New appraisal rules BAD for the borrower
I appreciate the chance to be heard on this subject of appraisers and what we can and can’t do in the near future. I believe that the quality of the loan process will suffer greatly if these proposed changes are made. Those who seek to change this interaction between the appraisers and the loan originators do not realize the increased cost and the greater risk that will be placed on the borrowers shoulders.
When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal. Very frequently, in fact on almost every loan I ask them to run comps first to make sure the value is there. I don’t want to waste my time or the client’s money if the loan can’t be closed. Many times, they have both told me that value requested was not available. That’s what an honest appraiser should do. I believe the vast majority do just that. If the few bad apples aren’t playing by the rules, there are ways to deal with them. What about putting greater responsibility on the lenders who review the appraisals? If an appraiser does poor work or is using fraud to justify a value, the bank should refuse to accept his work. This is done all the time now, but needs to be a streamlined process with rights and responsibilities for both sides. I only use two appraisers that I trust to perform all my appraisals for me.
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When I closed a loan in Florida for example I used someone that doesn’t know how I work and vice versa. The last loan I did in Florida, the appraiser was almost a week late getting me the appraisal, had drastically cut the value to an absurd level in my opinion and then cursed me out and threatened not to send the appraisal even though he had already been paid. A terrible experience from start to finish. Why was it so bad? In my opinion it was that bad because I had no idea what the appraiser was like and how he conducted business. He also did not know what I expected of him. I don’t know of anyone that likes to do business with a person they don’t know.
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This happens occasionally now due to geography. It could happen every single time very soon!! It will be a new person that you must place your trust in for every single transaction. This can be what happens on VA loans when we don’t interact and order the appraisals. You are taking the factor of accountability out of the loan originators hands. The appraiser will not be as likely to put in the time to find the comps that justify the sales price/value. It’s also true that we have no protections against, lazy, unscrupulous or just plain poor appraisers. We will have none and certainly our customers will have no protections either. Once again the rule that is designed to help people will hurt them. They just don’t know it yet. And who do you think they will blame. Some nameless, faceless appraiser or the person (loan officer) who told them everything would work and that the loan they wanted, the loan they needed, the loan they had to have won’t work? We won’t even be able to tell them why if these rules are enforced. We will get into trouble for asking questions and making sure they did their job correctly.
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When I began this business I used a few appraisers before I selected the two I currently have chosen to use. They didn’t do a good job, they made mistakes and when I asked them to correct their mistakes they took days, sometimes weeks to even return a phone call. If this lack of contact is encouraged and even mandated; this will occur over and over from coast to coast. Make no mistake; this will directly affect the borrowers in a negative fashion. Loans will take longer to close, locks will be extended at a cost to the borrower, and many loans that should close simply will not. All because people in power don’t think through the ramifications of their decisions. Shouldn’t that be EVERYONE’S first interest?
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What’s best for the borrower?
more on the new appraisal changes
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I’d love to hear your stories since the HVCC rules went into affect, please click here and share!
Brent Mendelson
September 3rd, 2009 at 12:05 pm
[...] problem is the current crop of appraisers being used has included some who are inexperienced in or unfamiliar with the local market. In addition (or, perhaps, as a result), too often they have used distress sales (foreclosures [...]
June 16th, 2009 at 7:07 pm
poorest conditioned homes in my neighborhood.
Thirdly, none of the remodeled comps had all new electrical wiring with a 200 amp service, all new copper plumbing, a swimming pool with or without solar heat, supplemental solar electrical power, an insulation package that includes perimeter wall insulation, roof insulation with a radiant barrier, and double pane windows throughout.
In addition, renewable and recycled materials were used for all of the cabinetry, counters, and floor coverings. No products were used that included solvents, created off gassing, or contained environmental contaminants — creating a safe, toxic free home.
And finally, a high efficiency condenser boiler with comparable radiators, energy star appliances, water saving fixtures, and a drip irrigation system round out the improvements that set this real estate apart from ALL the properties that have been sold and are currently for sale.
June 5th, 2009 at 2:04 pm
The way appraisers are doing there job anymore we might as well do away with them and just use a technology solution like zillow as does not matter how the house compares in quality to the neighborhood or city it is located. They only take an average as a cost / sq ft and multiply away. What a waste of money.
Most appraisal firms are now national and have no idea of local market and will send in someone who can quickly make sure no glaring signs of large investment to be made then send report to a clerk who runs a few comps and viola a unrealistic dollar value is applied to a home. Sometimes it is way high sometimes way low. Tell me what value this is?
June 3rd, 2009 at 2:10 pm
[...] is shameful. HVCC/the new appraisal rules are bad for borrowers Please share your thoughts [...]
April 29th, 2009 at 10:46 pm
had an appraiser come out to check my house out recently. This was for a refinance. I have gone through the process a couple times before, so I’m not new to it. My house was built in ‘33 and has been a rental for years, so it’s not real pretty. Still, the appraiser’s report was filled with glaring untruths. As a result, my refinance is in jeopardy. The appaiser said that I had a leaky roof which is totally untrue. In fact, about 7 years ago, a brand new roof was installed (two years before I bought it). She saw evidence of leaking from years ago, and concluded that the leakage was recent, and that my roof needed repairing. She also said that I had a water damage problem in my hallway, which is also incorrect. I was stripping old wall paper off the wall there, and she wrongly concluded that water was coming in. So, what does a home owner do about crummy appraisers who don’t use their noggins?
THE ANSWER SADLY ON FRIDAY IS PAY FOR ANOTHER APPRAISAL!! Of course who knows that one will be any better. Hold on homeowner, you are about to embark on a long national nightmare. You too appraisers, hope you like working for peanuts and losing the very indepenant nature you use to have. I noticed appraisers used to all be in favor of this new law but now seem to be changing their tune. Welcome to reality. Better late than never. Banks should love this new law, it binds the clients to them unless they want to shell out more cash to switch lenders. Rates lower somewhere else? Too bad. Appraiser did a poor job, too bad, deal with it. This system can and will be junked but how much money and time will be wasted until it is. It is unworkable.
It goes into effect in two days and banks are saying rules will be out in a few weeks!!
UFB.
January 11th, 2009 at 1:12 am
Ken,
I just saw the question you asked about giving the borrower a heads up if the credit won’t work. Yes I can do that. I can pull one bureau at no cost to the borrower. If I see a 500 score I can tell them not to do anything else. If I see an 800 score I can order the full credit report which is only 17 bucks instead of 350-500 like you charge more than likely. Wow that was easy so next question Mr. Appraiser?
January 2nd, 2009 at 7:10 pm
No Long Island actually I don’t do that. You don’t know me so stop with the general comments. Did it happen yes it sure did. There should be some middle ground to reach an agreement. You didn’t actuallly read anything I said, just spat out the same old tired crap about how it was all my fault as a loan officer. You are so weak and pathetic. People normally realtors have asked me to do things that are against the law. Guess what, I said NO. I am sure it cost me some business but who care?
Have the same toughnes and refuse the illegal requests. I didn’t go under by being honest and neither will you.
December 31st, 2008 at 3:04 pm
Mike Malone,
you know your gonna ask an appraiser for a ball park comp check, and then if what he tells you is not the value you were looking for GUESS WHAT your not going to talk to your borrower, your gonna go shopping around for your value. MB’s killed the market by forcing apprasiers to stretch values to make your loans work. If we didnt, you went to someone who would and we would be out of business. value is what it is, it can’t “BR COWERDLY”your comment right there is the reason why this law is going into effect. So what is a heroic value? the highest streched value you can find where apprisers skip 30 comps to go cherry picking to get your value? YOU ARE WHAT IS WRONG WITH THIS BUSINESS! I do agree that comp checks would help home owners from wasting money at times, buyt the reality is you cant have comp checks without mortgage brokers being greedy and shopping around for values. Maybe if you were assigned an appriser and you had to use them no matter what. Then they could give you comp check and be honest about it and confident that they wont loose you as a client if they dont make your “target value”
December 19th, 2008 at 12:37 am
The whining from appraisers just confirms that they want a paycheck and nothing else. There is nothing wrong with asking for a comp check to protect the borrower. What should happen and what I do is call and appraiser and ask what the value is. Don’t give them a number to hit, just ask what it’s worth. They come back and give you a ballpark and then you can go to the borrower and give them the choice if it’s close. I am sick of hearing appraisers complain about bad mortgage brokers. Have some stone and do business somewhere else if they bother you with illegal requests or better yet, turn them in. Watch the new system that is coming into place next year will be a disaster for the borrowers. Do your jobs appraisers and stop crying. By the way, this new system will end up cutting into your business also, you are just too stupid and blinded by greed to see it. Doesn’t matter because it won’t work and will be quickly shoved aside and I say good riddance.
December 5th, 2008 at 2:52 pm
Ken Jonson – that was kind of a good comment but a borrower is not losing much to a credit report ( what ? 12.00) vs 300.00 out the window?
December 5th, 2008 at 2:51 pm
And here I am again – Brokers – Tell your borrowers what risk it will be to go Fannie Freddie as far as this appraisal law and then convince them to go with FHA – Just the MI requirement alone is a way for the borrower to sway to FHA
December 5th, 2008 at 2:32 pm
Here I am again – This law might just pertain to Fannie and Freddie loans – FHA should not be affected – Brokers – stick with FHA Only – We all Know how Fannie and Freddie guidelines have progressively went south. We as brokers know that the money given to banks ( you know the banks that have ripped off consumers for 20 years with thier late fees, annual fees, fees to increase credit lines etc ) that it won’t help the market at all UNLESS GUIDELINES CHANGE AND THE FEDS ARE NOT SAYING ANYTING ABOUT GUIDELINES CHANGING at all – These banks will simply remodel thier branches and open news ones and tell the Feds that this is how they can “service the consumer” and the Feds will accept it. – if Most of you notice how the feds say how the homeowners and banks are suffereing and they never ever say anything about the people in this industry – go figure.
– In turn stick with FHA Only and if you have to go conventional stick with purchases only especially if they are listed with realtor – but under this new law – conventional refi’s will be a rip off for the borrower – don’t lead your borrower down that road – FHA MI is cheper anyway.
December 5th, 2008 at 2:13 pm
I have been a mtg broker for 15 years and This law will simply make no business for anybody because comps are essential in this market today since the borrower does not know what their current value is due the declining values in the past few years. – some borrowers are clueless to value some think that since they put in a 15k kitchen that it adds 15k to value – with this law coming forth – the borrowers will get ripped off with a low value and the appraisers will get paid as usual. – It’s Ok Brokers Stick together and do not do Refiannces – the Market will get even worse – just do Purchases – most purchase values should be solid especially if the property is listed with a Realtor. – the law will change if we take our stance and do not give any of these appraisers money- they will make minimum money doing appraisals ( for a few months) and then they will be cutt off – trust me on that. The lenders and Appraisers will catch hell from the Brokers and the Lenders have at least 4-5 choices – if one appraisal Company fails you DO NOT EVER GO BACK AND CHOOSE THEM AGAIN – AND LET THEM KNOW THAT THIER VALUE IS COWARDLY AND YOU WILL NEVER USE THEM AGAIN. once a number of borrowers get ripped off by paying for appraisals and losing thier money they will stop and the refinances will cease which will show in about 90 days after this happens – Once brokers do a little work only to have it stopped by a conservative lazy appraiser they will not do refinances again – and the housing market will cease again due to refinances. – Brokers stick together we can make the mareket come back on our terms – the Country needs us to make the market come back together – if we stand firm on this the market will tank even further and they will have to change the rules.
September 20th, 2008 at 3:39 am
Brent; A question for you that will solve this “debate”. Does the credit bureau give you a heads up on the homeowners credit rating before you order the credit report? If you answer yes then appraiser perhaps should give you a heads up. If you answer no then you have your answer on getting a heads up on value.
September 19th, 2008 at 9:30 am
First things first. Every state had adopted the Uniform Standards of Professional Appraisal Practice as representing the minimum standard of conduct for licensed appraisers. If an appraiser violates USPAP they are in violation of state regulations that govern their license. When a loan originators asks an appraiser to perform a substandard and undocumented appraisal they are asking the appraiser to violate the regulations that govern their license. In choosing to deal with appraisers who thus violate their own ethical standards these loan originators are deliberately choosing to deal with unethical appraisers.
This is an incontrovertible fact that these loan originators cannot deny. They’ve all been told often enough by those appraisers who have refused to cross that line. They know appraisers aren’t supposed to accept assignments that are contingent on returning a minimum value but they routinely turn a blind eye to this corruption. In fact, when they do this they become a willing co-conspirator in the fraud that occurs when their “team player” appraisers fraudulently certify on their appraisal reports that they *didn’t* accept either the engagement nor the compensation for that assignment based on the promise to return a minimum value.
Secondly, loan originators really do need to recognize that the purpose of an appraisal is not to enable their loan. The intended use as stated on every mortgage lending appraisal assignment is to assist the lender (not the loan originator) in underwriting and making a loan decision. Loan originators don’t make underwriting decisions, they don’t grant credit, and it’s not their money that goes out the door. All a loan originator does is show loan products to borrowers and sell loans to lenders.
No appraisal report states that its intended use is to help the borrower obtain a loan and indeed borrowers are not named as intended users of appraisals. If a report prepared by one of these “team player” appraisers ever did truthfully disclose that its intended use was to assist the borrower in obtaining a loan or the loan originator in booking their commission, the lender would be required by federal banking laws to reject that appraisal. That’s why these team players have to lie about the nature of these assignments and the limitations of their relationship with the loan originators.
Because appraisals are not intended to be used as part of the marketing package the loan originators send to the lenders in hopes of “selling” the deal to them, there is an inherent conflict of interest when a loan originator engages the appraiser. The loan originator isn’t the one who makes the relevant decision – the lender is. It only makes sense that the lender should be held 100% accountable for the engagement of the appraiser and their use of the appraisal. It makes no sense to allow the lender to avoid these responsibilities and hide behind the thin veneer of plausible deniability that using outside loan orignators would seem to provide.
It is a huge mistake for loan originators to think – or for their appraisers to allow them to proceed under the misconception – that an appraisal is worthless if it doesn’t help the borrower to obtain their loan or the loan originator to book their commission. If an appraisal prevents a lender from overencumbering a property, prevents a borrower from entering into a mortgage wherein they are already under water, then the expense of that appraisal is well justified.
We now face multi-trillion dollar losses in the general economy that are directly related to the subversion of due diligence efforts – including appraisals and underwriting – in the real estate mortgage lending business. Had more loan originators paid more attention to the reasons why they are required to obtain appraisals and refrained from viewing them solely as a commodity or an element of their marketing their loans to lenders we could have avoided a sizable percentage of these bad loans – because after all, these bad loans never should have been made in the first place.
The Federal Financial Institutions Reform, Recovery and Enforcement Act of 1989 recognized that the the regulated institutions had to be held accountable for the engagement and their use of appraisals. As a result of these trillion dollar losses, it should come as no surprise to any loan originator that these regulations will be expanded upon and more heavily enforced as a result of the abuses in which many of them participated.
Oh yeah, and a pox on your “team player” appraisers, too. Had they done what they were supposed to do and refused your improper requests we wouldn’t have some of the problems with loan originator ignorance that currently exist.
September 18th, 2008 at 2:07 pm
[...] ..more comments on these new appraisal rules [...]
September 17th, 2008 at 3:50 pm
Average Joe,
Thank you for the compliment, however it is only because I medicate before I post..
Seriously, as the monkey has said, we have and do go thru hell dealing with the misconceptions of our profession. Those of us who work within the rules and hold ourselves to a high level of ethics are constantly berated by those who either don’t understand and/or simpley don’t care.
It makes it much more difficult when there are other appraisers out there who constantly do things in what is truly an unethical manner…
The OP said that he spoke to 3 appraisers who said that a comp check is not an appraisal….Kinda makes you wonder about those appraisers…I think that with all the information posted on this blog it has been shown that they are, in every manner, an appraisal.
Heather made a comment about greed in a previous post. She is on target more then she will ever know.
Hopefully readers of this thread have taken something good from it.
BTW, I also know some of the appraisers who have replied to this blog as we all belong to different forums across the internet and I can understand and share the frustration.
September 17th, 2008 at 9:38 am
Yes, many great appraiser here and I may know some of them, but do you know how of us Appraisers have been exposed to the rest of the RE market? These are the comments that we get; “Oh, don’t use him, he will kill your deal”, “they are too conservative”, “get another appraiser!” “if you keep using them, I will no longer send you clients”, on and on and on. Do you think it is fare to reward the unethical?
Yes, it is his opinion, but has also exposed how many of the undereducated MB/LO’s have little knowledge or do not want to understand USPAP or the long term damage by such business protocols. We are tired of being made the bad appraiser, when many of us love our profession and will continue to do it if we were allowed to do it correctly.
Many appraisers have gone to the Dark Side to appease these kind of business decisions and at the end, the one that gets hurt is the borrower and the American Tax payer. Yes, I am in your face will tell you the truth that such blogs do invite scrutiny, not just by appraisers, but also others that do search the Internet for such blogs. I did not expose this guy, it was someone else before I ever first posted. You may want to question the previous posters.
Should I have sympathy for his opinion? Did he have sympathy for the appraisers professional opinion that did a well researched ethical appraisal? (after all he had to go through many appraiser before he found the right ones. That is just code that he found the Appeasing Appraisers) well, just like his, I have mine, He invited the world to see. I will say it, WE ARE TIRED OF THIS! Not just for us, but for the American Public that has been and continues to be abused.
September 17th, 2008 at 8:20 am
I’ve read through this extensive post, and I must say TONY V you are the most level headed commenter and have done a GREAT job explaining things and keeping it professional. It disgusts me when others resort to nasty tactics. Pink Monkey, this blog is for a discussion and not a place for you to make yourself feel better by thinking you found the MB devil and exposing him. You and others make it hard to have a reasonable discussion. Investigation? for expressing opinions? get a life.
September 16th, 2008 at 2:51 pm
Mr. Mendelson,
One thing that you may find out some day is that appraiser that do comp checks are not necessarily the most informed bunch. Here is your answer from the source, Appraisal Standards Board:
http://www.appraisalfoundation.org/s_appraisal/bin.asp?CID=12&DID=1224&DOC=FILE.PDF
The definition of an appraisal, as defined by the Uniform Standards of Professional Appraisal Practice, is noted below:
http://commerce.appraisalfoundation.org/html/USPAP2008/USPAP_folder/uspap_foreword/DEFINITIONS.htm
APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).
In the future, please provide support for you opinions, not just the opinions of individuals that have no idea what they are talking about.
September 16th, 2008 at 1:29 pm
The appraiser is required to be a disinterested third party… much like a baseball umpire. The umpire cannot call strikes and balls in favor of a certain hitter or certain batter. All he can do is call it a strike if is is in the strike zone and a ball if it is not.
If I am called to do an appraisal, I cannot perform it trying to “help” anyone beyond calling it like it is. If I cannot perform a particular appraisal assignment without bias, then I am required by the regulations governing my appraisal license to withdraw myself from that assignment.
When appraisers refer to being “independent”, that is more a reference to the fact that if we are independent that we are not employees of a lender, mortgage broker, etc. Each order that is sent to the appraiser is a new “contract offer” to perform an appraisal. The acceptance of that order is our acceptance of that “contract.” However, if there are “terms” in the contract that are against the regulations governing my license, I have two choices: 1) try to renegotiate those terms, or 2) decline the order.
Brent posted, “When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal.”
Here is the definition of an appraisal (from USPAP–the regulations governing appraisers):
“APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).”
Okay, the questions that come to mind are this:
1. How can an appraiser know if a property is going to meet a “certain value” without performing an appraisal (reread the definition above)?
2. Based on Brent’s statement, if an appraiser agrees to those terms, how can an appraiser know whether or not to go forward if that “certain value” is not a value that has been “predetermined” by the lender?
September 15th, 2008 at 7:58 pm
K C
….since the OP started in the business in 1999 this most likely reflects the way he was taught….Although it is the long and winding road, education is the way to approach these situations….Hopefully someone will learn something
September 15th, 2008 at 1:35 pm
Heather……
We really don’t know what the bottom line is yet…..Todays Wall Street action is a result of this situation with other things factored in….
Above someone said follow the money honey….That person is right…and look in the past….
The Dot.Com crash….Those who don’t remember the past are doomed to repeat it..
As for Cuomo deal being dead…As far as I know it has not died yet….
Mack, if you have something on it please share….
September 15th, 2008 at 9:22 am
Tony, that is amazing. I didn’t know any of that. Sounds like everyone in the system simply got greedy. I know that is dumbing it down but that is the bottom line correct?
September 15th, 2008 at 9:21 am
Mack, what do you mean the Cuomo deal is dead?
September 14th, 2008 at 8:14 pm
From USPAP
Management (ETHICS RULE)
The payment of undisclosed fees, commissions, or things of value in connection with the procurement of an assignment is unethical.
Comment: Disclosure of fees, commissions, or things of value connected to the procurement of an assignment must appear in the certification and in any transmittal letter in which conclusions are stated. In groups or organizations engaged in appraisal practice, intra-company payments to employees for business development are not considered unethical. Competency, rather than financial incentives, should be the primary basis for awarding an assignment.
It is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:
the reporting of a predetermined result (e.g., opinion of value);
a direction in assignment results that favors the cause of the client;
the amount of a value opinion;
the attainment of a stipulated result; or
the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose.
Advertising for or soliciting assignments in a manner that is false, misleading, or exaggerated is unethical.
Comment: In groups or organizations engaged in appraisal practice, decisions concerning finder or referral fees, contingent compensation, and advertising may not be the responsibility of an individual appraiser, but for a particular assignment, it is the responsibility of the individual appraiser to ascertain that there has been no breach of ethics, that the assignment is prepared in accordance with these Standards, and that the report can be properly certified when required by Standards Rules 2-3, 3-3, 5-3, 6-9, 8-3, or 10-3.
September 14th, 2008 at 7:58 pm
By asking the appraiser for a value range, comp check or whatever you want to call it, the appraisal is contingent on a predetermined value. You have said that if the appraiser can call this house at least this much, than he can get a paycheck. That’s illegal.
The Andrew “Cuomo ” deal is dead.
September 14th, 2008 at 7:44 pm
Heather said “” And whoever said anything about underwriters just answering to the their employers; isn’t the employer the one lending the money? I mean yeah you might think the bank making the loan would want to make sure the appraisal along with everything else needed was accurate????????? If I was lending you my money for your home, I would want to make sure the appraisal was good and I would want to see your credit and income. Wouldn’t you?..”"
That was me, which is why I posted up the blog that you enjoyed…
The underwriters bosses were also paid on bonus commission as the loans that were approved were then packaged and sold to WALL STREET INVESTORS. If the lenders had to keep the note for the life of the loan your comment would be dead on target…
September 14th, 2008 at 4:35 pm
Hi Heather,
You have the picture. Yes, many bad/stupid appraisers and many bad/stupid mortgage people who ignore the appraiser’s rule book because they never learn it. And it doesn’t make them money if they pay attention. The scenario plays out as, “If you would like more Appraisal work from me, my deals need to work or you need to warn me if they won’t”. Realtors also play this game. I can’t tell you how often a commissioned participant in the deal has told me straight out, “My deals have to work”. So bad/stupid appraiser’s continue making deals work because they don’t want to starve. Bad mortgage officers insist their deals must work because they don’t want to starve. Bad realtors insist their deals have to work so they won’t starve. And I will add, I am not calling Brent a dishonest broker. I am pointing out that he doesn’t understand the law. And ignorance of the law won’t keep you out of trouble.
When it all comes to light, the home owner is in the bucket on their house due to a bad appraisal and the appraiser goes to jail. The other two participants go forward making more deals because they easily escape scrutiny. That’s why appraiser’s continue to shout about being pressured. Good appraiser’s don’t cave and they don’t as a result often continue to get any work from these types of people. This is rampant in the appraisal/mortgage business to this day.
I work for local banks directly more than anyone else and avoid brokers to try and avoid being pressured. Brokers are all COD in my business because it is common to refuse to pay the appraiser if the value isn’t there. That’s because the commission structure requires a broker to pay the appraisal fee out of their own pocket if they can’t close the deal. That is what the real issue is about telling the broker ahead of time as to whether the property will appraise or not. However, home owners also nail me time and time again because they want the financing to work too. I become the bad appraiser because two years ago someone said my house should be worth x and I don’t back that now. Forget the news about declining markets, that must be someone else. And on and on we go. So when you go into this business, and I hope you do, remember honesty is worth more than any amount of money. At the end of the day, that’s what you take home forever.
September 14th, 2008 at 3:45 pm
Heather,
The theory behind not allowing someone to even “suggest” a number to an appraiser has to do with what may be construed as a “direction of value.” Putting a number down on a piece of paper may not bind the appraiser but it can, and often does, imply that that that is the number that needs to be reached. Its the covert, unwritten rule in this business. This dirty little secret is the bane between appraiser and mortgage broker.
Also, understand the difference between a mortgage broker who brokers mortgage packages through various lending institutions and a bank who makes the loan. This is an important nuance in the process and one you may find quite enlightening should you decide to persue it fully.
The blame game between mortgage brokers and appraisers is a result of the two parties operating under two very different set of rules and from two very different vantage points – both legal and perceived. Of course the legal rules trump the perceived expectations, much to the frustration of the public.
September 14th, 2008 at 2:57 pm
Tony,
GREAT ARTICLE, makes alot of sense. I think I have been saying that in laymens terms, the blame is on EVERYONE in the business.
September 14th, 2008 at 2:51 pm
Steve thanks for the education and thanks unlike so many others for being smart and polite. I believe you on the law. I only have two comments.thoughts. Number one if an appraiser caves to a bad mortgage banker then shame on both parties but since it’s the appraiser that is in trouble then they were pretty stupid to give in. Number two, just one person’s opinion who like I said is only considering a caeer in the related field of real estate; but if a lender can’t even suggest a number so everyone involved knows if a loan can go forward or not then that is one of dumbest things I have ever heard. Not calling an appraiser or anyone stupid. I am calling the system and whoever designed it as not logical. Just because a person puts a number down on a piece of paper shouldn’t bind an appraiser in any way shape or form. It should be regarged as an opinion and nothing more. I don’ want to see a good person in trouble for breaking the rules but I really do think the rules don’t help the homeowner which to me was Brent’s main point. I agree that there won’t be any accountability and the appraisers are fine with that. In fact they love to proclaim how independent they are and will be. Uh Huh. Sounds good it just won’t be. Kinda like big government socialistic programs. This sounds like one coming to me. Who will pay for this new program, who will run it? How will an appraiser get into trouble if they do a poor job, screw up etc? I bet all I get in return are more speeches about how everyone’s bad except the honest appraisers. Frederick is right, if they are pulling all these old files and no one cheated then no one should be worried. I bet when they do they will find MASSIVE appraisal fraud committed by the poor appraiser. I know, I know poor appraisers, the devil mortgage guy made you do it. Try having a spine next time. And whoever said anything about underwriters just answering to the their employers; isn’t the employer the one lending the money? I mean yeah you might think the bank making the loan would want to make sure the appraisal along with everything else needed was accurate????????? If I was lending you my money for your home, I would want to make sure the appraisal was good and I would want to see your credit and income. Wouldn’t you? My point is appraisers seem to blame loan people and they blame appraisers. I think you should both blame the banks more than each other.
September 14th, 2008 at 12:55 pm
If the appraiser’s payment is tied to hitting a number, it’s illegal. Period.
September 14th, 2008 at 11:30 am
Tony V
“Since the sub-prime melt down and the ensuing debacle which followed, many homes that have gone or are going into foreclosure have had their files pulled”
As long as those appraisers were doing the job right, then all that file-pulling will just be a waste of time.
September 14th, 2008 at 9:54 am
Since the sub-prime melt down and the ensuing debacle which followed, many homes that have gone or are going into foreclosure have had their files pulled and all paperwork reviewed including the appraisals…Presently many field reviews are being ordered on these reports…..If issues are found hopefully they would be sent to the State…….In this process the State requires the entire file, including the order and most likely a trip to the board.
BTW….in this process appraisers are finding that some of the PDF reports that were sent out to MB’s and lenders have been broken into and changed….It was discovered that there are several PDF Cracker software programs available which have been used to change information on the reports…This is not to imply anything about any posters within this blog, just a little more info as to what is/has been discovered so far.
September 14th, 2008 at 9:46 am
Heather,
This is all very simple. Your State Appraisal Board and the law hold us all accountable. These rules we keep discussing are what hold us accountable. We are all licensed by the state we work in. We are allowed to explain results to our client’s only. That would likely be the lender, not the borrower, even though they might be paying the bill. The client is the person or company that placed the appraisal order. I am not accountable to the lender or homeowner beyond a fair and polite business relationship. I am accountable to the law. I am accountable to everyone to provide honest results sheilded from influence by others. I am accountable in that I must perform the appraisal based on regulations for my client.
If a lender says the homeowner thinks their home is worth x, you are right, the lender didn’t say hit that number. And if I as an appraiser, just complete the job and turn it in, no discussion of possible results, I’m OK. If I have that number printed on the appraisal engagement letter from the client and my appraisal result is exactly that number, it is considered highly suspect to an auditor however. Big red flag that something illegal is in process.
So communicating any number to an appraiser prior to a result is very bad form. If I call someone and say, I think it will be this not that, should I go forward, the law is broken. In fact, how did I know it needs to be this and not that unless somebody communicated a number to me? If I say, yeah, that looks OK, the law is broken and I broke it. That is the point. USPAP, as incorporated into state law, forbides an appraiser from doing any of this. It all just became a pre-determined value when we discuss possible outcome as a factor in getting paid and completing the job. No matter who brought it up, the appraiser becomes the liable party subject to prosecution. Not Brent, not Heather, not anyone else. If Brent or Heather argue with me and insist that the value is Y and then I finally break down and give a value of Y, then Heather and Brent are implicated as well. Federal law prohibits any effort to influence the outcome of an appraisal by another party and makes that party subject to prosecution right beside the appraiser.
Why is this so hard to understand? We aren’t making this up as we go here. Call or e-mail your state appraisal board and get this straight from the horse’s mouth! You will be glad you know how to keep yourselves and me out of trouble.
September 14th, 2008 at 9:09 am
Heather…..
The appraiser is held up to USPAP as it has been incorporated into each and every State Law…
Since there is little or no regulation of MB’s, in most States they don’t even do background checks, they do not concern themselves with “”The Line”"…realize that I am not refering to out and out fraud.
as for a system of checks and balances….check out this blog…(you may have to cut and paste..
http://subprime.kanzeigroup.com/?p=18
And realize that the underwriter only answers to his employer….No State Regs involved…simply risk ..
Kinda shows that appraisers are the only ones with their necks out..
September 14th, 2008 at 12:09 am
Mary Anne, I think you are the one that needs to do some reading here. If you don’t care what I say as a client but if you are hired not by mortgage lender but just randomally assigned to whom exactly would hold you accountable? You complain about mortgage people threatening you and I am sure that has happened. There are bad people in every profession, we all know that right? It just seems like people want to vent and not actually pay attention to some of the counter arguements that have been presented. And here is something I have been thinking but never seems to be brought up by anyone. If a mortgage broker pressures an appraiser and they agree to committ fraud aren’t both parties just as guilty and just as bad? What are some thoughts on the percentages of appraisers who helped the bad brokers committ fraud? But more importantly, didn’t all these banks have anyone checking the appraisals? I mean if a home was worth 692k like you said Mary Anne and you put down 750k which would obviously hurt everyone involved ;didn’t the bank have the job of saying you did a poor job and or broke the rules? I mean if it was me lending my money I would set some rules and make sure you and the mortgage person and everyone involved were following my rules. If the banks were paying attention wouldn’t alot less of this type of thing happened and protected everyone?
September 13th, 2008 at 9:48 pm
Well Folks,
We have beat this to death here in hopes of helping everyone. Brent, thanks yet again, but I have one final comment to all the non-appraisers. Please, please, please, call your state appraisal board and ask these questions of the government. Forget all of we lowly appraiser types that don’t know the rules that govern our business. Forget your friend’s/appraiser’s opinions. Certainly please ignore all of us.
Find out first hand what is considered ethical for an appraiser when it comes to making a preliminary or pre-comp opinion of value no matter if the lender asked the appraiser, the home owner asked the appraiser or if the appraiser just spontaniously offered an opinion. If you are all as honest as you believe, then you will all believe the government when they explain the rules won’t you? And then please pay close attention. And ask what penalties your appraiser faces if he/she does do what you all seem to think is the only fair approach.
Most all appraisers I know want to tell all of you the truth about your home or your borrower’s homes value. We take pride in being truthful despite being pressured at every turn to be otherwise. We are sincere in our wish to be completely honest in how we operate. We are not allowed to advocate that you deserve the loan or that you don’t. The law states we are not allowed to care. The law! Not us!
We are not the enemy as so many people have been conditioned to believe. We are not here to make a loan work out. We are not guilty of poor work when the value is less than you hoped. We are here to tell the truth based on laws and regulations. What we are, is educated about the rules of our profession. What is apparent, is that most everyone else is not and doesn’t seem to want to be because it might mean the deal won’t work. Thanks for everyone’s time and patience. Now call your state appraisal board and get the facts first hand, and then run your business based on being ethical at every turn. If you do that, we can turn this nightmare market around.
September 13th, 2008 at 8:44 pm
Brent, What exactly do you mean when you say “The appraiser will not be as likely to put in the time to find comps that justify sales price/value”? We don’t look for comps based on their sales price. Are you kidding me. Do you think we are supposed to search for comps that reflect the value you want/need? This is way more egregious than requesting an appraiser not complete an appraisal that doesn’t meet value. We look for comps that are proximate, similar and recent regardless of what they sell for. It’s their sales price that reflects the value of the subject property. Appraisers don’t “get value”. The market determines value. It seems obvious to me that if you order an appraisal needing 600k in value that you expect the appraiser “to in the time to find comps to justify” 600k. You couldn’t be more wrong if you tried.Please explain your comment.
September 13th, 2008 at 8:35 pm
Heather – “Would it be possible to give a range and then the appraiser could make an early read one way or the other.”
Yes
September 13th, 2008 at 8:29 pm
Brewer,
“anytime an appraiser offers and opinion of value, a direction in value, a range of values and value in relationship to a benchmark, etc… it is defined as an appraisal (see USPAP). As such, a whole host of regulations and certifications MUST be adhered to.”
That has nothing to do with the client.
Brewer
“As stated in other posts, it is against regulations for any appraiser to accept an order that contingent upon a pre-determined value”
And as state in other posts, Brent didn’t tell the appraiser to hit a predetermined value. He said, “No one is telling an appraiser they must hit a pre-determined value”
September 13th, 2008 at 6:52 pm
Let me ask a question of the non appraisers here….
What do you think the job of a real estate appraiser is… and what is your definition of an independant third party??
September 13th, 2008 at 4:53 pm
Heather,
Where did you get the inane idea that an appraiser is or would be accountible to no one??? Perchance you are thinking of the mortgage broker.. you see an appraiser is accountable to the state and to the public trust.
READ Heather READ..
an ‘early read’ as you put it is defined as an appraisal. It is also known as a comp check, fly by, range of value. If I tell you the home is worth between 700 and 750 I have virtually given you an appraisal. THEN what happens is you ‘bank’ on that possible 750 – the appraiser wants to keep his promise to you to get more business…. goes to the house.. grids the comps….and guess what.. the house is only worth 692 and you are mad at the Now unethical appraiser who told you a lie. OH.. well then there are those appraisers who will cleverly PUSH that value up to 730 – you are still mad and try to get the promised 750 because oooops there is a prepay penality you did not know about…. loan closes and poof the customer is upside down instantly because the house is only worth 692!
THIS IS WHAT HAS BEEN GOING ON HEATHER… that question IS IT POSSIBLE? If I say yes without inspecting the home and gridding the comps…then be dammed I better get there to what I promised or else.. or else I am not paid … or else I get cut off…. or else!
If you are paying for an appraisal, exactly what rights do you have? The right to guide the value to suit your needs? You have a right to a copy of it for sure but that is it darling!
Would you go back to the grocery store and demand your money back on diet food you purchased if you did not succeed in loosing weight????
September 13th, 2008 at 4:25 pm
Wo sure seems like some people like to make threats like that jerk from the Hamptons. I am considering a career in real estate and it seems like the appraisers are really looking forward to this new system. Appraisers is that true? I read the cbs news article and I had to laugh as how biased it was. Typical from the media these days. It does seem if anyone tries to put a different view they are shouted down and threatened.
I think the appraisers are protesting too much. Sounds like the system needs change but to have an appraiser accountible to no one does not seem right to me. IF I am paying you I should have some rights also. It didn’t sound like Brent was ordering anyone to hit a cetain number, he was asking if it was possible. I think he made that pretty clear many times and people heard what they wanted to hear. Would it be possible to give a range and then the appraiser could make an early read one way or the other. I wouldn’t want to pay for something not knowing if it would work or not, would anyone else?
September 13th, 2008 at 9:31 am
“I do not deal with dirty appraisers”
Dirty, maybe yes, maybe no. Unethical? Yes.
September 13th, 2008 at 9:28 am
“Brewer, if you are so independent it’s really none of your business as to why a person is refinancing right? Are you qualified to know if they are doing the right thing by rolling their car into a new loan?”
As an appraiser, it is none of my business why one is re-financing. What is your point?
As a citizen looking down the road at the long term impact, it is 110% stupid to be still paying off a brand new 2008 Chevy in 2025 because the car loan was rolled into their 30 year mortgage. They are called CONsolidation loans for a reason!
September 12th, 2008 at 11:43 pm
Sorry to scare you off, Brent, It was no threat, I am just giving you heads up on the reality of such busniness practice, because we get similar threats. Un-American? what is happening?…..I have tons of evidence and others of the tactics that have hurt the American Public, lets stop being a victims here. The public is screaming very loud while they are being put to the streets, because MB/LO’s wan to use an appraiser to help you out and you did not want to be the bad guy. If you would have let the appraiser do their job correctly, none of this HVCC/AMC take over would be happening. You think there are bad appraisers that do not play ball, wait till you have to use an AMC appraiser.
September 12th, 2008 at 9:45 pm
Your comments are a perfect example of how this country got into this mortgage meltdown in the first place.
The lending industry wants short term, profitable commissions and closing fees. The Realtors want the short term commissions. Borrowers want to cash out (phantom equity) in many cases or seek to acquire real estate with little to ZERO of their own money in the deal. This all lead to seeking out and using the unethical, dishonest appraiser who will accommodate THE DEAL and profiting from it as well.
Comp checks and appraiser shopping, while illegal per USPAP, is so entrenched and accepted within the mortgage and Realtor industries as standard operating procedure, that most don’t even begin to comprehend the short ethical compromises or the long term ramifications. We’ve seen this going on for years with nothing being done for the sake of SHORT TERM profits. We now have the LONG TERM train wreck, yet many still refuse to connect the dots.
The ’skippy’ appraiser is rewarded, while the honest appraisers get less work and are labled overly conservative, anal and naive. Why, they’re just looking to get paid for appraisals that don’t make the deal, thus money wasted by the borrowers! Try telling your doctor you’re not paying him unless he gives you a diagnosis more to your liking, next time. Ya think that might tend to sway some doctors in rendering less than honest medical advice?
By definition an appraisal is supposed to be UNBIASED and INDEPENDENT. The system is broken and has been for a long time. What’s more disheartening, is the general understanding, or the lack thereof, by the general public, as they’re the ones who are impacted the most, both by equity losses, foreclosures and/or the added tax burden of the lender bailouts.
When will this country ever ‘get it’?
Follow the money, Honey.
CBS Evening News with Katie Couric, March 14, 2008
http://www.cbsnews.com/stories/2008/03/14/eveningnews/main3940741.shtml
September 12th, 2008 at 6:15 pm
Heather,
Not that we don’t care about anyone. We aren’t allowed by law to be an advocate for any party in the transaction. All we can do is say x=y and that’s my real opinion of value. But remember that different people are allowed to have different opinions. The difference is that an appraiser must back their opinion with real facts and follow a set of ethical as well as physical guidelines to form that opinion. And there are good and bad appraisers as in everything else.
Can’t tell you how many clients have told me that they simply know through a gut feeling that their house is worth more than I think with my facts and figures. A gut feeling isn’t a fact, but if you want to list a house based on that, no one is stopping you. Will it sell based on that? Not likely, but possible. You could win the lotto too.
If you got a low number and found another appraiser who gave you the right number, what does that mean? Always remember it’s a professional opinion, but still an opinion. And has nothing to do with getting you the loan. The minute it does, it’s not legal. Banks and mortgage companies can use it to hang an appraiser. That’s one reason they get an appraiser, so they have someone to prosecute if things go south. That won’t happen if you don’t default, but if you do? And an examination says the appraiser pushed the value to help you get your loan? Someone is going to jail and it won’t be you.
Good luck Brent. Keep working at understanding the process, you will be a much better loan officer for it. Sorry for the threats, that’s not good form, but is a reflection of being pressured and then fired for not playing ball.
September 12th, 2008 at 6:05 pm
Brent said, “Elliott Reed, you don’t know anything you discussed in your post by the way. There are many consequences if a loan goes bad for the loan officer. ”
Brent,
I’ve been appraising 25 years. I was around when S&L Bailout I occurred. One of the big problems back then was the close connection between ‘production & processing.’
Interesting enough after the Bailout there were a few months when only processing could order appraisals, MBs/Production couldn’t even speak to appraisers, it was a golden era, but lenders had a hissy fit, just like your having now.
The current issues with appraising are the same, its ‘pressuring’ for value. I doubt that most MBs can see past their own wallets. You really are part of the problem.
September 12th, 2008 at 6:03 pm
Sorry to see that you do not wish to respnd to this blog anymore Brent……due to a threat of a poster…..One thing that you may be interested in is that when Cuomo had his folks call every appraiser in NY, many were scared about it….I ended up talking for about a half hour to the guy. Within the conversation I had with him, he said that they are going through the internet blogs, including AF, BO and the grapevine looking for proof of what is going on (targets, if you will)….
The one thing out of all of Cuomo’s investigation which ended up with the HVCC that really bugs me is ….What the heck did he find that made Fannie and Freddie sign so fast?? and how does that lead up to the take over…
I wish you luck and since your site requires an e-mail, if you wish to ask any questions, you have my e-mail….
September 12th, 2008 at 5:53 pm
Wow, interesting subject and it’s getting pretty mean spirited. Seems to me like the appraisers could care less if the borrower is helped or not.
Seems like that to me. Of course I am a little biased as I have been ripped off by an appraiser who did a terrible job and I had to pay another 600 bucks to have his mistakes fixed. Brewer, if you are so independent it’s really none of your business as to why a person is refinancing right? Are you qualifed to know if they are doing the right thing by rolling their car into a new loan?
September 12th, 2008 at 4:56 pm
Good afternoon Brent
You say: “A comp check is NOT an appraisal, I just called three appraisers for their opinion and they laughed at you. True story man, so after hearing from my guys I don’t take you very seriously.”
Please forward the below information to your three appraisers.
USPAP 2008-2009 – Definitions:
APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).
~ Source:
http://commerce.appraisalfoundation.org/html/USPAP2008/USPAP_folder/uspap_foreword/DEFINITIONS.htm
ADVISORY OPINION 19 (AO-19) states:
Many residential property appraisers report requests for service where the caller includes statements or information in the request similar to the following:
We need comps for (property description) that will support a loan of $___________; can you provide them?
Sales Price: ___________.
Approximate (or Minimum) value needed: __________.
Amount needed: ______________.
Owner’s estimate of value: ___________.
If this property will not appraise for at least ___________, stop and call us immediately.
Please call and notify if it is NOT possible to support a value at or above ___________, BEFORE YOU PROCEED!!!!
Appraisers report that the caller usually makes it clear that they do not want the appraiser to do any fieldwork. Some callers refer to the service requested as a “comp check” while others refer to it as a “preliminary appraisal” or use some terms other than appraisal (such as preliminary evaluation, study, analysis, etc.). Some callers indicate that if the numbers will not work, the appraiser can send a bill for research services or a “preliminary” inspection. Other callers promise future assignments if the appraiser can make the present deal work.
Appraisers ask, “Can I respond to such requests without violating USPAP and, if so, how?”
3) assignment conditions that compromise an appraiser’s impartiality and objectivity in an assignment are unacceptable.
While a client may feel that offering preference in current or future assignments on the basis of “making the numbers work” in a specific assignment is appropriate, attaching such a condition to an assignment compromises an appraiser’s impartiality and destroys the appraiser’s credibility.
The Uniform Standards of Professional Appraisal Practice is explicit about such matters. Accepting an appraisal assignment under such a condition violates the Conduct section of the ETHICS RULE in USPAP, which states:
An appraiser must perform assignments ethically and competently, in accordance with USPAP and any supplemental standards applicable to the assignment. An appraiser must not engage in criminal conduct. An appraiser must perform assignments with impartiality, objectivity, and independence, and without accommodation of personal interests.
An appraiser must not accept an assignment that includes the reporting of predetermined opinions and conclusions.
Furthermore, accepting compensation for completing an appraisal assignment under such a condition violates the Management section of the ETHICS RULE in USPAP, which states:
It is unethical for an appraiser to accept an assignment, or to have a compensation arrangement for an assignment, that is contingent on any of the following:
1. the reporting of a predetermined result (e.g., opinion of value);
2. a direction in assignment results that favors the cause of the client;
3. the amount of a value opinion;
4. the attainment of a stipulated result; or
5. the occurrence of a subsequent event directly related to the appraiser’s opinions and specific to the assignment’s purpose.
Illustrations (AO-19)
Some of the requests shown in the Background section of this Advisory Opinion share common characteristics. Possible responses to each common group of requests could be:
We need comps for (a specific property) that will support a loan of ___________; can you provide them?
“Maybe, but I’ll need to research the market to know whether the ‘comps’ will support a value range relative to the loan amount. In doing this, I will be deciding which sales are ‘comps’ and what those ‘comps’ mean. Those decisions will result in a range of value for your prospective borrower’s property, which is an appraisal.
You also need to recognize that there are risks in this kind of assignment. You should realize that my value conclusion could change if I subsequently perform an appraisal. Under the research and analysis limitations you suggest, I would not have verified some of the data and would have to use extraordinary assumptions about the market data and your borrower’s property information. I would not have performed some of the analyses steps I might complete in an appraisal assignment without those limitations. If all of that is agreeable to you, we can proceed.”
Sales Price: ___________.
“As long as the amount is only to inform me of the pending contract [or of the sale price] and is not a condition for your placement of this assignment with me, we can proceed. However, if that amount is a condition of this assignment, accepting an assignment under that condition violates professional ethics.”
Note: A sale price (in a pending or a settled transaction) is part of the information an appraiser is required to ascertain in accordance with Standards Rules 1-5(a) and (b). Receiving this information with a request for service is appropriate, but accepting an assignment with the price in an agreement of sale, option, or listing or a sale price in a settled transaction as a predetermined value in the assignment violates USPAP.
Approximate (or Minimum) value needed: __________.
Amount needed: ______________.
Owner’s estimate of value: ___________.
“As long as the amount is only to inform me of your objectives or someone else’s opinion and is not a condition for your placement of this assignment with me, we can proceed. However, if that amount is a condition of this assignment, accepting an assignment under that condition violates professional ethics.”
If this property will not appraise for at least ___________, stop and call us immediately.
Please call and notify if it is NOT possible to support a value at or above ___________, BEFORE YOU PROCEED!!!!
“Your request is acknowledged, but it is important for you to be aware that I must develop an appraisal before I can tell you whether the property will support the value indicated. It is also important for you to be aware that your statement of that amount with this request for service does not, in my view, establish a ‘condition’ for my performing the appraisal. If you intend it to be a condition for performing the assignment, I cannot accept the assignment because it violates professional ethics.”
Hope this information is helpful.
Thank you,
Desiree Mehbod
Real Estate Appraiser
September 12th, 2008 at 4:53 pm
Steve,
Thanks again for writing in, I really do appreciate your side of the story. Sadly due to threats for people like Pink Monkey I have decided that we apparently don’t live in America and can’t have a difference of opinion and share our thoughts and respect each other. I will not be responding to any future posts on this topic. Just to be clear one more time for those who are too stupid or too lazy to get what I am saying; I do not deal with dirty appraisers, never have, never will. Your threats are personally offensive and I have done nothing wrong. You and your thuggish Nazi like tactics are so un-American it’s hard to be believed. I guess the net allows you to show what type of person you really are to the world. How sad.
September 12th, 2008 at 4:36 pm
Hello Brent,
Thanks again for providing a forum to have an open discussion on this topic. It is a common thread on many forums right now. I for one, have always appreciated my mortgage clents, as long as they would pay attention to the fact that the rules are what they are and can’t be compromised. And I have had to loose a clent or two for not playing ball. As stated by others, my job as an appraiser is that of a disinterested third party. I am no one’s advocate or I am breaking the ethical rules I’m bound to. That becomes hard to get based on a world of customer service standards that suggest the client is always right. In this case, the client’s thoughts on value can be given no consideration what so ever, and that’s hard to swallow when you are paying the bill.
It’s easy as the person jobing out the work, to think the appraiser owes his/her client a certain level of service to keep them out of hot water with their borrower. But as soon as we do that, we are out of line and in a compromising position, which per USPAP should force us to walk away from the assignment. There is very little latitude for us at this point. So thank you again for entertaining our thoughts and I hope the next time you order an appraisal from one of your guys, that you see the position they may be put in if they see a hoped for number or even suggest to you a make it or break it scenario. It all seems innocent enough and in the borrowers interest until the hammer falls and then everyone will be sorry and the appraiser most of all. We face finacial fines, sanctions, loss of license (business closed) or worse. Once we are in trouble everything changes. It’s like being convicted of a felony. Might as well start looking for a new career. And all over a $300 fee.
All this is why we are known as “Independent Fee Appraisers”, because we are to operate independently of everyone involved, not because we are self employed. The less said by an appraiser to anyone including the loan officer the better, again hard to swallow. So appraiser’s are often perceived as difficult. Not always true, just a reation to the huge liability we must shoulder.
September 12th, 2008 at 4:32 pm
Then you wonder why the economy is going to the toilet. It is this kind of Predatory tactics and Subprime Mentality that is like Crack, Just trying to get the next “DEAL” Fix. I hope you do know that your comments may have started an investigation for perhaps any committed violations? Because if you are willing to deal with a dirty appraiser, what other things are you willing to do?
September 12th, 2008 at 3:49 pm
“… on a refinance it’s already too late. There should be a way of making a compromise here to help protect the borrower. That’s really all that matters.”
I disagree. Many, many times, I have seen refinances where people are trying to roll the car, credit cards, etc… into the mortgage. Simply put, they have over extended themselves.
The best way to protect the public is the proven truth. That is all that matters.
September 12th, 2008 at 3:33 pm
“”There should be a way of making a compromise here to help protect the borrower. That’s really all that matters.”"
An appraiser is a disinterested Third Party, acting independently in a way which does not favor any parties involved within the deal……
This is true in all aspects of appraisal such as divorce, tax greivence, estate, etc, including mortgage lending….
September 12th, 2008 at 3:17 pm
Rice,
Yes on a purchase that could protect them, on a refinance it’s already too late.
There should be a way of making a compromise here to help protect the borrower. That’s really all that matters.
September 12th, 2008 at 3:03 pm
“If I send you an order though with a value of 300k and its 250k when you check, why on earth would I actually want you to perform the appraisal and give me something that is worthless to the client?”
A few things:
1) When the appraiser opined that the value was $250,000, an appraisal had been communicated for anytime an appraiser offers and opinion of value, a direction in value, a range of values and value in relationship to a benchmark, etc… it is defined as an appraisal (see USPAP). As such, a whole host of regulations and certifications MUST be adhered to.
2) If the $250,000 was indeed correct, you will need to have that appraisal report in file as part of YOUR due diligence.
3) A “low” appraisal is not always a bad thing. In some cases, it may prevent a client from getting in over their heads and having what is substantially unsecured credit.
4) As stated in other posts, it is against regulations for any appraiser to accept an order that contingent upon a pre-determined value. You are asking your appraiser to put their license in jeopardy.
September 12th, 2008 at 2:44 pm
Maureen, Brent and others….
The borrower does have a right to a copy of the report….
Residential Borrowers May Receive Copy of Appraisal
December, 1991 amendments to the federal Equal Credit Opportunity Act, known as 12 USCA Section 1691(e), require a lender to provide, on written request, a copy of the appraisal report to any person who applies for a residential mortgage.
The text of the section reads: “(e) Each creditor shall promptly furnish an applicant, upon written request by the applicant made within a reasonable period of time of the application, a copy of the appraisal report used in connection with the applicant’s application for a loan that is or would have been secured by a lien on residential property. The creditor may require the applicant to reimburse the creditor for the cost of the appraisal”.
This law applies to all real estate secured residential mortgage lenders, including banks, S&Ls, credit unions, mortgage bankers, mortgage brokers, mortgage originators, etc.
Important Notes
The following is mandated under the Federal Uniform Standards of Professional Appraisal Standards (USPAP) by which all Real Estate appraisers are governed.
Rules promulgated by the Federal Financial Institutions Regulatory Agencies allow borrowers a 90 day period during which to file the written request for a copy of the appraisal.
The lender must supply a copy, not the original appraisal report. The residential borrower, or potential borrower, must obtain the appraisal copy from the lender, not the appraiser. The appraiser can only deliver a copy of the appraisal report to the lender.
Only the residential borrower, or potential borrower, has a right to receive a copy of the appraisal from the lender. Sellers, brokers, and other parties who are not the borrower have no right to obtain a copy of the appraisal.
The lender who ordered, accepted delivery, and based a business decision on the appraisal is the
appraiser’s client, regardless of who paid for the appraisal, or when, or how. The appraiser must comply with the client confidentiality provisions of the Uniform Standards of Professional Appraisal Practice.
The appraiser is under obligation to not discuss the appraisal, including value, with the homeowner and/or proposed borrower. The only discussion the appraiser is allowed is in gathering information to assist in the preparation of the appraisal. The borrower is not the client. The appraiser is only allowed (by law) to discuss the appraisal with the lender/client named on the appraisal order form. The appraiser must comply with the client confidentiality provisions of the Uniform Standards of Professional Appraisal Practice.
September 12th, 2008 at 2:20 pm
Mr. Mendelson,
One thing that you may find out some day is that appraiser that do comp checks are not necessarily the most informed bunch.
APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.
Comment: An appraisal must be numerically expressed as a specific amount, as a range of numbers, or as a relationship (e.g., not more than, not less than) to a previous value opinion or numerical benchmark (e.g., assessed value, collateral value).
In the future, please provide support for you opinions, not just the opinions of individuals that have no idea what they are talking about.
September 12th, 2008 at 2:00 pm
Steve,
Thanks for reading and getting my sentiments. It’s more than most bothered to do.
I don’t know much about the appraisal requirements, you are correct but I am learning.
I don’t know your business just like you don’t know mine. I do appreciate the education though. More importantly I agree that these changes in Jan are very bad for appraisers, loan officers and again for our mutual clients. It will be a complete disaster and no one in our business even knows how it will work yet. And we do care, there just doesn’t seem to be much in the way of information yet. Clear as mud and catch 22’s are definately the way I would describe things. I like Oregon’s plan to get everyone together and start to work these things out.
September 12th, 2008 at 1:49 pm
Maureen,
Sorry to hear about what happened to you. A quick glance shows if the home is worth 196k and you owe 168 then you have a LTV of over 86%. If it’s worth 228k then it’s just a bit over 73%. Now I don’t know why he wanted/needed to hit 228, maybe it was to get you a loan at all. Especially if you had credit problems, those are tougher to do.
I agree with you, if you told the broker it was in the 190k range he should not have expected it to come in at 228k. But why on earth couldn’t the appraiser just call back and say “you are way off and it can’t be done”?
The broker doesn’t have to give you a copy, even though he could, I know you paid for it but it’s made out to him and technically belongs to him. I would have given you a copy though. I agree it sounds like the appraiser was honest. There are two problems here, the broker should have been up front with you and said “I can’t help you unless it’s worth 228k. I still think the appraiser should have told the broker ” I can’t do that because the value isn’t there” Then the broker should have told you that and saved your money. That’s what I would have done. Maureen, let me ask you this, since you think ALL mortgage brokers are such bad people, to whom will you turn the next time you need a loan? I don’t think you understand how the system works very well by your comment. And if you think that I use dishonest appraisers who will hit any number I say, I am puzzled where you think you read that? One more time though I must admit to being frustrated by people who seem to read whatever they want to read. One more time, I have never asked an appraiser to do anything that will get them in trouble, to inflate numbers or anything unethical. Is that clear enough? My goal is to protect the homeowners like you who trust the mortgage broker to come thru for them. That’s it. Thanks for writing in and please re-read how many times I state the above referenced sentiments.
September 12th, 2008 at 1:43 pm
Oregon
It sounds like an Appraiser should not be CONTACTED unless an Appraisal will be ordered. If the Loan Officer needs estimates, he should go through other means to do comp checks so it doesn’t ever put the Appraisers in a compromising postion.
This way the appraiser is never put in a bad position, and the Loan officer still gets his research to share with the Client who can THEN make an educated decision on if it makes sense to move forward and order the appraisal and risk losing the $400.
September 12th, 2008 at 1:41 pm
Hello Brent,
As you point out, I agree, you never said to the appraiser, here’s the number I need to hit. Again, I don’t think you intend to ask the appraiser to break the law or anything else. I’m clear on that. The rules we as appraisers are sworn to, (and we are required to swear to them in case you didn’t know that) are seldom understood by the lending officer because it isn’t something he/she is required to learn. Underwriting guidelines for instance, generally are based on FNMA not USPAP. USPAP violations are ethical violations. That’s why the frequently asked questions section to try and clarify things. And USPAP when addressing comp checks is clear as mud.
But if you put a number on the order, that’s interpreted as a number to hit and the appraiser does a comp check and calls back with a warning that sales indicate that the value as suggested isn’t there or is there, that’s a predetermined value in the eyes of the authorities that oversee our business. The appraiser just moved into illegal territory. Any appraiser telling you different needs to call the state board and get straightened out. I’ll bet they won’t do that for fear of bringing the spotlight on their work. If you only put down the loan amount and the appraiser calls you back and says, “I don’t see enough value out here to allow you to loan that amount, that’s a predetermined value. And again, the appraisal if completed, comes in just like the appraiser predicted, that’s a violation. And if not completed, the appraiser did an illegal verbal appraisal without fulfilling the required steps to back up the opinion. All a catch 22 if you think about it. Any hint of a possible value for any reason, before completion of the appraisal is a violation for the appraiser. Keep in mind what I just said, it’s a violation for the appraiser. And the powers that be could look at it as colusion between lender and appraiser.
So that’s my contention, not that you mean to do anything but what you feel is your best, however, the scenario is illegal for the appraiser at every turn. Don’t think all the appraisers here are whining, the HVCC will put most of us out of business and the AMC you’ll have to order appraisals through will take half of our fee. You’ll pay more for the appraisal and we will make less. Every appraiser I talk to thinks the HVCC is a bad idea just as you do and as I do too. Who wants their income cut by half? Who wants to loose the clients they worked years to form a relationship with? Not me.
Just please keep in mind that we, lender and appraiser together, are really under the gun to tow the line at this point. Stating a possible number or a value range before completing an appraisal is a USPAP/ethical violation. Doesn’t matter if you asked me to or not, to do it. Perhaps just because we work together often, I know that’s what you expect if I want to get your work. As soon as that is the working relationship and I do it, I get caught, I’m toast. And next they will be talking to you because you originated the questionable appraisal. So this idea of pre-comping and killing the project if the value needed isn’t going to be there, or continuing if it is, hurts everyone.
September 12th, 2008 at 1:32 pm
Brent
Story:
LO calls me up and gives me information for a comp check. I research my local MLS for sales. I come up with some similar sales in the neighborhood and narrow it down to a few. AT THAT POINT I have determined a value range. According to appraisal rules, when I determine a value range, be it narrowed to one number or between, say, $200K – $225K, THAT IS AN APPRAISAL. Verbal or written, I have to have a file to prove my opinion. I don’t work for you or anybody else. I am paid to be ‘disinterested’. To evaluate the market and report my educated opinion of value. That has value, in this case; a fee.
September 12th, 2008 at 1:29 pm
He never said he uses dishonest appraisers who will only hit value. He said PLEASE tell me if this specific value is there or not. No one is asking anyone to be dishonest Maureen.
September 12th, 2008 at 1:28 pm
SO HOW DID THAT HELP YOU MAUREEN??
THE LOAN WAS TO HELP YOU, RIGHT? THE BROKER TOLD HIM A VALUE AND IT COULDN’T BE REACHED. THE BROKER SHOULDN’T BE MAD, AND YES THE APPRAISER DID THE RIGHT THING BY COMING IN AT CORRECT VALUE.
HOW DOES THIS MAKE ANYONE LOOK BAD? YOUR BROKER NEEDED A VALUE TO HELP YOU MAUREEN AND CLOSE THE LOAN. THE VALUE WASNT THERE, END OF STORY, SO WHAT… THIS HAPPENS ALL THE TIME. WHAT’S YOUR POINT?…. THE LOAN YOUR BROKER WANTED TO PUT YOU IN REQUIRED A HOME VALUE OF 228. IT WASNT THERE. OK, BIG DEAL.
September 12th, 2008 at 1:18 pm
Maureen-
I don’t know what state you are from, but if you paid for the appraisal, you have a legal right to a copy. They cannot, by law, refuse you a copy. Check it out.
September 12th, 2008 at 1:14 pm
Perhaps we could step back and take a look at where all the disagreement comes from. Loan Officers, Appraisers, Underwriters, Lenders all have concerns and rules. The problem is at the top, the financial rules and regulations that govern each entity and the consequences that ensue if the rules are broken. In my limited study of these different rules, it has become very clear to me that ‘the right hand doesn’t know what the left hand is doing’. Each has morphed into a reactionary response and we get further from the the original purpose; The Borrower.
As an appraiser, I have watched my profession loose it’s self to Skippys and those who’s only intention is to make a buck, at everyones expense. I, as a consumer, totally agree with Brent. Until a couple of years ago, I did comp checks for the very reason Brent is asking for them. ($400 leaves a heck of a hole in MY checkbook.) But with the market, failing lending institutions, dishonest investors, etc., and the appraiser taking a major hit in the media (not unwarranted), my profession is ‘righting’ itself. It is a messy business and NOT a lucrative one. Because of my integrity, I have lost about 40% of my business due to standing up to dishonest LO’s and standing my ground. My suggestion, as it has been for a long time, is to organize a committee from each faction of the real estate world; i.e. Appraisers, Lenders, Loan Officers, Brokers, Real Estate Brokers, and work together to solve the problems where they start: AT THE TOP.
Until then, LO’s, I respectfully suggest you get used to it.
Diane Forsberg, CREA
Certified Residential Appraiser
September 12th, 2008 at 1:12 pm
Yes, hello, I am a home owner and feel I have gotten caught in the middle of this situation. I applied for a loan several months ago. I only owe $168,000 on my mortgage and my house should be worth $195,000. I am basing this on the fact that it was appraised two years ago for $190,000 – I know my market is very slow now but I have improved the home. The mortgage broker asked me what I thought it was worth and I told him this. He said he could help me, I am having some credit problems.
Anyway, the appraiser came to the house . While he was there I accidently saw his file.. he dropped it and a pile of papers came out. There was a fax kinda cover sheet and on it was my brokers name address and my address and down on the bottom was…” You need to hit $228,000″ on this one”
The appraisal came in at I think at $196,000 – about what I thought but the broker will not give me a copy of it. He then said that he could not give me a loan.
I am not angry at the appraiser at is appears he was honest, what I am angry about was that it appears the mortgage broker was trying to get my house value way up there so HE could close my loan. I guess he got his tho, as of a few weeks ago the phone number is no longer in service. I went to my bank and was able to work out my financial situation.
I applaud the honest appraiser. Your comments here that you only use dishonest appraisers who will hit a number for you say it all!!!!
September 12th, 2008 at 12:24 pm
Hamptons- A comp check is NOT an appraisal, I just called three appraisers for their opinion and they laughed at you. True story man, so after hearing from my guys I don’t take you very seriously. In your defense, just like I say on appraising there seems to be a range of opinions. Some of your fellow appraisers on this blog seem to suggest that a range of value may work and be a compromise. And Steve, Frederick had it right, I never told anyone what they had to hit, I guess you could look at it as the number I placed on the appraisal request was the number I needed to make my loan work. Again, it’s getting really old but if you can’t do it, then don’t do it, I don’t want to break any laws and ask anyone else to do so. Jeez, is that so hard to understand that I would want some idea back from you that you can do what is needed?
September 12th, 2008 at 12:19 pm
Well glad to see people are paying attention!! I think people are hearing what they want to hear and some are coming in with axes to grind. Jeff I don’t think that describes you and thanks again for writing in again. I am just going to respond in general because there was alot of volume over night.
Let me be clear again, I do not want any appraiser to do anything that would get them in trouble, or compromise their independence. No doctoring, no inflated appraisals wanted here. I want an honest assesment.
I think most of what was written here was appraisal whining pure and simple.
It also doesn’t really matter because as of Jan 1, 2009 it looks like the appraisal disaster will be here for unsuspecting borrowers. Thanks to big government a new central bureaucracy will be created by the government to remove ordering appraisals from the hands of the loan officer. It might sound good but my orginal post was more about the dangers that this system will bring to the homeowner. It seems that I touched a nerve on appraisers and I am glad I did. Thanks to those who were trying to help and educate like Jeff, Steve and Desiree. Most of the rest just seem to have an axe to grind against my profession. That’s fine but after reading most of the comments I have lost alot of respect for the appraisal profession in general. I think that appraisers see an easier job next year and not having to be held accountable and to have guaranteed jobs. Sad but true. I think that Andrew Cuomo doesn’t know enough about what he has started and I am sure think that he is “helping” In my opinion creating a huge bureaucracy that will remove appraisers from actually doing a compentent job and being responsive to their clients is not a good idea. I don’t care what you say, this is no doubt where the industry is headed. You will now all be shackled to the namless, faceless government run system that is straight out of Soviet Russia. We always go to extremes in this nation, yes there were bad appraisers, loan officers and banks that broke the rules and people got hurt. Don’t worry we are from the government and here to help. LOL Now to the personal comments.
Jeff and Hal, I want to say answer a few of your comments directly. An appraisal is only of value to a borrower if it lets them borrow!!!!! I thought this was obvious, everything else is not important if they can’t do what they want. I hear you about Cuomo’s investigation, I just don’t think he was correct in his findings. If he was correct there are many other ways to fix the problems, not destroy the entire way business has been done. Were appraisals getting inflated a problem, 10, 20, 30, 40 years ago???
Elliott Reed, you don’t know anything you discussed in your post by the way. There are many consequences if a loan goes bad for the loan officer. You just rant about a broken system, I say it’s everyone’s fault to a bit, I will not allow you to attack the mortgage industry while you claim your hands are clean. What a crock.
MRKIW- You are a complete intellectual coward. I am not a salesperson, I don’t sell anything but good service and product knowledge. This goes to all the appraisers that can’t read, I will say it again- I don’t want to compromise your independence, integrity or get you in trouble. Perhaps Frederick had it right, call it a desktop analysis but if you think that to do an appraisal when you know the value isn’t there is morally wrong. Not close, not a maybe but you know you are taking someones money and giving them a pile of worthless paper makes you a greedy, non professional with no integrity.
mrkiw- If you would like a range, then that is fine also but I will not allow you to take your entire profession off the hook by claiming how we bully you and threaten your independence. My appraisers do an excellent job, and have never had their work questioned in hundereds of appraisals for me. You don’t know me so please never again question my ethics.
September 12th, 2008 at 11:16 am
Loan Officer Says:
September 12th, 2008 at 10:20 am
In defense of Brent, he is not trying to do anything unethical in fact he is trying to do just the opposite and not waste his clients time and money. If instead of requesting an “appraisal” from you with a value needed… What if he just got a Comp Check from you instead?? Would that be ok?
From there he can take the comp check and make his own decision with his client if it’s worth it to order the actual appraisal.”
REPEAT:
A Comp Check is an appraisal. Just because someone calls an appraisal (point value, range of value, less than or greater than some value, etc.) something else does not make it something else.
And, once again, why is it okay to waste the appraisers time an money, but not waste the borrowers time and money???
September 12th, 2008 at 11:10 am
Desiree writes
-Good morning Brent, Loan Officer and Frederick
-How would you interpret the above? Please be specific and detailed.
The same as what I wrote before. It’s not relevant because Brent didn’t tell the appraiser a predetermined value to appraise it for. He wrote about asking appraisers to determine what they think the property is worth and using the best comps. Payment should be based on the scope of work product.
September 12th, 2008 at 10:57 am
Steve, the part I don’t understand is the emphasis on this, “A pre-determined value conclusion, high or low is illegal. End of story.”
End of the story? It was never part of the story. Brent didn’t write that he was telling the appraiser what to appraise it for.
September 12th, 2008 at 10:31 am
Good morning Brent, Loan Officer and Frederick,
The Uniform Standards of Professional Practice (USPAP) do not allow an appraiser to accept an assignment based on a pre-determined value. Standards Rule 2-3, of 2008 USPAP, requires language in each appraisal certification, similar to the following:
My compensation for completing this assignment is not contingent upon the development or reporting of a predetermined value or direction in value that favors the cause of the client, the amount of the value opinion, the attainment or a stipulated result, or the occurrence of a subsequent event directly related to the intended use of this appraisal.
~ source [http://commerce.appraisalfoundation....s_Rule_2_3.htm]
The Appraiser’s Certification of Fannie Mae Form 1004/Freddie Mac Form 70 (URAR) rev. 03.2005, page 5 of 6 paragraph no. 18 also states:
My employment and/or compensation for performing this appraisal or any future or anticipated appraisals was not conditioned on any agreement or understanding, written or otherwise, that I would report (or present analysis supporting) a predetermined specific value, a predetermined minimum value, a range or direction in value, a value that favors the cause of any party, or the attainment of a specific result or occurrence of a specific subsequent event (such as approval of a pending mortgage loan application).
~ source [https://www.efanniemae.com/sf/formsd...trans/1004.pdf]
How would you interpret the above? Please be specific and detailed.
Thank you,
Desiree Mehbod
Real Estate Appraiser
September 12th, 2008 at 10:20 am
In defense of Brent, he is not trying to do anything unethical in fact he is trying to do just the opposite and not waste his clients time and money. If instead of requesting an “appraisal” from you with a value needed… What if he just got a Comp Check from you instead?? Would that be ok?
From there he can take the comp check and make his own decision with his client if it’s worth it to order the actual appraisal.
September 12th, 2008 at 10:13 am
Hello Frederick/Brent and others,
I’m also an appraiser. Again, thank you for listening to us. We are trying to tell you that you are creating a dangerous situation for your appraisers and for yourself. Not suggesting that you don’t have your clients best interest at heart. But think all this through.
There is a simple point we as appraisers are trying to make. If a loan officer or originator, says in any form, verbal or written, “I need a certain value to make my borrower’s deal work”, and we as appraisers except the project at any level, we have opened the door to an illegal action that is a violation of USPAP. In providing a pre-comp of any kind, we are indicating a range of value without completing an appraisal. That is also a violation. Plain and simple. We know it is common practice to order an appraisal and then suggest that the borrower thinks my home is worth X. Also here is the amount of the loan for you to considere, Mr. Appraiser. As soon as that happens, ethics regs, etc. say to us as appraisers, “Refuse the assignment, your impartiallity in the process has been compromised. You are not supposed to know those things”.
No matter what you think should be right about telling us to check out the value before going forward, as soon as we call you back and say “Yeah, it looks like it will be there”, we have broken the law because we have agreed to hit the value if we complete the project. That call immediately places an appraiser in violation of USPAP. If we call and say “The value is not there”, then we have also done an appraisal without all the required support. The required support is a completed appraisal that includes looking at the property. If you say, “Go ahead and do the appraisal anyway”, the appraiser still gave a pre-determined value. Also a violation of USPAP. A pre-determined value conclusion, high or low is illegal. End of story.
One solution for you as a mortgage broker, is to call your state appraisal board, talk to them, don’t take our word on this, and ask if what you are hearing here is correct. You will find they are very serious about prosecuting appraisers that do what you are asking. And following through by prosecuting loan officers involved as well.
September 12th, 2008 at 8:46 am
Frederick:
You claim that Brent did not predetermine any value. Then perhaps you can clarify this statement copied from Brent’s original post:
“…When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal”
Jeff,
I don’t know what to clarify. Brent didn’t tell the appraiser what to say the property is worth. He aks the appraiser to determine what the property is worth. That is clear.
Maybe Brent doesn’t know the lingo. I think he means for the appraiser to do a desktop analysis. Have the appraiser see if his client is trying to borrow $300,000 with a $200,000 house. That would be a no-go right there. But if it looks like a go, then the broker would have the appraiser “proceed” with a NEW inspection type appraisal that banks and investors want, and written up on a GSE form that banks, investors and the secondary market want.
Jeff – “And you acuse APPRAISER and myself of not being able to read? Curious indeed. Sounds like the appraisal is contingent upon a minimum value to me.”
Jeff, he did not write that he tells the appraiser to appraiser the $200,000 house for $300,000. That’s why you read something into the post that wasn’t there, and the statements that his post describes aksing appraisers to break laws or rules is also wrong.
September 12th, 2008 at 8:25 am
appraisers II says – In some schools of thought you can do comp checks, value checks and what ever else you may want to call it.
-But under USPAP you must have a complete work file
I’d call them appraisals. That’s why appraisers can do them. The fact that appraisers can them is why they need record a work file. However, USPAP does not say “complete” work file. Saving the MLS search on the hard drive should be a sufficient record to make a summary report, if that necessary.
This is from the board that writes USPAP. This is the only “school of thought.” –
“Question: I’m a residential appraiser and have been asked to perform a “comp check” (or “pre-comp”) assignment, where a client wants to get an idea of the value of a home prior to proceeding with a mortgage financing transaction. Does USPAP allow me to perform this type of assignment?
Response: Yes.”
September 12th, 2008 at 8:08 am
Frederick:
You claim that Brent did not predetermine any value. Then perhaps you can clarify this statement copied from Brent’s original post:
“…When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal”
And you acuse APPRAISER and myself of not being able to read? Curious indeed. Sounds like the appraisal is contingent upon a minimum value to me. Also, some of the actions which I referenced that fall throught loopholes in USPAP will be addressed in the HVCC. I certainly am not familiar with any advisories or FAQ’s published by the Appraisal Foundation which allow for the activity quoted above. However, if such an FAQ exists, I would be interested reading it.
For the record: Here is the language as copied directly from the draft HVCC located on Attorney General Andrew Cuomo’s web site. Since this language exists in a document used to overhaul Fannie and Freddie and prevent foreclosures and a future repeat of the economic mess we are in today, I hope you will begin to understand that these things are IMPORTANT!! They have been identified as contributing to mortage fraud and creating serious economic problems. To read the entire draft, you can visit:
http://www.oag.state.ny.us/media_center/2008/mar/Code%20Final%203-2.pdf
Here is the excerpt describing some prohibited acts for Fannie/Freddie loans:
“…conditioning the ordering of an appraisal report or the payment of an appraisal fee or salary or bonus on the opinion, conclusion, or valuation to be reached, or on a preliminary estimate requested from an appraiser;
5) requesting that an appraiser provide an estimated, predetermined, or desired valuation in an appraisal report, or provide estimated values or comparable sales at any time prior to the appraiser’s completion of an appraisal report;
6) providing to an appraiser an anticipated, estimated, encouraged, or desired value for a subject property or a proposed or target amount to be loaned to the borrower, except that a copy of the sales contract for purchase transactions may be provided;…….”
Now if doing precomps and targe values are the mark of ‘good” appraisers as idendified by Brent, how come they are being prohibited by the GSE’s which hold or guarantee about half the mortgages in the USA! Wake up.
September 12th, 2008 at 7:07 am
In some schools of thought you can do comp checks, value checks and what ever else you may want to call it. But under USPAP you must have a complete work file for the work done and you must meet USPAP standards. In other words you must do an appraisal. I my self am not interested in betting on the come, that the value is there and work for nothing. I have clients that order appraisals reguardless. The appraisal is an opinion of value and time is money.
I don’t think you would walk in to a doctors office or lawyers office and tell then unless they can cure you or can win you case you are not going to pay them.
Time is money you want a value you will pay for that value or move on to some thing that the dung beetle rolls around.
As far as what is best for your client, in my world that has turned out to be a crock of _ _ _ _ _ _ _ _ that loan officers use as a no good reason . It must make lenders feel good. More people have been damaged by the good hearted loan officer looking out for thier good.
September 12th, 2008 at 6:22 am
APPRAISER,
Brent wrote that he asks the appraiser to determine the value. He did not “predetermine” any value. You write about laws. I hope you can read them better than you read Brent’s post.
Jeff Deutch,
The services requests that Brent wrote about in his opening post would not cause an appraiser to contradict USPAP. In fact, the board that writes USPAP published a QA in July explaining that appraisers are permitted to provide the services Brent asked for, because apparently too many appraisers cannot figure out what USPAP says.
September 12th, 2008 at 6:20 am
“…..I will not waste my time, my clients time and most importantly their money if the value needed to perform the loan is not there.”
And are you hurt in anyway if the value is inflated and the loan works?
How about the homeowner? What’s more costly to them…the appraisal fee or being upside down on their mortgage the day they close?
September 12th, 2008 at 6:04 am
Hello Brent;
1st thank you for publishing the comments by appraisers. I am an appraiser and proud of it. I don’t care that on any given loan, I make a few hundred $$’s and the MB or LO makes thousands. No problem, I like what I do, and if I wanted to, I would enter your field.
Please explain how a good honest appraisal report which accurately reports the home value is a waste of money.
The current mess we are in is the result of appraisers inflating value. Unethical and weak appraisers inflated value in response to the pressure placed on them by commissioned LO’s. One LO threatened my life when my value came in $15,000 below his expectation on a $310,000 condo. I am pretty smart, but I can’t see 5% while sitting at my desk.
Regards
Hal
September 12th, 2008 at 2:20 am
Brent………
The fact is: you are a salesperson attempting to make a sale when you decide for yourself, with assistance from your loan client, what a value on a property is (or is needed) before an appraisal is done.
The fact also is: appraisers are supposed to have independence in the valuation process, not influenced by you or others as to the ‘amount needed’ prior to accepting an appraisal assignment.
You need to learn to due more due dilligence yourself by examining a variety of web sites which help to establish ‘approximate values’ on properties. Those are normally reported in a value range. If the range contains your target loan amount, then order the appraisal.
If you are employing appraisers who give you a stated value in advance prior to seeing the property, you need to fire them immediately. They are the worst of our profession. Similar to you, they have no ethics.
September 11th, 2008 at 10:40 pm
I have often had lengthy conversations with young mortgage brokers making request for guaranteed values. Initially I was quite put off by this, but after some thought, I decided that in many cases this was not malicious, but learned from the “elders”. Taking a different tact, I decided to explain USPAP (not that I am a scholar of USPAP and certain provisions can be confusing). Of course, USPAP only regulates the appraiser. MB’s and LO’s are not bound by this document.
I also realized that trying to influence appraisers has become a near ubiquitous procedure throughout the MB industry but not unheard of with banks.
Any hint of a target value is an influence. The spirit and intent of appraisal laws and regulations are quite clear. Valuation of real property is clearly not supposed to have any bias. This includes any strike price, special instructions related to value or other contingencies. For those who might not be aware, the purpose of an appraisal is NOT to encourage a loan origination. It is used for purposes of risk managment by the lender to prevent over lending on the property. The very nature of an originator hiring an appraiser is a conflict of interests, since the orignator has a vested interest in a high appraisal. This is a process which needs change to eliminate the conflict.
Strike values or other “hints” at what is needed only serve the originator and incentivize bad behaviour from unscruptulous appraisers who equate artificially high appraisals with repeat business from originators. As such, the dictate from regulatory agencies is for appraisers to not consider values for the purposes of “making the deal”. Value is value and that is what you are hired to do. You are paid for your time and expertise, and not for a result. That’s the deal. Who says so? State and Federal Government. That is who. Feel free to google “USPAP” and read for yourself if any doubts exist.
While I am not an attorney I can only forward a personal opinion that not only is it a violotion of USPAP to accept an appraisal assignment explicitly contingent to minimum value, but also where implicit understandings are in force. Such an implicit understanding would be where an appraiser is supposed to voluntarily cancel an appraisal where a target value is not met, or by some similar means.
The appraiser, in the eyes of law and regulation, indeed is supposed to value the property. Period. This is reguardless of the outcome. I would challenge the contention that if the value is below such a figure sufficient to secure a loan, that the appraisal is useless to the borrower. Indeed it provides the borrower valuable information regarding collateral and equity for the purpose of loan acquisition and allows them to know what their borrowing limits realistically are. However, this is off the point a bit, since the message I am trying to get to, is that appraisers do have specific laws and regulations which govern them, and requests for appraisals where performance contingencies exist, place the appraiser in legal jepardy and at risk for license actions. This is what you do not seem to understand, even though you claim to not want place appraisers at risk, you do exactly that.
For one monent, ask yourself why language contained in the HVCC and/or the documents related to Atty General Cuomo’s investigation into Fanie/Freddie specifically referenced, as problems needing reform, the very actions which you proudly perform? Namely, requests to appraisers for pre-comps, value contingencies for performing appraisals etc. These deeds are not virtues and are widely held as unethical. They clearly do not promote appraiser independence and do lead to approval of loans that should not be made. Much of the fallout from these behaviours has contributed to the problems we are experiencing today with unreasonably high loans, upside down equity (although natural market forces have contributed as well), foreclosure and all the rest.
Yes, in my opinion, appraisers who cave to these demands are unethical and in violation of USPAP. And no, I do not believe that the majority of appraisers engage in these behaviours-not by a long shot, alhtough there are no shortage that do. These folks are ostricized by the greater appraisal community and are identified in the industry as “Skippies” (I do not know where this name came from) as an undignified title to undignified appraisers. This is exactly why we now have the HVCC looming and eminent, and my guess is that similar regulations will spread rapidly to most non conforming instruments.
Sorry if I have made spelling errors or typos and thanks for the space to speak.
Jeff
September 11th, 2008 at 10:33 pm
Brent,
You seem to have the same attitude as most Mortgage Brokers. Unfortunately,
MB’s are exempt from the consequences of the bad loans they make. You pick
up that nice loan fee at closing and never have anything to do with the loan after
that. Neither did the Wall Street financial types who leveraged lots of investors
money and ended producing, ‘no doc’ subprime mortgage bonds that have turned
out to be virtually worthless, while in the conventional market Fannie Mae screwed
the pooch too.
The US had one of the best mortgage systems in the world, but right now its in
the toilet. Its not because of most appraisers, though the ‘good’ appraisers you
prefer contributed to the mess more than most. If you think that its just not fair
that you can’t ‘pick’ your appraiser, wait, there will be lots of changes you won’t
like. The reason is no one is going to foot the bill for a mortgage system that
is broken and is only good at losing lots of money.
The last time I was in Las Vegas I mentioned to my cabbie that I was a real estate
appraiser, he said, “Really, I use to be a mortgage broker, then one day they
pulled the rug out, lost their funding source and closed the business.”
September 11th, 2008 at 9:50 pm
“When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal.”
Determining whether or not a certain value is there is, by definition, an appraisal. The appraiser cannot simply pull out a value and be done with it. Developing and reporting requirements apply, the appraiser must have a workfile, and the appraiser has liability.
“Very frequently, in fact on almost every loan I ask them to run comps first to make sure the value is there. I don’t want to waste my time or the client’s money if the loan can’t be closed.”
Why is it fine for you to protect the buyer by not wasting your (or the borrower’s) time and money, but yet demand that the appraiser waste his/her time and money if the value isn’t what you want to hear?
“Many times, they have both told me that value requested was not available. That’s what an honest appraiser should do. I believe the vast majority do just that.”
An honest appraiser must abide by state law and be independent. Many appraisers are happy to do just that. Whether or not the value is what you do/don’t want to hear is not relevant to the appraiser getting paid. To do otherwise is to take on the advocacy rule and violate the law.
Many mortgage brokers that the point of view that everyone else plays by the same rules that do…not true at all. Persons such as myself that have multiple licenses completely understand that. As a salesperson, I play the role of advocate for my client. As an appraiser, I am an advocate for the appraisal and nothing else. While mortgage brokers often do not understand that, lenders, attorneys, CPAs, and most other client types do.
September 11th, 2008 at 3:49 pm
Jeff,
I appreciate the time to respond and the effort to educate me and others interested in this subject. I am not an appraiser and don’t know all the rules and laws the govern appraisers. The most important thing to me is that my client receive the best deal possible and that I can make good the loan as promised. I will never understand anyone that would want my client to pay for an appraisal if the value they need to make the deal work isn’t there. If it’s not possible to do it, that’s fine. I would never want, ask or expect an appraiser to do ANYTHING to risk their license or good name.
If I send you an order though with a value of 300k and its 250k when you check, why on earth would I actually want you to perform the appraisal and give me something that is worthless to the client? Nothing I have ever done would in the least compromise an appraiser’s independence. I expect it as a courtesy and a cost of doing business that an appraiser do some homework prior to actually seeing the property. If you would like to call it interference by protecting my clients from unscrupulous appraisers that have no accountability to anyone then so be it. Let’s be clear I am in no way casting that aspersion on you. I have seen some pretty bad appraisers in my career though. I want to be extremely clear in what I am about to say next though; I have never interfered and or pressured an appraiser to hit a certain value. If they can’t then they can’t. I can tell you that appraising is an art not a science and I have had two different appraisers look at the same home and come up almost 50k different. That is an extreme but even on little condos I have had different numbers come back. How would you explain that?
Plus in the times of falling markets, especially your market, wouldn’t going some basic research be expected? If a home was worth 300k last year and is not worth 180k don’t I as a lender need to know that right away?
I believe you make my point about the homeowner be hurt by the proposed changes. You call it lender interference and pressure that will be eliminated. I call it looking out for the homeowner and making sure before we spend 400 bucks of his own money, there is a chance that he may actually get full service for his money. Creating a new unaccountable central bureaucracy will HURT the borrowers and that’s all that should really matter. I don’t know how that will help you either by the way. You would get the name, address and phone number of the borrower, you would also get written instructions not to proceed unless you were in the ballpark of a certain value. You would be free to decline such a request, and in my opinion you would be in the extreme minority of your profession.
If it becomes illegal to advocate for my clients to make sure they get a loan that closes then it’s become a strange world indeed. I still believe there should be a benchmark or a minimum value for you as a goal.
Your next to last paragraph is accurate and offensive at the same time.
That description is your job no doubt about it. And just like a jeweler, beauty is in the eye of the beholder and everyone comes up a bit differently. That’s why the requested value is on the appraisal order form, not to pressure you or threaten you. Have lenders done that in the past? No question. Stand up and have some integrity and backbone and say no. Plus where were the underwriters that looked the other way as appraisers doctored the numbers? I will not accept the blame for just my industry when there is plenty to go around, including yours Jeff. The prostitution comment is just weird and will be ignored.
And you are quite wrong; I value your comments and thoughts very highly. I do have a different opinion though, I think you are looking out for yourself and not the borrower and I disagree with that approach. Thanks again for writing in and feel free to check back again.
Brent Mendelson
Choice Finance
Senior Mortgage Banker
O-301-881-8900 X123
September 11th, 2008 at 3:48 pm
‘In doing some research regarding our appraisal industry, I came across your web site. I am not commenting to be discourteous but to hopefully inform you how appraisal ethics and laws work.
I have to say I was in disbelief when I saw the comments “When I order an appraisal I need my appraiser to know unless a certain value is there, to not proceed with the appraisal.”
I hope you have heard the term USPAP. This a an abbreviation for Unifrom Standards of Professional Practice which is published by the Appraisal Foundation which was born out of the Federal FIRREA act back in the late 1980’s
USPAP has been adopted into law in all 50 states. While it contains many guidelines and advisroy opinions, two are the most prominent.
1. All property characteristics which affect value must be clearly reported. This includes any defects or unfinished areas.
2. It is a violoation of USPAP (and state law by default) to accept any appraisal assignment contingent upon a minimum value.
USPAP violoations are the most common cause of license suspensions and revocations.
Clearly, precomping, calling if value does not seem attainable, or other acts which compromise appraier independence are unacceptible and will likely become illegal in upcomming legislation. The spirit and intent of USPAP and other laws and regulations is to eliminate lender interferrence and pressure such as described in the statements you proudly proclaim in your web site.
The HVCC will remove any interferrence or influence by LO’s or other vested indivuals by taking the appraiser selection process out of the equation. This will be a welcome chage for appraisers, although some appraiser have issues of their own with the HVCC.
As for our company, we only accept assignment where we are given an address, client, and contact info to get access. No owner’s opinions of value, requested value or any other form of interferrence is tolerated.
The statements you make in your site which claim to be positive attributes, are in fact highly unethical behaviours on the part of appraisers and will likely become quite illegal in the near future.
It is, in fact, the job (and a compensated one) of an appraiser, to estiamte market value. Period and end of story. Just like a jeweler who is appraising jewelry. We are paid to estiamte the value of a property. No considerations, such as if the value is high enough are pertinent. We are paid for a professional opinion of value and not for prostitution services.
I know you do not welcome unsolicited comments form people who you do not know. As mentioned, I am trying to educate and nothing more. If you have an interest in how the appraisal community as a whole feels, I invite you to log on to appraisersforum.com and I hope you will see that my opinions are shared by a substantial portion of other appraisers.
Thanks for listening.
Jeff Deuitch
Owner
Manatee Appraisal Service’
Palmetto, FL ‘
August 26th, 2008 at 9:47 am
Bobbi,
Sorry the post wasn’t quite finished. Six is alot of comps to ask for, but there is a reason for the extra level of scrutiny. They must feel the home is located in an area of declining home value. Bobbi, it could be a delay tactic but more likely just a sign of the lending industry becoming more careful affter years of letting anything get by.
August 26th, 2008 at 9:42 am
Bobbi,
They can do that if they feel like the comps used are wrong for some reason. Some of those would be too far away from your home, not the same type of property, too old , things of that nature. T
August 25th, 2008 at 5:31 pm
My lender has requested 6 comps, they threw out 2 and then asked for another, which they then threw out and are now deciding whether or not to get a whole new appraisal.
My property was appraised (new purchase/new loan) at $5,000 above the sale price. Some features/benefits of the home were missed, but it still came in higher than the price. Is this also a common tactic? or delay?
July 30th, 2008 at 11:10 am
First off appraiser, stop yelling and calm down. I am aware of the current laws. We are not telling appraisers anything that violates the law. I do send value requests to appraisers. I don’t care what you think, I will not waste my time, my clients time and most importantly their money if the value needed to perform the loan is not there. When I don’t appraisers call me and ask what value is needed to make this deal work. No one is telling an appraiser they must hit a pre-determined value. If the value isn’t there, it isn’t there end of story. Are you telling me that is I send 2, 5 or 10 appraisers to the same home ALL will give me the same value? Because that is a very silly thing to say, I have multiple appraisers that give different values on the same property. Sometimes I am surprised how far off they are. So if you think that doing some research and some scouting to make sure a deal can work is such a horrible thing then so be it. As I said, I will not waste the time and money and reputation of my company charging people for appraisals that can’t be used. By the way if you think pulling some comps on MRIS is an appraisal and you should be paid for that then you are the only appraiser that I have come across that feels that way. I would never do business with someone that acts and feels the way you do. I imagine that most loan officers feel the same way about your arrogance. “Just pay me no matter if you can do your loan or not”
I can promise you that people will have tougher times, more expenses and an overall higher level of frustration if they take the appraisals to some remote, bureaucratic national call center. There will be no accountability to the borrower or the loan officer who works for the borrower. And seriously, take a minute and read over what you just wrote.
July 30th, 2008 at 9:12 am
“APPRAISER”, i think you are missing the broker’s points… especially when trying to avoid spending a homeowner’s money when the value isn’t there. The Broker would be irresponsible to hire an appraiser if he definitely can’t get value. You wouldn’t have the work to begin with if it weren’t for this Broker hiring you… and he is only going to hire you if he knows there’s a chance you can get the value he needs. My god, take an english writing class… did you complete the 3rd grade?
July 29th, 2008 at 10:26 pm
HELLO, I WAS SHOCKED TO READ YOUR ARTICLE. I AM NOT SURE IF YOU EVEN KNOW WHAT THE CURRENT LAWS ARE. THE MORTGAGE BROKER OR THE LENDER OR ANY ONE ORDERING AN APPRAISAL. CANNOT PREDETERMINE THE VALUE OF THE HOME. IT IS ILLEGAL FOR AN APPRAISER TO ACCEPT AN ASSIGNMET BASED ON ANY PRE DETERMINED VALUE. SO WHEN YOU ORDER AN APPRAISAL AND ASK YOUR APPRAISER TO HIT A CERTAIN VALUE OR OTHERWISE STOP!! BECAUSE YOU DONT WANT TO WASTE YOUR TIME OR THE BORROWERS MONEY. THATS JUST CRAB TALK !!!
BY THE WAY, A COMP CHECK IS AN APPRAISAL. AND THE APPRAISER SHOULD GET PAID FOR THAT SERVICE. LET THE APPRAISER DO THIER JOB AND GET PAID. AND IF THE VALUE IS NOT THERE? TOO BAD. THE APPRAISER SERVICE IS NOT COMMITIONED BASED . ITS A FEE SERVICE. THATS WHAT THE NEW LAWS ARE AFTERE. TO PREVENT ALL MORTGAGE BROKERS FOR SHOPPING FOR THE VALUE NEEDE TO DO THIER LOAN TO VALUE. THE BIG PROBLEM HERE IS THAT MORTGAGE BROKERS ARE CLUELEDD OF THE LAWS, OR JUST PLAYING STUPID. AND THEY SHOULD BE REGULATED AND EDUCATED MORE.
July 24th, 2008 at 9:02 am
Sorry to hear about your problem. This story makes my case in some ways. The first and only call I would make is to your loan officer. He or she works for you and the appraiser works for the loan officer. They hired them and they need to take some responsbility for the quality of the work. If I was your loan oficer I would be on the phone to the appraiser and make sure that they were doing the best job possible. If I felt they were not, I would fire them and get a new appraiser. And I would more than likely pay for it because it doesn’t sound like your fault. The way this makes my point is that if we as loan officers don’t hire the appraisers, we will have NO influence or pull with the appraisers. The appraiser will not care what we say, not care if we don’t hire them again and they will do what they want and how they want. Bottom line the accountability will be taken out of the appraisal process and that won’t help anyone, especially the homeowner.
July 23rd, 2008 at 6:26 pm
I had an appraiser come out to check my house out recently. This was for a refinance. I have gone through the process a couple times before, so I’m not new to it. My house was built in ‘33 and has been a rental for years, so it’s not real pretty. Still, the appraiser’s report was filled with glaring untruths. As a result, my refinance is in jeopardy. The appaiser said that I had a leaky roof which is totally untrue. In fact, about 7 years ago, a brand new roof was installed (two years before I bought it). She saw evidence of leaking from years ago, and concluded that the leakage was recent, and that my roof needed repairing. She also said that I had a water damage problem in my hallway, which is also incorrect. I was stripping old wall paper off the wall there, and she wrongly concluded that water was coming in. So, what does a home owner do about crummy appraisers who don’t use their noggins?