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[Sounding Bored] Behind The 8 Ball: Weaker Market Requiring Stronger Appraisals

[Sounding Bored is my semi-regular column on the state of the appraisal profession. This week I get woozy from getting beat up so much.]

Last month I was speaking in front of the loan officers of a local mortgage brokerage firm that we do some work for. We are not considered a favorite choice because of our reputation is less about the playing ball then it is about estimating a reasonable market value. We get very light, but regular volume of work from them and they are pleasant enough to deal with, but they clearly favor a competitor by giving them heavy volume because their orientation towards better “service.”

I remember a specific question by one of the mortgage reps posed to me at the meeting that sort of threw me for its brashness. It went something like:

Jonathan, assuming that there is a range of gray in valuation, how high in the range would you be willing to go to make the deal for us?

Although this is probably always in the back of every mortgage broker’s mind when ordering an appraisal, the audacity of being so blunt and open, made the room go quiet.

I didn’t have an answer, other than:

I understand what you are saying, but we can only provide what we feel to be a reasonable estimate of market value, supported by facts.

I ran into this loan officer a few weeks later at a holiday party and he chuckled as he recapped the situation and replied that he knew I gave the only proper ethical answer I could and he enjoyed seeing me try to answer it.

Apparently he didn’t understand how the question made him look in front of his peers. At the end of the day, I don’t need (or want) more work from someone like that and I resent the fact that our profession is placed in this position every day …play ball or die.

The irony here is that the profession is even more important now for assessing collateral as the market weakens. Perhaps there is a remote possibility that lenders will start to have a more critical eye in their need to understand what the real value of a property is. They just need to ask why appraisal reviews nearly always turn up inflated first appraisals [SCS] [1] that were done for wholesale lenders (mortgage brokers).