Appraisal Contemplations is a column written by native Californian and a certified real estate appraiser, Aaron O. Thomas. He began appraising in Arizona and eventually ended up in San Diego where he owns and runs San Diego Appraisers. His firm specializes in greater San Diego County area residential properties and his clients include mortgage brokers, CPAs, lawyers, businesses and homeowners. Aaron is very outspoken and passionate about real estate appraising. Colleagues on Appraisers Forum have long known him as “Tucson Appraisals.” Good thing it’s too warm in San Diego to have the wool pulled over his eyes to the unethical business practice of the day: “comp checks.” Like me, he experienced a growing frustration in recent years with the form-filler mentality that many appraisers and users of appraisal services have embraced.
I received a phone call from a home owner yesterday complaining about the last appraisal that was done on his home. He didn’t think the Appraiser should have utilized all bank owned comparables and that the comparables were inferior in condition compared to his home. After complaining for several minutes, the home owner finally said that he would give my information to the new finance company since the last refinance did not go through with the previous one. I told him it would be great to have the business, but I could by no means promise that I wouldn’t use bank owned comparable sales.
The reason I tell this story is because I knew that I had to respond in a way that did not take the side of the home owner or the Appraiser. Why tear down another appraiser for a report I have not seen? After all, don’t most home owners think that their home is gold? I am by no means saying that there was nothing wrong with the appraisal. My point here is that too many Appraisers are ready and willing to tear each other down in the name of more business with little proof or no proof that what people are saying about the “other” Appraiser is accurate. Another thing I see wrong with this picture is that this information mostly comes not from another licensed Appraiser, but from someone who desperately needs the loan to go through.
I can sum up this entire situation with one word; “biased”.
If I am getting these types of phone calls, I am almost positive others have as well. I just hope other Appraisers return the same professional courtesies I extend to them. Our industry sure could use more people that extend a level headed approach to have the awareness of where they themselves stand in the midst of the circle of bias that we are constantly surrounded in on a daily basis.
Tags: Soapbox Blog, Aaron Thomas, Appraisal Contemplations
Why tear down another appraiser for a report I have not seen?
I have been the “second” appraiser 12 times for FHA loans as required by HUD since January 1, and ten of those home owners have said to me “The other appraiser did not look in the attic, crawlspace, under the sinks, test the electrical, etc.”
So once again I get to be the bad guy who writes and honest report. “Biased”? No. Just my opinion based on experience.
“Our industry sure could use more people that extend a level headed approach to have the awareness of where they themselves stand in the midst of the circle of bias that we are constantly surrounded in on a daily basis.”
I agree with the sentiment. Getting from here to there needs attention though. When appraising is a calling and not just a job that pays better than flipping hamburgers is when we will begin to see the industry approaching the professional demeanor of which you speak. Some things need to happen.
First and foremost: the vast majority of this industry survives on mortgage appraising and that sector is almost completely out of the control of the industry. Mortgage appraising is and has been under the control of owners, brokers and lenders and there is no sign that they want to relinquish any part of the control. The industry responded to the plunder of control by qualifying anyone and everyone as an appraiser. And that brings me to the next problem.
Most appraisers are irrelevant and actually have little to offer other than a signed certification for the bank to use as a CYA. Fortunately there is industry movement toward better screening and more education. Maybe the malaise in mortgage appraising somehow began to effect the higher citadels of appraising, but at any rate the industry is responding in a way that should bring about improvement. The hazard is of course that those now in control of the industry will not retire easily. I do not believe their interest has ever been in any kind of quality control other than breezing the MBSs through to AAA ratings.
So since the demand for appraising is found in hitting the numbers, we have a huge job ahead in changing demand. If you must stay in mortgage appraising, then may I suggest that you only accept assignments wherein the market value of the collateral is truly an important issue. You may be able to guess its relevance by finding out what stage the lending process is in when they order your appraisal. If you are the last thing before closing you may also guess the ring of bias is not going to relax and let your opinion of market value be definitive or of much relevance.
Then finally we need to be constantly vigilant as to what our relevance is and then measure up. If we are going to peddle ourselves as giving our opinions based on objective market analysis then we better by golly know what a market is, what analysis is and then do it. If the demand is for something else, then that customer doesn’t want an appraisal, and no licensed or certified appraiser should call it one just to get the business. Tall orders Aaron, some may consider them the ramblings of a crusader, but I don’t think your ring of bias is showing any sign of weakening. The only way to deal with it is to stay completely above the fray, as you suggest. The problem now is there is little incentive outside of personal character values to stay above the fray, and quality of character is not a prerequisite to becoming an appraiser. Indeed, as it is, most appraisers must join the fray to survive in business.
I just got a call from one of the homeowners wanting to know why my value was “so low” compared to the other appraisers. So I asked what the other appraiser came up with ready to call BS on Skippy’s value. The difference was only 2.86%. With a statement like “so low” I expected Skippy to be 10% over or more! I told them that both values were within 5% so there was not a problem and did not discuss either report since the homeowner was not the client.
I guess in this economy Skippy can’t hit them out of the ballpark anymore!
Well, that sort of stuff is SOP in the mortgage end of things. And it really isn’t about how big or small the difference in the bottom lines are, it’s about whether the support is sufficient and well researched and analyzed. I do think homeowners should continue to hold appraisers accountable and I think an appraiser should be held to answer to the entire at least why his value is what it is.
Screw using the USPAP confidential cover.
All of that confidentiality, client and intended user stuff is not designed to avoid accountability or keep secrets about how you do your work. It is about protecting LEGITIMATE interests of the client. Puts you on the hook to decide what LEGITIMATE is and to be accountable all at the same time. If anybody has the right to ask questions of an appraiser, it is the homeowner. They are more effected by what you do than anyone else and they care more. Really real world stuff. They aren’t trying to peddle their smoke on the secondary market and let somebody else deal with it.
I think you are doing a disservice to the homeowner and the appraisal profession by refusing to discuss your work with anyone effected by it who asks. On a critical note, have you noticed whether the corruption in the lending industry is waning?