Dismantling the Appraisal System. Really? Appraisers are the only ones who care about a home’s true value anymore. What a sad state of affairs for the home-buying public. The bankers and GSE’s only care about getting deals done. That mentality got us into the last housing crisis. Now there’s all this talk about doing away with appraisers and letting automated valuations take over the system for all loans up to $500K. The day that happens, you can start the countdown to the meltdown!
I have studied AVMs and public records for almost 15 years now. Automated valuation products rely on public records and they never visit any property. That’s a recipe for disaster! First, the square footage details contained in public records are wrong more often than they are right. And, not by a few square feet, but enough of a difference to change property values. AVM’s rely on the mystical, all-powerful “price-per-square-foot” formula. If those sqft numbers are off, even by 10% (and many times they are off 4-500%), it flat out changes values and cheats consumers out of money. I have collected lots of examples over the years so no opinion here, just the facts.
The appraisal system would not delay any closing if the lenders would order the appraisal at the time the contract is signed. Why is it they wait until the last week, or last few days, and then order the appraisal? Perhaps because if they need someone to blame a delay on, the appraiser makes the perfect scapegoat. It’s a crazy system! Order the appraisal at the start of the transaction and it’ll be completed in plenty of time. Then, if there are any delays, look to the bankers.
The motivation behind all this talk of appraiser reform comes down to the most powerful motivation around – MONEY! If there was no chance of anyone else profiting from the appraisal portion of a loan, all this talk would disappear overnight. It simply comes down to trying to find new ways to make a profit and with all this talk of appraisal reform, lenders see appraisers as an easy target. But, if you want to learn the truth, all you have to do is talk to the local lenders, the people that meet and deal with consumers and the AVM products being used in place of appraisals. They are quick to tell you most AVM’s are not worth the paper they are printed on. That’s a huge statement and guess what – it’s the absolute truth! Why is it the GSEs want to use them more? It simply comes down to more profits. Now, they can charge for the appraisal fees and if they don’t get the value they need from one AVM, there will be lots to choose from, all competing to take over the new appraisal windfall, and all without any training or education about the real estate system. A computer simply cannot replace a skilled appraiser.
So, if they truly want to move forward with more appraisal reforms, I say go right ahead. But don’t try and blame it on appraisers for causing problems in the mortgage lending process. Appraisers are the last line of defense for the American homebuyer and if they leave the process it will leave the foxes in charge of the henhouse. After all, we know big banks have consumer’s best interests at heart, right! If the government officials decide that automated valuations are reliable enough to loan hundreds of thousands of dollars, then I say “here’s your sign.”
Consumers Beware!!! Big banks will continue to grow bigger and make more profits while consumers lose money when they buy or sell or refinance. Please stop this now!
WASHINGTON – “When it comes to the regulatory regime surrounding appraisals, it seems we’re stuck in 1989.” said Subcommittee Chairman Blaine Luetkemeyer (R-MO). “Ultimately, our nation’s appraisal system is unnecessarily complicated and outdated. That complexity impacts homeowners and is, in part, responsible for delayed closings and increased consumer costs.”
Read that last line. Wow! Increased costs in the appraisal industry comes from appraisal management companies, who I believe add no benefit to the lending process. Ged rid of AMCs and the appraisal fees will decrease. Give them a larger role and add AVM’s in the mix, and I guarantee a new mortgage meltdown. Right that down! If this change is made, it cannot be undone. Stop AVM’s in mortgage lending NOW!!!