Appraisers Still Pressured to "Hit Target Numbers!"
DESPITE NEW FEDERAL BAN ON ATTEMPTING TO INTERFERE WITH APPRAISALS, PRESSURE STILL EXISTS . . . BUT IT'S MORE SUBTLE!
Many experts contend that inflated home prices, made possible in part by inflated property appraisals, were at the core of the equity troubles of many of today's homeowners. Here in Chicago, it's been common for many years for lenders, and for Listing Agents, to persuade the appraisers to make sure the property "appraises out" for the sales price - before they complete their appraisal.
Here at Dean's Team, we meet the appraisers at the subject property, armed with our own comparable property data, as well as a copy of the contract, to validate our opinion of value, based on the comparables nearby. Of course, the appraiser must use his own data and analysis - but is is our duty as Listing Agents, working for the Seller of the Property, to do whatever we can to substantiate value and make sure a sale closes.
Sometimes, however, attempts to influence cross the line!
Sara F. Schwarzentraub, president of Inter-State Appraisal Service of La Mesa CA., mentions one client left a message on her office phone complaining that, "If you didn't know you couldn't hit what was needed, you shouldn't have taken the assignment." The number needed by the mortgage company employee was $50,000 to $60,000 higher than comparable values in the area, Schwarzentraub said.
Michael Tsourounis, president of Calvert Appraisal and Realty Services, Owings MD, recently inquired about doing appraisal work for a mortgage company in his area.
"The office manager asked me directly: 'If I sent you out to appraise a million-dollar home and the comps only came in at $800,000 ... but in your heart you knew it was worth a million dollars, what would you bring it in at?' "
The intent here, according to Frank Gregoire, immediate past chairman of the Florida Real Estate Appraisal Board and an appraiser in the St. Petersburg-Tampa area, "is really to find out: Will this guy play ball? Will he be cooperative when we need him?"
According to Bill Garber, Government Affairs Director for The Appraisal Institute, "Absolutely appraisers continue to get pressured" to hit valuation number needed to assure a transaction will close.
Gary Crabtree, of Affiliated Appraisers in Bakersfield CA, is concerned about new rules for U.S. Foreclosure Refinancing, to go into effect on October 1st of this year, will require lenders to write down the value of distressed homes to 90% of their market value to help borrowers refinance their home. Appraisers may be under pressure from lenders to "inflate property values," Crabtree fears, to minimize the lender's potential losses - although Housing Relief Legislation expressly forbids that.
The Immediate Past President of the Florida Real Estate Board, Frank Gregoire, feels the climate of property appraisals will only change if government regulatory officials crack down on appraisers who inflate their property appraisal reports. That may be starting to happen, he sees. Many state regulators are cracking down on appraisers who inflate their property reports. Also, the new Federal Law authorizes the U.S. Secretary of Housing to impose fines and disciplinary action on those who write inflated appraisals.
For more info, read Kenneth R. Harney's article in the Real Estate Section of last Sunday's Chicago Tribune.
DEAN MOSS & DEAN'S TEAM CHICAGO
