John Philip Mason is a residential appraiser with 20 years experience and covers the Hudson Valley region of New York. He’s a good friend and a true professional who believes that all appraisers need to have a macro-economic perspective in order to be effective. This week, he expresses his distaste for being made the scapegoat in Solid Masonry. …Jonathan Miller
It’s been said by many that if you’ve been around long enough “you’ve seen it all.” I say, if you’ve been around “longer than enough” you get to see it all over again. You know how history repeats itself again and again? Well, I’ve been in the appraisal business since 1985, and now it’s longer than enough. Or, so it might seem based on a number of recent articles including one in the Wall Street Journal. In the WSJ front page article by James R. Hagerty and Ruth Simon, New Headache For Homeowners; Inflated Appraisals, the writers state:
“Most homeowners have enough equity in their homes so they don’t need to worry much about whether past appraisals were realistic. But dubious appraisals are a risk for the hundreds of thousands of people who in the past few years have bought homes with little or no down payment, or used almost all of their home equity to finance home improvements or other types of spending. That has left these people with little financial cushion to deal with rising interest rates.”
While the article doesn’t put full blame on appraisers, I have my suspicions. I seem to remember similar commentary offered in 1988, when the real estate market last showed signs of fatigue (soon followed by worse). At that time appraisers were lumped together with the mortgage industry, as “we” collectively contributed to the real estate market becoming over-inflated and over-leveraged. But the “we” quickly unraveled as the various participants of the industry began pointing fingers at each other. Lending industry lobbyists claimed that none of this would have been possible had the appraisers minded the store. And since we appraisers had few friends in Washington (we are not good at banding together and buying politicians), we were saddled with more than our fair share of the blame. In the end, FIRREA, USPAP and federally mandated licensing laws were created to keep us in line, and all was well again.
But wait, here we are some 16-17 years later and some how we appraisers have done it again! While they haven’t pinned the whole damn mess on us yet, there will be few other options come Judgment Day. Like last time, there will come a day when those who freely gave PAC money and all-expense-paid trips to lands of paradise will look to the power brokers of Capitol Hill to find a solution. A solution that lays blame on the under-represented (yours truly). A solution that casts the borrowers, lenders, investors as “unknowing” participants, or better yet, as innocent victims. A solution to a problem that is uncovered and fixed in a matter of weeks, while none could be had during the past 16+ years.
Yes, there are undoubtedly some true victims of the latest lending binge. And yes, there is predatory lending with a cast of characters who respect no man or fear no god. But, many of the “unfortunate souls” have only themselves to blame. Like junkies begging for the next fix, homeowners pleaded for one more advance on the equity of their homes. Like kids in a toy store, renters threw a fit hoping someone would find a way to show them how to buy a house, any house, at any priceeven if they had little or no money. And, like junkies and kids, in moments of clarity, they’ll tell you they can’t be held responsible for their actions. The lenders and investors will say they were simply filling a need and providing a service. They did no more than rely on the appraiser’s estimates of value to base their decisions. In the end, they’ll all want to blame someone for making that happen, for letting it go too far. You did this to them, Mr. Appraiser. You!
Well, not this appraiser. And not most of the appraisers I associate with. We’ve swapped countless stories of our latest brush with the dark side of the business. While others gladly took the work, we refused to sell our souls for a few shekels. When the loan representatives said, “make this deal happen and I’ll get you lots more work,” we said “no thanks.” When would be borrowers or real estate agents boasted of unfounded claims of hidden value in their properties or neighborhoods, we said, “no thanks.” And when the day comes that Congress claims to have found “a solution,” we appraisers should all say, “no thanks.” Not that they’ll be asking us, but we should say it anyway. “No, thanks.”
While I don’t believe Hagerty and Simon intended to cast any dispersions against appraisers, I’ve live long enough to see what’s coming. I’ve seen the past, so I’ve seen the future. And, I sit here and wait for “the day” to come to us, which it undoubtedly will. And I ask myself, are we damned if we do or damned if we don’t? Cause it seems like deja vu all over again.