In today’s WSJ has an article that was on the front page of the online edition (not sure about the print version) called “How to Appraise Home Appraisers“
The core idea behind the article was that appraisers:
- had little data to work with these days
- make mistakes
- are in an environment where a low appraisal is more likely to kill a deal
- banks are seeing people appeal the value
- lenders may appeal value with the appraiser
- appraisers may have used foreclosure or short sales as comps
- appraisers may not be from the area so request a local expert
Ok, my response to all of this is [Doh!]
- had little data to work with these days [not true with robust sales activity in past 6 months]
- make mistakes [moi?]
- are in an environment where a low appraisal is more likely to kill a deal [why should that be any different now - should appraisers be more flexible now - seriously?]
- banks are seeing people appeal the value [didn't need to during the boom because values were higher through mortgage brokers]
- lenders may appeal value with the appraiser [that's rare - lenders aren't interesting in pushing values higher now as they did during boom]
- appraisers may have used foreclosure or short sales as comps [yes and why shouldn't they, especially in a market where they are common? as long as condition and terms are adjusted for.]
- appraisers may not be from the area so request a local expert [lenders are predominantly using appraisal management companies and national firms who DO NOT CARE about local expertise, only the fee and turn time.
This article reflects conditions of more than a year ago. Today with the advent of HVCC, the quality of appraisers has fallen precipitously due to the popularity of appraisal management companies. For the most part working for national retail banks as an appraiser is an abomination of the profession.
None of these checklist items have much to do with today's mortgage process that rewards lenders for hiring a middleman (AMC) who simply finds appraisers who are certified in a state and can turn work around in 24 hours and often are hours away from the property working for nominal fees.
Lenders are afraid to lend right now and the disconnect between upper management and the front lines is bigger than ever. Apparently there is great comfort by national lenders for a poor valuation product in exchange for homogenous nationwide conveyor belt style ordering with rapid turnaround and nearly non-existent oversight. The appraisal process within the mortgage process is a complete joke - it makes me want to scream.
Can we all be so blind and so dumb? Haven't we learned anything over the past 18 months? [Nope. Not a thing.]
To the media – please spare everyone the misleading portrayal of our industry as professionals willing to use their eraser on occasion when the banks ask us to reconsider. Thats a mischaracterization – we have no choice and no real voice in the mortgage lending process. I’d estimate that 20% of our profession is terrific. The remainder are not.
Garbage in [AMC's], garbage out [their appraisal quality].