Realtors® Giving Too Much Power to RPR®

“Since then, we’ve become RPR’s biggest fans. It has helped grow our business because it has given us more credibility.” A recent article talks about the benefits of using the Realtor® edition of online home valuations. This growing trend is frightening for home owners as more and more agents rely on computers to price real instead; instead of using their time, skill, and research to calculate home values the right way. When it comes to determining the price of most people’s single, largest, lifetime investment, shorts cuts are NOT a good idea. Money matters, and getting a suggested listing price based on a computer and not a licensed professional’s skill, is the new trend and it is very bad for consumers.

“That first phone call is critical, I’ll immediately pull up RPR on my tablet and start researching the seller’s home while asking questions at the same time. I quizz the seller to confirm the home’s basic facts such as number of bedrooms, baths, square footage, etc.

Stop the presses! This is a licensed real estate professional, responsible for pricing people’s homes and financial futures, that proudly announces to the world that she accepts whatever information she can find online, or better yet, that the seller provides her. Just WOW! The square footage totals agents rely on are one of the most important items when it comes to pricing a home. Tax records are notoriously inaccurate, and how are the owners supposed to know what size their house is? Most know what is in tax records. The “Official Record” for square footage is a myth started by an agent that didn’t want to be responsible for measuring a house. I actually don’t think agents should measure houses. They can’t be experts at everything. However, finding the correct square footage is a vital part of pricing the house and providing that data has always been part of the real estate agent’s duties. Ask 100 home owners where their agent gets their square footage total and they will tell you – that’s part of the agent’s job.

gents say square footage is not that important and so they can use tax records to get close enough. On the one hand, they say square footage is not that big of a deal. But, then you look at every CMA they create and there you have it – a price-per-square-foot formula used to price the home. You just can’t have it both ways. It’s either important or it’s not. The fact is – if you change the square footage total used in the price-per-square-foot formula, you change the listing price. Often, by tens of thousands and much more. It absolutely changes home values and this is not just a number, it’s real money from real home buyers and sellers.

If Realtors® want to use RPR, more power to them. The graphs are wonderful. But, if you (or your computer) is going to use a price-per-square-foot formula – then have each listing measured BEFORE you give the owners a suggested listing price. If you don’t, you’re cheating consumers every day. Not an opinion, a fact of the real estate business. Size does matter!

Dismantling the Appraisal System?

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!!!

Rising Markets – Proof or Not?

by Hamp Thomas on 03/22/16

Let’s talk about “Rising Markets.” We hear this term more and more often and many Realtors are claiming that appraisers just don’t understand what is happening and are flat out killing deals for no good reason. Pretty strong statements and many times, way off base.

In a true “rising market,” there has to be some evidence and history. Obviously, one sale doesn’t define a rising market. So, who defines a rising market and what data do they use to support that opinion? If they’ve seen multiple offers for the same house and this happens on every new listing in an area, there’s no doubt you have a rising market. In those cases, agents and appraisers should be able to point to the listings that have sold above list price, and be able to determine a percentage of rising values. If you have the last five houses that have sold at between five and six percent above the listing price, you have a pattern that can be documented on paper. It’s “proof” that an appraiser could use to show the rate of rising values and not have an issue with a low appraisal. Agents should be able to help appraisers in these circumstances and if it is truly a neighborhood with escalating values, there has to be some evidence of that growth. And, this kind of information should be reported in the Closed/Settled MLS data!

However, just because an agent convinces one client to pay more than list price does not equate to a rising market. True rising markets have real proof and appraisers deal in facts. Sometimes, the appraisers are not to blame for a low appraisal. They are simply trying to protect the home-buyer and the mortgage lender. As long as you are working with a local appraiser, you should not have a problem in true rising markets.

The CU, Realtors & the Future of MLS

by Hamp Thomas on 01/23/15

For 10 years I have been screaming about sqft problems within MLS and tax records. The problems are real and happen in most states. Some counties are better than others, but without going inside the house, the tax assessor can only do a so-so job. It’s bad enough on two story homes but especially bad on homes with basements. If you’re lucky enough to live in an area without basements, count your blessings. For those of us where basements are common, the CU is going to expose the unprofessionalism in reporting square footage that agents get away with every day. Maybe then we can convince Realtors that “their” info does matter and sqft classes will be on the horizon for every real estate agent.  The “Machine” will never work because appraisal is an art (opinion) not a science. Big data is just dots and dashes without the ability to select the right info and analyze the data. A computer can’t do it, not accurately. The MLS (and the public records data that currently fills the MLS) is going to be uncovered for the information accuracy problem they have now, and that has been growing since the mid-nineties. Their magic price-per-square-foot formula doesn’t work with inaccurate data and if you don’t think agents use price-per-sqft, check out a few CMA’s. Also check out HGTV®. They teach consumers every day about that over simplified magic formula that prices the American dream. Get ready for the square footage revolution! The good fairy DOES NOT work for the local tax department and providing accurate sqft information should be the responsibility of the listing agent. If they want better appraisals, they need a better MLS. Time to turn attention away from appraisers and towards Realtors®. And yes, I am also a Realtor®. (:

Where Do You Get Your Square Footage Number From?

by Hamp Thomas on 11/25/14

This numbers matters more than you might imagine! Just this morning I found a large brick ranch that was reported “Closed” with 3,880 sqft. I had done an appraisal about a year ago and measured it at 3,511 sqft. Nothing really complicated, just a basic design. That’s a difference of 369 sqft. That works out to a difference of $9.86 per sqft. Doesn’t sound all that bad, but if the next house in that neighborhood sells with 3,000 sqft, that works out to a difference of $29,580. That thirty grand might be just enough to create a low appraisal and cost someone a sale.

This is a very real problem and the mistakes are often much larger, especially when the info is taken from the tax records. Remember, the Real Estate Commission specifically states that you should NOT use the sqft reported in tax records. The mistakes would shock you! The vast majority of your peers use price-per-square-foot in some manner to determine values. It influences listing prices, offer prices, appraised values, and it happens every day. Your best bet is to make one call to the appraiser who did the report for the buyer (unless you had a prelisting appraisal), and ask for the square footage total. Use that number to report to MLS. This can make our MLS better and make all of us better at our jobs.

Appraisal Adjustments, AMC’s and Talking to a Brick Wall

by Hamp Thomas on 08/21/14

The passion of many appraisers faded with the HVCC and completely went out when Dodd-Frank showed up. When you have to work for someone else (AMC’s) and work harder for less money just to make money for them, then any passion for the job is lost. Appraisers need to be concerned about protecting consumers (and lenders), but most of their reasons for doing so have been taken away. Nobody wants to hear their opinions of value. Banks only want a form to fit percentage guidelines so they can make their loans work. It’s sad to see the lenders that appraisers are trying to protect still don’t seem to want their protection. The true property value appears to concern no one but the appraisers.

The government took one problem and made it into five more to supposedly fix “it,” although the “it” in question is debatable. Did it really fix anything? If we read the news, the lending industry is full of fines and penalties (in the billions-17 Billion announced today for Bank of America), while they keep on making more. But, the little guys (appraisers) are still under the scrutiny of people who really know very little about the industry. It’s like Ambulance Drivers trying to tell Doctors how to do their jobs better.

“I love this profession but cannot stand the business. I am totally burned out. It is so stressful I get physically sick. It’s no longer worth it to me.”  Too many lines like this are posted in appraisal forums and blogs every day. Appraisers are being insulted and intimidated, and I have to ask “what has really changed?” A quality appraiser loves the challenge of creating a fair value and doing everything in their power to be the voice of reason in an emotional process. Everyone else is motivated by a paycheck. Agents and lenders only get paid if the loan goes through and that sometimes allow s them to overlook things they should not. Appraisers are unbiased voices in a very tough business.

In the current system, appraisers can’t do their jobs the way they were trained. Appraisal is an art not a science and it can be deciphered by a computer program. If it was possible to put everything in the real estate valuation process through a computer system, AVM’s would be more accurate and could replace the appraiser’s role all together. It can NEVER happen, because real estate is a complex business and there are things an appraiser learns over the years that simply don’t fit into any standardized form. There are dozens of adjustments or differences between properties that must fit into a few lines for a computer to read.

There are only so many line items on the mandatory appraisal form and many times the numbers are not “black and white.” Condition, quality, site, location, age, etc., there are numerous things that have to be considered in an appraiser’s adjustments. And, there is simply no room on the standardized form to adjust for such items. Without having room for far too many single line adjustments, the “condition” and “quality” adjustments are often a combination of a great many factors. It may be only a few things, or it can be a dozen items or more, on each comparable that have to be factored into the total adjustments somewhere.

And, try explaining the adjustments to an untrained or unlicensed AMC employee and it’s like talking to a brick wall. No matter how many explanations an appraiser writes, they don’t understand the language or logic and ask for more. For many appraisers, frustrating is an understatement.

There are many adjustment nuances in order to “fit” into the highly regulated appraisal underwriting guidelines. For instance: Differences in a yard, landscaping, the slope of the lot, the neighbor’s $30,000 landscaping view or lack of maintenance, the pond, the trailer through the woods, the horse farm across the street, the abandoned warehouse one block away, the park two blocks over, schools, employment, etc.; the difference between laminate and solid surfaces countertops, hardwood vs laminate flooring, smooth ceilings vs popcorn; the difference between a 10×10 deck or a 20×14 deck with Trex type materials, a fenced back yard with a 10×20 wired section vs a six-foot privacy fence surrounding the entire back yard; location within the street/neighborhood, views, privacy, etc. etc.; or what is known as enjoyment of ownership; which is based on the total value, not just a price-per-square-foot. Or, one of a hundred other scenarios that must be consolidated somehow into a standardized form. While some adjustments may not appear logical or mathematically feasible, there is a total logic behind them based on an appraiser’s experience in the local market. On the mandatory appraisal form there is a reason for each number. The appraiser understands the reasoning, but a computer never will.

You can see why it’s hard for appraisers to get excited about adjustments between a C3, C4, etc., when there are so many things that must be considered in a truly credible appraisal report. We have to decide if the appraiser should use their expertise to determine a fair value, or use their skills to fill out a form to make bankers happy. Appraisers solve valuation problems, and if you think earning an appraisal license is easy take a look at what is required. All the training that is required and then they are expected to earn a similar wage to an unskilled laborer? This system is destined for failure and death unless changes are made soon. And, consumers will pay the price for the downfall of the appraisal industry.

I say, train appraisers well and let them do their job. The more the government tries to fix the appraisal system the worse it gets. Bad appraisals account for only a small portion of the lending problems. Take the time spent trying to better appraisals and focus on the lending industry. And then, take a long hard look at the source of information that appraisers use. If you really want to uncover some problems, look to the MLS. The problems are easy to discover. It’s a nightmare that no one seems to want to talk about. Every appraiser knows of the mistakes and exaggerations in the MLS. Hec, most agents know about the problems. For me, after ten years of studying the MLS and square footage problems, many MLS systems are nothing more than advertising sites. The property details and descriptions are basically useless. Harsh, maybe. But very true.

Agents using inaccurate square footage data in their price-per-square-foot calculations cheats consumers out of millions every year. Appraisals are filled with mistakes that come directly from the MLS. There are lots of problems in the home selling/buying process that have nothing to do with the appraisal industry. Cumo got us on the appraisal bandwagon and it’s time to get off.

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Appraisal Adjustments, AMC’s and Talking to a Brick Wall

by Hamp Thomas on 08/21/14

The passion of many appraisers faded with the HVCC and completely went out when Dodd-Frank showed up. When you have to work for someone else (AMC’s) and work harder for less money just to make money for them, then any passion for the job is lost. Appraisers need to be concerned about protecting consumers (and lenders), but most of their reasons for doing so have been taken away. Nobody wants to hear their opinions of value. Banks only want a form to fit percentage guidelines so they can make their loans work. It’s sad to see the lenders that appraisers are trying to protect still don’t seem to want their protection. The true property value appears to concern no one but the appraisers.

The government took one problem and made it into five more to supposedly fix “it,” although the “it” in question is debatable. Did it really fix anything? If we read the news, the lending industry is full of fines and penalties (in the billions-17 Billion announced today for Bank of America), while they keep on making more. But, the little guys (appraisers) are still under the scrutiny of people who really know very little about the industry. It’s like Ambulance Drivers trying to tell Doctors how to do their jobs better.

“I love this profession but cannot stand the business. I am totally burned out. It is so stressful I get physically sick. It’s no longer worth it to me.”  Too many lines like this are posted in appraisal forums and blogs every day. Appraisers are being insulted and intimidated, and I have to ask “what has really changed?” A quality appraiser loves the challenge of creating a fair value and doing everything in their power to be the voice of reason in an emotional process. Everyone else is motivated by a paycheck. Agents and lenders only get paid if the loan goes through and that sometimes allow s them to overlook things they should not. Appraisers are unbiased voices in a very tough business.

In the current system, appraisers can’t do their jobs the way they were trained. Appraisal is an art not a science and it can be deciphered by a computer program. If it was possible to put everything in the real estate valuation process through a computer system, AVM’s would be more accurate and could replace the appraiser’s role all together. It can NEVER happen, because real estate is a complex business and there are things an appraiser learns over the years that simply don’t fit into any standardized form. There are dozens of adjustments or differences between properties that must fit into a few lines for a computer to read.

There are only so many line items on the mandatory appraisal form and many times the numbers are not “black and white.” Condition, quality, site, location, age, etc., there are numerous things that have to be considered in an appraiser’s adjustments. And, there is simply no room on the standardized form to adjust for such items. Without having room for far too many single line adjustments, the “condition” and “quality” adjustments are often a combination of a great many factors. It may be only a few things, or it can be a dozen items or more, on each comparable that have to be factored into the total adjustments somewhere.

And, try explaining the adjustments to an untrained or unlicensed AMC employee and it’s like talking to a brick wall. No matter how many explanations an appraiser writes, they don’t understand the language or logic and ask for more. For many appraisers, frustrating is an understatement.

There are many adjustment nuances in order to “fit” into the highly regulated appraisal underwriting guidelines. For instance: Differences in a yard, landscaping, the slope of the lot, the neighbor’s $30,000 landscaping view or lack of maintenance, the pond, the trailer through the woods, the horse farm across the street, the abandoned warehouse one block away, the park two blocks over, schools, employment, etc.; the difference between laminate and solid surfaces countertops, hardwood vs laminate flooring, smooth ceilings vs popcorn; the difference between a 10×10 deck or a 20×14 deck with Trex type materials, a fenced back yard with a 10×20 wired section vs a six-foot privacy fence surrounding the entire back yard; location within the street/neighborhood, views, privacy, etc. etc.; or what is known as enjoyment of ownership; which is based on the total value, not just a price-per-square-foot. Or, one of a hundred other scenarios that must be consolidated somehow into a standardized form. While some adjustments may not appear logical or mathematically feasible, there is a total logic behind them based on an appraiser’s experience in the local market. On the mandatory appraisal form there is a reason for each number. The appraiser understands the reasoning, but a computer never will.

You can see why it’s hard for appraisers to get excited about adjustments between a C3, C4, etc., when there are so many things that must be considered in a truly credible appraisal report. We have to decide if the appraiser should use their expertise to determine a fair value, or use their skills to fill out a form to make bankers happy. Appraisers solve valuation problems, and if you think earning an appraisal license is easy take a look at what is required. All the training that is required and then they are expected to earn a similar wage to an unskilled laborer? This system is destined for failure and death unless changes are made soon. And, consumers will pay the price for the downfall of the appraisal industry.

I say, train appraisers well and let them do their job. The more the government tries to fix the appraisal system the worse it gets. Bad appraisals account for only a small portion of the lending problems. Take the time spent trying to better appraisals and focus on the lending industry. And then, take a long hard look at the source of information that appraisers use. If you really want to uncover some problems, look to the MLS. The problems are easy to discover. It’s a nightmare that no one seems to want to talk about. Every appraiser knows of the mistakes and exaggerations in the MLS. Hec, most agents know about the problems. For me, after ten years of studying the MLS and square footage problems, many MLS systems are nothing more than advertising sites. The property details and descriptions are basically useless. Harsh, maybe. But very true.

Agents using inaccurate square footage data in their price-per-square-foot calculations cheats consumers out of millions every year. Appraisals are filled with mistakes that come directly from the MLS. There are lots of problems in the home selling/buying process that have nothing to do with the appraisal industry. Cumo got us on the appraisal bandwagon and it’s time to get off.

Appraisal Bullying, Still Going Strong!

by Hamp Thomas on 08/15/14

Even today there is undue pressure being put on appraisers to make loans work. All the new regulations in the appraisal industry did nothing for the bullies who work for AMC’s now. It’s sad to hear veteran appraisers talk about the way they were disrespected and treated unprofessionally, and how they are making plans to leave the industry. It happens every day in appraisal forms and blogs all across the country. The bullying and intimidation is as bad now as it ever was before.

This would never happen in any other industry and there is obviously a huge discrepancy between how appraisers are trained and what the mortgage industry expects from them. Appraisers are taught from day one; protect the buyer, lender, and mortgage investor. Make sure the value is fair to the best of your ability. 100% imbedded in every appraiser’s brain; be ethical and fair, you are there to protect the public and are influencing large financial investments. Then they discover this is NOT what lenders want. They might say they do in public, but their day to day business operations tell another story. The lenders and AMC’s (who pay the appraisers) often could care less if the loan is secure, not their problem. Make the loan, get paid, and let the next guy worry about it. Sound familiar?

So, what has really changed? It appears not much in the mortgage lending industry. Oh, except for the fact that prior to the HVCC each lender handled appraisal ordering and reviewing, and paid their own appraisal related expenses. Now, they pass that expense along to an AMC, who in turn takes it from the appraiser. Yet consumers are paying more than ever. Not because of appraisal fees, but due to AMC increases, which are conveniently listed under “appraisal fees” on a closing statement. I’m still amazed that lenders do not have to disclose AMC fees to consumers. If they are not trying to hide something, why would they care about having their fees disclosed on a closing statement? Every single fee related to the home buying process is listed on a HUD1. All except one; AMC fees. It’s a flat out deception of the home buying public.

Let’s call a lemon a lemon. AMC’s are not in the best interest of the public and basically add zero value to the mortgage lending process. Far too many AMC’s are all about getting appraisals done faster and cheaper. They force appraisers to complete work so fast it has to hurt quality. Then, the reports lay around on some lenders desk until the rest of the process catches up. Do we really think the lending process is any faster now than it was prior to the HVCC? No way, it’s slower than it ever was, and it is now obvious the appraisal has no bearing on the speed of the lending process. Getting appraisals done cheaper only helps AMC profits. Appraisers have to do more work for less money, so what do you think happens to the end product? Try this process at your job, more work for less pay. It’s a system doomed for problems. And, those problems only hurt the consumers who we have been led to believe they are designed to help. There’s no logic in this process. It’s all about profits and power, certainly not consumer protection.

Appraisers are being harassed and threatened by untrained and unlicensed people (often in another country), that understand little or nothing about the appraisal business. They only know forms, distances and percentages. They expect perfection from a system where perfection is not an option. Real estate will never be a form filler, computerized process. At least NOT if you want accurate results. The AMC’s goal is to find a way to force the appraiser to make the loans work, whatever it takes. There’s even appraiser’s being blacklisted for not accepting their low fees. AMC’s are bully appraisers by saying you will work for what we tell you, or we will make sure you don’t work for anyone. That’s absolute intimidation and it should be illegal. But wait, it is illegal, but no one enforces it! File a complaint and an appraiser will never work again.

How about an in-depth study by one of the television news shows looking into AMC practices? If the public knew what was happening and what they were paying more for, they would be outraged. And, they should be. The only ones being served by AMCs are AMCs (and big banking). Oh yea, remember the Golden Rule? This is a perfect example. The ones with the gold (big banks) are making all the rules.

Why teach appraisers to be so ethical and hold them to such high standards, when the people that pay them don’t want them to be that way. Talk about a communication gap! There needs to be an appraisal product that lenders actually want, that still protects consumers and mortgage investors, and that allows for some common sense back in the appraisal process.

For the appraisal industry, and most importantly for consumers, AMC’s don’t work as promised. The home buying public receives zero benefit from an AMC controlled appraisal industry. The only ones who win are the banks (who no longer have to pay for appraisal management), and the AMC’s (who literally got business dropped in their laps the day after the HVCC). They did NOT earn their place in the market, one government official gave it to them.

When will it stop? When one politician stands up and says enough is enough. Remove the HVCC and Dodd-Frank from the books. Good try, but didn’t work. We are no better today than we were prior to the HVCC. Focus on lending practices and let appraisers do what they have been trained to do, the right way. Give consumers an unbiased appraisal and give the appraisal industry back to the people who actually care about doing things fairly. After seeing all the fines and penalties placed on the banking industry the last year (in the BILLIONS), I think it’s clear that the focus needs to be on the banking system. And after that, we need to take a look at Realtor® quality.  Remember, appraisers are only as good as the data they rely on. The MLS is another story, but is also is a large player in appraisalquality. It’s time to stop appraisal bullying for good and put some teeth in any new law.

Citigroup Pays Record Penalty

by Hamp Thomas on 07/16/14

Citigroup will pay $7 billion to resolve claims it misled investors who purchased shoddy mortgage-backed securities that helped lead to the financial crisis six years ago, Reuters reported July 14. The deal includes the largest civil fraud penalty ever levied by the U.S. Department of Justice. The multibillion-dollar settlement is more than twice what many analysts expected but less than the $12 billion the government sought in negotiations with Citigroup.

All those who argue about the causes of the real estate crisis cannot discount yet another billion dollar settlement. Over and over again we see large settlements for mortgage securities fraud, where the problem was not with the appraisals, but the crooked financiers who manipulated the system, stealing money from homeowners all across the country. While appraisers are still being punished for the sins, big banks obviously have ample funds to pay these fines and continue with business as usual, while appraisers are being regulated to death. Every day more skilled appraisers are leaving the business while AMC’s steal profits and do little if anything to improve the home buying system. It’s time to take AMC’s back to the pre HVCC days where they can earn a market share the fair way, rather than by government intervention. It’s time to get the government out of the appraisal industry. Let’s says goodbye to AMC’s, and hello to sanity back in the appraisal industry.

Adjustments Fitting the Form-Real Estate Appraisal

by Hamp Thomas on 07/16/14

There are only so many line items on the mandatory appraisal form and many times the numbers are not “black and white.” Condition, quality, site, location, age, etc., there are lots of things that have to be considered in the adjustments (such as a back yard superior to another). And, there is simply no room on the form to adjust for such items. Without having room for far too many single line adjustments, the condition and quality adjustments are often a combination of a great many factors. It may be a few things or it can be a dozen items, on each comparable that have to be factored into the total adjustments somewhere. It took me ten years to learn all the nuances that “fit” into over-regulated appraisal underwriting guidelines. “Condition” adjustments they understand. Differences in a yard, landscaping, the slope of the lot, the neighbor’s 30,000 landscaping view or lack of maintenance, the pond, the trailer through the woods, the horse farm across the street, privacy, etc. etc.; or what I call enjoyment of ownership, which is based on the total value, not just a price-per-square-foot. Or, one of a hundred other scenarios that must be consolidated somehow into the form. Oversimplified maybe, but that’s a summary of what happens. While some adjustments often don’t appear logical, I understand the total logic behind them. On that mandatory appraisal form there is a reason for each number, even when it may encompass more than just quality or condition.

Realtors® – No, I Won’t Work with this Appraiser

by Hamp Thomas on 07/25/16

The lender gets a call. Agent tells them that appraiser “X” just called to set up an appointment to do the appraisal for 123 Main St. That darn appraiser killed my last deal and if he is appraising this house, I will have my clients find another lender. I flat-out refuse to work with this appraiser.

Whether it’s the listing or buyer’s agent, who put this person in charge of the appraisal process? Does the banker have to listen to them and risk losing the loan? It depends.

What’s his motivation? To protect his client and do the best job he can; or to simply get a commission. Far too often the commission wins. Many could care less if the appraiser is honest. They think they have already figured out the value and they don’t need someone coming in and checking their math. They just want an appraiser who understands their job, which is their mind is to bring the appraisal in at the contract price. The agents have already set the value and no appraiser knows better than they do about the current market.

This is happening all across the country and is getting out of control. How much power does a Realtor® have over the appraisal process? Apparently, they have decided they know best and are taking charge.

Then there’s the MLS. That’s a whole different set of problems that keeps getting worse. Puffery and flat out exaggerations (lies) are filling the MLS. Anything to get a sale and get paid. And, square footage being correct is getting worse in more and more places. Most agents aren’t going to measure a house, or pay to have it measured. They are leaning towards using tax records and figure it’s close enough. Reality is – It IS NOT!

If appraisers don’t help protect buyers, lenders and mortgage investors, and keep doing their job the best way they can, with fair and honest values, many of these rogue agents will say anything to get a deal done. Consumer protection is going backwards at an alarming rate and no one seems to be looking at agents and the MLS. Why is that? Reform needs to make a beeline for Realtors® and the MLS!