- Miller Samuel Real Estate Appraisers & Consultants - http://ms.clash.outthinkgroup.com -

Appraisers: Band-aids Don’t Prevent Cuts

I ran across this Q&A at MarketWatch: How fair are appraisers who already know home price? [1]and I got very annoyed at the assumption made by the person posing the question, stirring up an already healthy dose of irritation at the predicament my industry is in.

Q: One of my pet peeves for years has been how appraisers are given the house contract before they appraise the house. Why is that, other than the fact he needs to make sure that his valuation comes in close to the contract price, otherwise the deal is off and he won’t get any more business from that real estate and/or mortgage company? Appraisers should be above this. -Timothy Murray, certified financial planner, Chantilly Va

He further proposes to make it illegal to allow the appraiser to have contractual information about the sale.

Do you think that the appraiser can’t find out what the sales price is without viewing the contract? Duh. Ok, make it illegal to provide the contract. Boy, that will really prevent appraisers from being pressured by their clients. Do you think a bank or mortgage broker, who is trying to make the deal, would feel the same way this questioner does? How about the real estate broker who has a commission riding on it? Of course not. In a mortgage related transactions, the appraiser usually only interacts with people who have a stake in the outcome.

Here are some thoughts:

So is the issue resolved by hiding the price from the appraiser? Of course not. It may make you think that you have made the appraiser unbiased. But that’s incredibly naive.

So to figure out the solution, we need to understand why this happens.

Because, in real world lending practice, the appraisal profession has been shredded into nothing more than an army of form-fillers.

Appraisers have to play ball. Its all about making the number. Instead of window dressing the problem, how about protecting the appraiser’s independence so we can provide a real service to the lending industry and the consumer? Not fear for our income because we didn’t make the loan work?

The good appraisers want this to happen, to be protected, because for those who haven’t sold their soul (there are only a few of us left who haven’t), its a losing battle. Just look at firms that specialize or base their practice nearly all on mortgage broker business. Lenders haven’t been incentivised to change their standpoint on understanding the value of their collateral for so long because values have been rising for a long period of time. With the fallout from the sub-prime mess, this may change, but it will take a long time.

Instead of lumping us in with used car salesman (sorry guys), lets try to be a little smarter.

I hope Timothy Murray gets the message, because while it bugs me just as much as it does him, lets try to effect change on the actual problem, instead of simply using a band-aid to feel better about the whole issue.