Been traveling quite a bit – back on schedule next week (I know, I know, you’ve heard it before)
For about the past five years, I have been telling, explaining, cajoling, articulating, ranting and lamenting (I am sure there are a few more terms to add to the list) the direction that the appraisal industry has moved towards. Its actually more like 15 years, but the past 5 years became intolerable. The industry has involuntarily taken the “please hit me again” position and has been powerless to do anything about it.
Well, the New York Observer decided to write about the issue in a very direct way in the article New York’s Longest-Running Real-Estate ‘Joke’ which I am grateful for. I hope it expands the level of understanding of the problem.
“It’s a joke, the system is a joke,” Mr. Miller said. “There is very little independent analysis of what collateral is really worth.”
I have spoken with everyone who would listen over the years, and some who would not, about whether the lending industry wants an accurate assessment of the collateral or simply a form filled out for the file. Don’t get me wrong, there are a lot of great appraisers, mortgage brokers and lenders out there, but honestly, they are few and far between.
Why? Because the current lending system is flawed as I and others have discussed in nearly every post on Soapbox and quite a few here on Matrix. Here are the the two choices when ordering an appraisal. If you have a commission riding on the appraisal report outcome, which choice do you make?
- Get an appraisal for a low fee, nearly immediately and always at the value required to do the deal.
- Get an appraisal for a fee commensurate with the complexity of the assignment in a reasonable period of time (no impact on the closing date) with a comfort level that the collateral is accurately reflected.
The current actions by the New York State AG’s office is a step in the right direction and I can only hope we don’t end up with simply a law they makes it illegal to pressure an appraiser.
New laws will make the stakes higher to be pressured but it won’t change a thing. (Rinse lather) repeat.
Making appraisal pressure illegal will not change a thing. There needs to be a regulatory environment created where appraisers are insulated from pressure, but still held accountable for accuracy.
Tags: New York Observer