Realistic Appraisals Deliver Angst

appraiserNow for a little bit of good news. A lot of people are ticked off because appraisals are coming in lower than expected. In other words, the appraisers are actually appraising homes again.

It was no secret during the boom that a little bit of shopping around would get you the appraisal you needed to get the job at hand done. Between a lot of rookie appraisers and the sheer volume of paper flowing through the mortgage lenders offices the profession saw its standards slip mightily which contributed not insignificantly to our current problems.

Now with some new rules and the rediscovery of religion by the nation’s lenders things are changing. An article in the WSJ describes the angst that’s accompanying the new regime:

Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines.

During the housing boom, appraisers often complained of pressure from lenders to inflate home-value estimates to justify dubious mortgage lending. Now, some people in the mortgage business — and some borrowers — say the pendulum has swung too far the other way.

Lenders burned by huge losses from defaults now are pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes.

“If history is no longer valid, then it is very difficult to get good and accurate values,” said Mark Rattermann, an appraisal trainer in Indianapolis.

John Rooney, an appraiser in Phoenix, said about half the recent appraisals he has done for people seeking to refinance have been too low to allow it. Applying to other lenders is likely to cost borrowers $350 or more for another appraisal.

All of this is being met with more than a little grousing. Naturally, owners are upset when they find out that their home isn’t worth nearly as much as they believe it to be and the appraisers continue to fret about the hit that they’re taking to their bottom line.

The appraisers’ gripe arises from the fact that mortgage brokers, loan officers or real estate agents from any role in retaining an appraiser. Lenders now order the appraisal through third party management firms that farm the work out to independent appraisers. The appraisers don’t like it because they have to give up a portion of their fee to the management firm though they couch their complaints in righteous arguments that allege the process degrades the value of the appraisal. Rest assured it’s all about money.

We can only hope this state of affairs persists for some time. One suspects that homeowners unhappy with an appraisal have probably been the victims of an honest assessment of valuation.

About Tom Lindmark 401 Articles

I’m not sure that credentials mean much when it comes to writing about things but people seem to want to see them, so briefly here are mine. I have an undergraduate degree in economics from an undistinguished Midwestern university and masters in international business from an equally undistinguished Southwestern University. I spent a number of years working for large banks lending to lots of different industries. For the past few years, I’ve been engaged in real estate finance – primarily for commercial projects. Like a lot of other finance guys, I’m looking for a job at this point in time.

Given all of that, I suggest that you take what I write with the appropriate grain of salt. I try and figure out what’s behind the news but suspect that I’m often delusional. Nevertheless, I keep throwing things out there and occasionally it sticks. I do read the comments that readers leave and to the extent I can reply to them. I also reply to all emails so feel free to contact me if you want to discuss something at more length. Oh, I also have a very thick skin, so if you disagree feel free to say so.

Enjoy what I write and let me know when I’m off base – I probably won’t agree with you but don’t be shy.

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