Pre Comps are actually illegal anyway and I am pretty sure that is true everywhere.

I am with you I turn down deals all the time when I no they are fishy. If I don't like what is going on in a deal and I think something to be untrue I turn it down immediately. And some people tell me I am crazy because..."if you don't do it someone else will". Well I say let them do it and let them face the consequences. I don't think that a couple thousand dollars is worth someones home and or well being.

I think it is time for stricter penalties when a broker or bank is caught doing such predatory things. And clear the way for us who really care about our clients and also want to make a better living.
Posted on: 19th Sep, 2007 10:43 am
Well i know of quite a few times that i had an appraisal review come back 30-40k lower then what my appraiser had given for a value(ill keep the particular lenders out but there are several that do this on regular basis). When that happened first couple of times I was surprised and sent the info to my appraiser questioning their judjement. But on several cases we had found out that the appraiser hired by the bank has used bad comps / adjustments that were not legit / and in one case a comp that wasnt even there. So i started sending these botched up attempts to lower my clients property values back with my appraisers comments and contacting upper management within the lenders. In 3 cases I got the value overturned back to my originall value and in one the bank just simply sidetraced the issue and I went to close the loan elswhere. It could be a coincidence but I dont think so. And the fault might not be with the lender on this one but with the appraisers they use.
If an appraiser has good experience in this busness he will typically work for himself as that will allow for the most income potential. But if he cannot do that that means he is either not very good/or very experienced and is willing to cut his income to get the job security from a large lender. And to keep recieving that income he will not want to overvalue the property to risk the bank cutting him off. So there is a pressure to go lower.
The other problem is that the appraisers like that dont do the research and do as little as needed to get the paycheck hence botched up comps and other issues.
This is just my personal oppinion and does not pertain to all the appraisers that work with or for major lenders out there.
Posted on: 19th Sep, 2007 12:01 pm
Great going guys!! so, we're getting to know the hard core facts of the industry. The problems appraisers and lenders often go through and we aren't even aware of. It's a sad thing that there's a lot of predatory practices going on but this discussion has hopefully given us a clear picture of what actually happens.

It's important to follow the way where you can remain honest and still earn but it gets hard at times. Well, this discussion is going to make the community aware of what actually happens there ..an thanks Eric for starting this wonderful discussion and to others for sharing the facts with us here.

Good luck :)
Posted on: 20th Sep, 2007 12:25 pm
I feel for Mike and any good appraisers out there. The refinance craze, flip craze, and housing boom we saw for several years really made it tough on good appraisers.

I actually loaned (underwrote) AND collected the same loans, so I had a vested interest in the value being accurate. If the house was overvalued and the loan went bad, we ate it. Unfortunately many mortgages were sold even before the loan closed so the originators didn't care if the house was over valued- they actually encouraged it to make getting loan approvals easier and get larger loans (which means more commission). I heard many mortgage lenders/brokers telling the appraiser what they needed for a value and guess what the appraisal came back with...

I changed industries and went into real estate back in 2003 because I saw the current problems coming. People I really didn't want to approve for a loan would actually complain about the interest rate because the guy down the street would approve anything.

I just received my Indiana Realtor magazine today and there was an article about appraisers and the history of the profession. Did you know they weren't required to be certified and there weren't any real standards until 1987 to 1989? Another article addressed the number of cases filed against appraisers by Indiana's Licensure and Certification Board:
2004- 6 cases
2005- 26
2006- 169
2007- 20 (January to July)

As you can see there was a serious problem for a while. I always try and remember that an appraisal is basically an "educated guess".

There are several factors that can be a negative influence on appraisers, but I do agree that the fear of losing future business from lenders is the biggest and until that is removed, it will be hard to get objective appraisals.
Posted on: 27th Sep, 2007 02:07 pm
Yes USPAP has been a good thing, but it still needs more strict clarity in my eyes. Then again, it will never stop fraud as long as lenders allow their employees to pressure appraisers on value, period.
Posted on: 27th Sep, 2007 02:23 pm
Yes James, you're quite right. May be the fear of losing business from lenders often force appraisers to evaluate such that the home value is in accordance to what the lender is comfortable with. After all, they have to continue their business but again on the other hand, the homeowner too goes through problems when the appraised value isn't an accurate one. It's very tough actually to satisfy both the homeowners as well as appraisers.
Posted on: 28th Sep, 2007 12:30 am
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