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(English) The Unspoken Appraisal Problem

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15 comentarios
  1. Dewey Linville
    Dewey Linville Dice:

    Appraisers are more qualified, by training, than realtors to determine value. Realtors and appraisers have many of the same tools to use in determining legal status, description, etc.. Providing a copy of the sales contract only tells the appraiser what value they need.  We need to take away the contract copy and let appraisers appraise.

  2. Pete
    Pete Dice:

    The problem with the “appraiser shouldn’t know the price” idea is that houses are not commodities.  Their value is not uniform across an area, a city or even a neighborhood.  An appraisal should not be looked upon as a means of determining the absolute value of a house, an appraisal should be used to determine if the value supports the price that the buyer and seller have agreed upon.

  3. Arlene
    Arlene Dice:

    I agree completely that an appraiser is only supposed to “read” the market just as a REALTOR does, which is what we were all doing in the boom. They were not responsible for the bubble any more than REALTORS were, yet the media, and people were quick to point fingers and lay blame, when it actually traces back to federal legislation upon Fannie and Freddie back in the Clinton years. (let’s not get into that here). The apprasal industry came away smarting from having part of the blame wrongly cast upon them, have become super sensitive to this criticism and overcompensated in some cases.
     I came upon an overcompensation last year that has not been mentioned. A “declining market factor” was used to devalue the subject property and to top that off, older comps were used. The factor dinged nearly 1% off for each month that had passed since the comp had sold (nearly a year old sale).
    How is a market ever supposed to recover when appraisers do that? Since future sales will use this sale as a comp, the declining market factor will then actually CAUSE a declining market and will become a self fulfilling prophecy.

  4. Njr2
    Njr2 Dice:

    no. no problem. any seller concessions that lowers what the buyer pays must be deducted from the sale price of whatever comps it applies to. it is nothing more than a disingenuous discount of the sales price. period. if the discount applies to the subject, the sales price must be adjusted by that much. no problem at all for an honest appraiser that recognizes that any contribution by the seller aside from those that are considered normal traditional seller cost are in fact a discounted sales price and need to be adjusted as such. as simple as that. no problem.

  5. ishcable
    ishcable Dice:

    one other thing about the Appraisal
    Management Co.s (amc’s) is that if the appraiser doen’t hit the numbers they can be “blacklisted”  and virtually will not be able to work with that company again. Also bank can also be involved in blacklisting the appraiser if they do not like his work even though the report is fully accurate (sometimes too accurate as the case may be).  This creates a major dilemma for the appraiser.  Should he provide accurate reports and get blacklisted by the banks and amc’s or hit the numbers to put food on the table and pay his bills.  There is still much pressure on appraisers.  The HVCC bill is just a farce. Thanks to congressman Barney Frank and his cronies (remember in 2006 he said that fannie mae and freddie mack were strong and will always be fully solvent!)

  6. Vyepello
    Vyepello Dice:

    I have one serious disagreement with this article and that is the role the appraiser played in the housing bubble, the run up of prices. At that time, an appraiser would actually ask an agent “what are you looking for?” the agent would tell him or her what the contract was and the appraiser would perform. To say they had no role in that mess is incorrect. Anyone in the process of doing a flip was culpable. They were all in in to make a quick buck. And they all gambled and then we all lost. One must lay the blame from the top at the financial greed all the way down to agents and buyer/seller greed.

  7. Patti Irwin
    Patti Irwin Dice:

    My husband has been an appraiser for 19 years and the amount of work required to get an appraisal done today is crazy.It can sometimes take him 6 hours to complete one report especially if it is a complex property and he gets paid peanuts! Very discouraging for him because the pay is now so low with the AMC taking a percentage…..If this keeps up good quality appraisers will not want to stay in the business.If the AMC’s don’t go away there will only be rookie appraisers and then we are all in trouble!

  8. David Mott
    David Mott Dice:

    Thank you Dean. This is my favorite subject! Let’s not forget that the insurance industry and the county (and maybe the city) also have their own appraisal process. These three appraisals never seem to line up! Why would that be?
     Outside of the value of the location (size, exclusive neighborhood, ocean view, driveway, utilities, outbuildings, fences, etc), the cost to build approach on the home could be taken care of by a computer application. While some applications already exist to help determine a cost to build a home, it’s more complicated than that. The price per square feet (ppsft) might change based on age, improvements, neglect, materials and local labor costs. Take out this ppsft value and you have the value of the location. The location has a baseline value similar to the home ppsft value that is exclusive of the ‘very desirable’ or emotional factor. What was the cost of the development of the property before the house could even be built? Does the location have city services? Is it in the boonies? These costs and their implied value should not be dismissed. One might argue that we’re just seeing this location value (the emotional factor) falling, but it seems to be getting worse.When appraisal values are falling below the cost to build, then the process is definitely broken. The ‘applying for a mortgage’ appraisal might be much, much lower than the county tax value and especially the home insurance value. Why might that be?If current guidelines for appraisals require the inclusion of a foreclosure or short sale price in the comp list, and there are 10 properties in the comp list, then that would imply the current market has a foreclosure / short sale overhead of 10%, but more than likely it’s quite a bit less (location is everything of course).If the actual foreclosure / short sale count is less than 5%, you would need more than 20 comps to be able to include a foreclosure /short sale to gauge the actual local market condition. I believe that it is the usual case to do the job with less than 10 comps, but by using 20 or more comps our ‘sky is falling’ graph would smooth out and we might actually find where the local market bottom really is. These comps also need to be based on cost to build along with the cost to develop at minimum. This is not a reasonable expectation unless the appraiser is compensated for the extra workload.

    If the government wants to solve this ongoing housing market problem, they (~we) can commit resources to fix the appraisal process into a unifying model that would be used by the insurance companies, the tax office, and the lenders. It seems like the fair thing to do.

    Owning a home doesn’t have to be about investing, but it should be about asset protection. If materials and labor costs always increase, a properly maintained asset based on the two should also increase in value. The current appraisal process appears to ignore this fact.


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