May 13 2009


Published by at 6:39 am under Real Estate News

I have lately become more aware than ever of the inconsistency and lack of uniformity in Appraisals.  The appraisers have dodged the criticism of regulators and the public, when in fact they may have contributed in part to the inflated housing bubble. And now, they are likely contributing to the pricing down-slide too. 

I have recently had three appraisals on three similar homes in the area. Each appraisal had three more comparables.  That provided me with a current look at 12 similar homes and I was shocked at the errors, subjective variables, opinions and conclusions they arrived at.  Two of the Appraisers were from outside of our immediate market area and had little clue regarding our unique market.  And now, your new Appraiser may be assigned by an Appraisal Management Company.  Yikes.

Last week saw the official kickoff of Fannie Mae’s and Freddie Mac’s mandatory new system of appraisals nationwide, and some mortgage and appraisal groups are up in arms over sharply higher costs for consumers. The so-called “home valuation code of conduct” imposed by Fannie and Freddie puts most appraisal assignments in the hands of management companies, some of whom are owned by major lenders such as Bank of America and Wells Fargo.                                               The Appraisal Institute is particularly incensed at the expanded management company role in appraisals because those companies pay appraisers much less than their standard fees, and tack on thirty to fifty percent extra charged to the consumer. For example, an appraiser who’d normally charge $325 for a valuation ordered though a lender or mortgage broker, now might be required by a management company to do the same work for $175 to $200. Meanwhile the consumer, who has no idea where the money is going, is charged $400 or more for the appraisal, and must pay for it up front by credit card, rather than at closing. The $200 to $225 extra goes to the management company. If the deal falls through and the mortgage doesn’t close, that’s the consumer’s problem. The appraisal fee has already been pocketed by the management company.  (courtesy RealtyTimes)

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