A BAD JOKE: REALTORS ANGRY AT "BAD" APPRAISALS

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EDITOR’S COMMENT: I understand that people need to make a living and how hard it is to do so. Many realtors work very hard and they went through a lot of training, education and the school of life to get to wherever they are now. But I have little compassion for those who would pressure appraisers into doing the wrong thing — just like the appraisers were pressured and even blackballed if they didn’t tow the line in the price run-up over the 2000-2007 period.

The mortgage mess occurred in large part because of two appraisal frauds — one at the level of ratings that the likes of S&P, Fitch and Moody’s gave to pure crap masquerading as investment grade securities and at the other end the “appraisals” that couldn’t withstand the test of 2 minutes time. If anyone knew that the prices were just plain wrong and would collapse it was the realtors who knew that property doesn’t increase in value by 10%-20% per month or per quarter without taking a nosedive when everyone wakes up.

Realtors liked the high appraisals because they made more money selling a $200,000 home for $500,000. And it was easy money because the market was flooded with money which is why they were selling payments instead of price and calling it an investment. It was realtors who gave the shove in the direction that prices always go up on homes — when they knew perfectly well that prices do go down, way down when the bad times roll in.

Now they are suddenly turning their attention to appraisals that are killing “their” deals. It’s not your deal and you don’t have to live with the consequences of the property going lower in value than the principal due on the mortgage. But I’m sure you will be right there offering a short sale when that does happen.

The appraisals are coming in low because the market is over-saturated with houses for sale that were virtually stolen from millions of people by banks who had no stake in the game. And realtors had a part in that too, convincing anyone who would listen that even a bad foreclosure was good for the economy because it keeps things moving — never mind the horrendous toll it takes on the occupants, the community, and the economy.

The appraisals are low because appraisers are afraid they might be sued over the appraisals they allowed to go to print during the mortgage meltdown. In 2005, as stated in an article here more than 2 years ago, 8,000 honest appraisers petitioned congress for action. They were concerned because the Banks and other mortgage originators were putting them up against the wall and insisting that if the appraisal didn’t come in $20,000 over contract price, they would never work again. With that constraint off, people were able to push prices through the roof in a grand movement that spread across the country lead by developers who were only too happy to raise prices every chance they had — raising “comparables” in self-justification of pure appraisal fraud.

There are another 8 million homes going into the pipeline which will drown the housing industry and realtors know it. The appraisers are looking at the real facts and applying them this time so they don’t get stuck under the gun of some lawyer’s examination as to what the appraiser was thinking when he put his name to that appraisal report. Realtors should learn a thing or two from the appraisers. There is no support for value in this market and there isn’t even a clear basis for asserting title.

Realtors should be using their knowledge and training to help people clear title — and then sell the property. There is probably a business model where realtors could make plenty of money on homes that have clouded title. Then a realtor could truly be proud of the work they put into the deal and get paid a proper amount of money for the help and the sale. Criticizing the appraisers won’t get you where you want to go. When the appraisers strike back it won’t be pretty.

AS SEEN ON AGBEAT.COM

The tiresome issue of the misunderstood appraisal

Raise your hand if you’re tired of hearing about low appraisals in the news.  Raise your other hand if you have no clue what the definition of a “faulty appraisal” even is.  If both of your hands are in the air, that’s awesome, mine were.

Let’s go back to class here for a second. An appraisal is an opinion of value, it determines how much a home is worth on a given day and time, based on age, size, condition, and several other factors. There are three methods on how this can be done – the income approach, for commercial or (duh) income producing properties, like multi-family homes, the cost approach, often used for manufactured homes, and occasionally for new construction – how much it literally costs to build or rebuild a home, and finally the most common, is the comparison approach, using active and sold comps in the neighborhood.

When done for a home purchase, an appraisal is done to protect the bank from lending more money on a home than it’s worth. It isn’t completed to meet the agreed upon price in the contract. It’s not there for the buyer’s peace of mind. It sure as heck isn’t there for the seller or Realtors involved. The lender is the client, they are the ones who are insuring their investment in the transaction by getting an appraisal ordered.

NAR and NAHB members claim lost deals

For nearly a year, between 10 and 18 percent of NAR members surveyed have reported at least one deal which has been delayed or killed due to appraisal issues. Usually the issue is that the appraisal is not meeting the contract price, and either the transaction falls apart completely, or the sales price needs to be renegotiated. Recently a report was released by the NAHB, wherein they are also reporting issues with appraisals. Within the last six months, of their surveyed members, roughly 60 percent said the appraisal was less than the contract price, and about half said the appraisal was less than the cost of building the home.

Both groups are trying to correct the problem of problem appraisals. In a NAHB statement on December 8th, they note they have been holding appraisal summits in Washington for several years with banking regulators in order to urge change of appraisal practices. One of their major concerns at this time is the use of distressed comps in new construction sales. NAR will be hosting a webinar in January with suggestions to make sure appraisers are qualified. Questions Realtors can ask when meeting an appraiser at a home, ensuring they know about upgrades, and providing neighborhood comps.

Not all appraisals are bad, but when they are…

This is all well and good. It never hurt anyone to be more informed about a property. However, to me, a crappy appraisal is one that isn’t up to standards, that is completed sloppily, inaccurately, one that doesn’t take all information into account, one in which data is falsified. Most appraisals are of quality, but when they are bad, they are really bad.

Not meeting contract price, for whatever reason; the home was overpriced to begin with, it was over-improved, the market is rapidly declining- possibly due to job loss or other economic issues, the market is driven by distressed properties, or even the condition of the home itself, this simply is not a reason to get into a huff. And I kind of have to say tuff tiddlywinks. The contract price, and sometimes even upgrades, don’t mean a whole lot, when the rest of the immediate area can’t support the value.

Tags: appraisal fraud, bankruptcy, borrower, countrywide, disclosure, foreclosure, foreclosure defense, foreclosure offense, foreclosures, fraud, LOAN MODIFICATION, modification, quiet title, rescission, RESPA, securitization, TILA audit, trustee, WEISBAND
Posted in bubble, Corruption, Eviction, securities fraud |