Why does that implicate the appraiser? Because they have to blame someone and often the broker or loan officer that originated the loan is no longer doing business. The one constant is the appraiser or real estate broker, if a purchase.
My background and experience are as a broker and loan officer but I see the appraisers being abused by all parties and wish to state that they are probably the least likely to 'fudge' anything. The first abuser is the loan officer trying to make a close valued deal, he will intimidate, entice, or beg the appraiser to come in with a certain value.The appraiser, if they are honest, don't even want to know what value is needed.The appraiser doesn't want to lie and the reason is that they have accountability as noted above. The loan officer, in most states, doesn't even have to take any course work or pay for even a license, the broker they work for has to pay for licensing and in some states has to take some coursework and the appraiser always has to take coursework and pay for the license and insurance. They have a large financial stake in giving the correct value.
That being said an appraisal is just an "opinion". It is based on real factors and if done correctly can be a very useful tool to lenders and buyers as to the value of the property. But it is still an opinion and there is no 'exact science' of appraising. You can send two or twenty-two appraisers to the same site and you will likely have as many opinions as you send out. Some of the values will be the exact amount but the "work-up" to arrive at those answers will invariably vary.
So, to review the work of an appraiser SHOULD be to verify the information provided but too often it is seen as a negative. There was a case where the appraiser came in thirty thousand less in value than he should have done and the evidence sent by another appraiser to refute that value was not even looked at. Reviews should go both ways but they do not.
In summary, if you want to know the value of a home use an experienced, licensed appraiser and if you do use a website to verify the value, use the county assessors website, if available, as they usually have verified the value for taxing purposes. However, there is one caveat there, the assessor is nearly always fifteen percent or more lower in actual value so as to not anger the taxpayer by asking him to pay higher taxes. You will have to pay for an appraisal but if you are serious about needing to know the value, it is worth it.
Monday, May 28, 2007
Home Appraisal Fraud Top Priority
Whether you are trying to defraud a lender or just trying to get a higher valuation for your property, the appraisal that you get can be an indication of what your net worth is.
Some homeowners are definitely trying to get an unrealistic value of their home in order to get more money on a 'cash out' loan. Others are trying to get it so they can sell for super high profit. Whether they commit fraud usually is judged by their relationship with the appraiser that does the appraisal. Some times in the past a lender or broker, needing to 'make the deal', would ask the appraiser to 'get me a value' so the deal can be done. Then most 'sub-prime' lenders (see the next article to explain that term) began the 'review appraisal process' as a matter of course. They assumed that the value would be inflated by the brokers appraiser and would order a 'desk review' at the very least and if that didn't verify the value assigned by the brokers appraiser they would commission a 'field review' whereby the reviewer would actually visit the subject property.
They assumed that there was always 'collusion' of some sort by the parties involved. This is, in my experience, rarely the case. However, their are some "carsalesmen" loan officers that are only in this business for the short term and don't really care about the borrower or the future hardship that an unrealistic appraisal puts on the borrower. It is because of these 'part timers' that the lenders have become disenchanted with most appraisers hired by brokers. The best and most experienced appraisers have learned to say "no" to inflated values. The professional ones know that they MUST be realistic in their valuations for a variety of reasons. The most important one is that they need to keep their license and reputation for future earnings. The secondary reason is that they need to keep their insurance premiums low. Yes, they pay what is the equivalent of malpractice insurance they call it errors and omissions insurance but it amounts to the same thing. Once a lender formally accuses an appraiser of false or inflated values it kicks in the Errors and Omissions insurance attorney. That DOES cost the appraiser money --often twice or three times the amount they make from one appraisal so it behooves the appraiser to not manufacture values.
So why do lenders automatically think that there is a falsified value in most sub-prime loans? Because the foreclosure rate has gone through the roof. In some cities it is 400% over last year. Why does that inplicate the appraiser.. (more to come)
Some homeowners are definitely trying to get an unrealistic value of their home in order to get more money on a 'cash out' loan. Others are trying to get it so they can sell for super high profit. Whether they commit fraud usually is judged by their relationship with the appraiser that does the appraisal. Some times in the past a lender or broker, needing to 'make the deal', would ask the appraiser to 'get me a value' so the deal can be done. Then most 'sub-prime' lenders (see the next article to explain that term) began the 'review appraisal process' as a matter of course. They assumed that the value would be inflated by the brokers appraiser and would order a 'desk review' at the very least and if that didn't verify the value assigned by the brokers appraiser they would commission a 'field review' whereby the reviewer would actually visit the subject property.
They assumed that there was always 'collusion' of some sort by the parties involved. This is, in my experience, rarely the case. However, their are some "carsalesmen" loan officers that are only in this business for the short term and don't really care about the borrower or the future hardship that an unrealistic appraisal puts on the borrower. It is because of these 'part timers' that the lenders have become disenchanted with most appraisers hired by brokers. The best and most experienced appraisers have learned to say "no" to inflated values. The professional ones know that they MUST be realistic in their valuations for a variety of reasons. The most important one is that they need to keep their license and reputation for future earnings. The secondary reason is that they need to keep their insurance premiums low. Yes, they pay what is the equivalent of malpractice insurance they call it errors and omissions insurance but it amounts to the same thing. Once a lender formally accuses an appraiser of false or inflated values it kicks in the Errors and Omissions insurance attorney. That DOES cost the appraiser money --often twice or three times the amount they make from one appraisal so it behooves the appraiser to not manufacture values.
So why do lenders automatically think that there is a falsified value in most sub-prime loans? Because the foreclosure rate has gone through the roof. In some cities it is 400% over last year. Why does that inplicate the appraiser.. (more to come)
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