While there is truth to this it sure does not make those of us who have been working hard to keep our mortgage payments current feel a whole lot better. Many will start falling behind on their payments just to get bailout help...sad but true.
But here is the real deal on how appraisers are dealing with the valuation of your home in this foreclosure crisis. We DO NOT typically use foreclosed sales to compare against your home. We first evaluate your individual neighborhoods, streets, subdivisions and trust me when I tell you it can vary street by street in today's market.
If and only IF your subdivision, street or neighborhood is full of foreclosures, more so than your typical arms-length transactions, then we WILL using foreclosures as our primary source for analysis. WHY? because these sales have now defined your neighborhood. If there are more sales in your area which are not foreclosures then we will use those sales primarily.
Therefore your home may NOT necessarily decline in value due to a few scattered foreclosures in your area. Now here is where it gets a little muddy in the water....If you have a home right next to yours or a couple of doors down that has been foreclosed upon and especially if it looks "run down" and obviously vacant, this WILL have an effect on the value of your home to some degree regardless of the number of foreclosures in your area. WHY? because if you were looking to buy a home and the one next door to yours is quite frankly and eye sore, this has an impact on how the market perceives your home. Sad and not fair but true!
The foreclosures in your area or on your street and their proximity to yours has an effect from that point outward as if in a circle. The further the foreclosure/s are from your home, the better off you are!
Again, let me repeat, if you only have a few foreclosures scattered about your development, street (unless you only have a few homes on your street) or defined neighborhood, chances are you are not going to be heavily impacted as appraisers will use non-foreclosure sales whenever it is reasonable to do so and is not misleading to the lender to do so.
One thing I want to make clear! Appraisers do not determine the value of your home...Let me repeat this. Appraisers DO NOT determine the value of your home.....The MARKET DOES! We analyze the market and as long as we do this correctly and as long as we utilize properties that are truly comparable to yours and make the appropriate adjustments for any variances, then the market LEADS us to the appropriate opinion of value....So don't blame the appraiser for the value of your home okay? It is the market you need to blame.
One final note. Appraisers are supposed to protect banks from lending risks. Banks need appraisers to analyze NOW more than ever what the market is doing, what the value of the property is currently, what the trends have been and where they are likely headed.
Banks & Mortgage Companies in the past did not really care too much about the fact that we were trying to protect their interests as they wanted to close loans. Sad fact but true and that is why we are in this mess Today. Appraisers many times are considered a necessary evil and Lenders pressured many Appraisers to do what they wanted. Unfortunately many succumbed to that pressure.
Banks are now going the opposite direction and running scared. They are dictating to appraisers what the comparable properties should be. They are non believers in what our reports are telling them. Before they wanted the highest possible value, now they want the lowest. They are telling us based upon some National Report that we MUST report our area as declining! Well here in Georgia there are some area that are NOT declining but STABLE. I personally do not let lenders dictate to me and I know for a fact I have lost business over this...but I digress...
Bottom line is they are still not letting us do our jobs! We have no vested interest in these properties, if they had let us do our jobs from the start, we would not be looking at a Trillion Dollar plus spending bill. Can you tell I am just a little frustrated. I AM!
So as a consumer what can you take aways from all of this. Keep up with what is going on in your neighborhood and do not let lenders determine the value of your home. You get a copy of your appraisal report, review it carefully. If you do not agree with it, protest it! Many banks use review appraisers who either have not even seen your home or who have only driven by your home to refute the original appraisal report. Don't let that happen to you because these review appraisers do not know the home like the first appraiser!
As Realtors, you can do the same thing. You have access to the same information we as appraisers do and even more than we do as you guys see many of the INTERIORS of the comparable properties used by appraisers which we do not see. Sure we have photos of the interiors if you post them on MLS/FMLS but the pictures do not always tell the whole story! So help your clients in this lending process by not letting them reduce or change the value of the first appraisal report without good reason.
Okay I am off my soapbox now, I hope this has helped you to understand how appraisers operate in this market or at any time.
Any questions, just ask!
Mary Thompson-Certified Real Estate Appraiser
www.marytappraisals.com
www.customslideshowcreations.com Custom shows for your next listing!
In a nutshell, when this new FEDERAL law takes effect, Mortgage Brokers, Realtors Buyers and Sellers will have NO control over the appraisal process. None of the above can call an appraiser and get an appraisal done and then bring it to the lender or bank for a loan. Banks must order the report directly from the appraiser or a third party will do the ordering hired by the Banks. These third parties are what we call Appraisal Management Companies (AMC's). The banks are hiring these companies to puts a layer in between the banks and the appraiser for more independence and less lender pressure on the appraisers to "make the value".
**Any of the above individuals CAN order an appraisal directly from the appraiser if their reason for the report is not for a LOAN, IE; to determine a listing or sales price, to obtain current value, a divorce, estate, tax rebuttal appraisal, PMI removal, etc. That is NOT prohibited and is actually encouraged in this ever changing market ***
Note: Realtors, buyers and sellers will not be able to call the appraiser or email them to tell them that they do not agree with our values. That is undue pressure and it NOT allowed. As an appraiser I am happy about that, because to be honest, most of the "comparable properties" that are provided by Realtors, buyers and sellers are not comparable, but that is another whole post all together. I am here to help you today! READ ON.......
Here is where REALTORS, buyer and sellers DO have control. Just the other day I was appraising a Lake Lanier property (our specialty) and I was surprised and very HAPPY to see that in the sales contract under the special stips page was the following statement:
" Buyer shall have all the rights and provisions manifested by the Appraisal Contingency provided that the appraiser the buyers lender selects has COMPETENCY to perform an accurate Lake Front Property appraisal and has completed at least 10 appraisals on Lake Sidney Lanier waterfront properties within the past 3 years" Said qualifications of any and all appraisers hired shall be provided to the Listing Agents in writing upon request."
That is awesome! I would suggest SELLERS rights are also protected in the contract, by stating that if the buyer signs an appraisal contingency in the contract, they should also REQUIRE an experienced appraiser in the property be it Lake, Golf Course, even a particular neighborhood. I would also suggest that in the case of a special property like Lakefront that the experience be even greater at least 10% of their work is completion of this type of appraisal over the past 1 year, not 3 years as things have changed over the last year as you well know. Many lenders are requiring that the property appraised by the appraiser is no more than 30 miles from the appraiser's office. I would suggest that you narrow that down and state that the appraiser must live in the SAME COUNTY as the property being appraised.
I can't tell you how many times a lender sends someone from ATLANTA to Lake Lanier to appraise that property and unless they have considerable experience on this lake, which most do not as their primary work is closer to the city of Atlanta (45 miles from Lake Lanier) you have a disaster waiting to happen when it comes to the appraisal!
So you DO have control and you need to start adding this type of language to every sales contract. Trust me when I tell you that BANKS and especially the Appraisal Management Companies (see my previous post on AMC's) DO not care about competency of the appraiser. They select the one that can do it the quickest and the cheapest and if that happens your DEALS will fall apart on a regular basis.
Please pass this along to every Realtor you know, repost it, blog about it NOW. If you do then you can take control back on this HVCC law when it comes to appraisals on your sales deals.
If you have any questions about this new law, let me know it is just around the corner.
Mary Thompson
Here is the deal: The Obama stimulus package includes loan re modifications across this country if you are "under water" meaning your mortgage is higher than your home is worth. Lenders, Fannie and Freddie are planning to and already do use Brokers Price Opinions (BPO's) to determine value for the homes in question or those that will qualify for this program.
In the state of Georgia as well as about 23 other states per the Legislators that were speaking at our meeting yesterday, this activity is against the law. WHY? Because Realtors and Brokers are acting as appraisers in the valuation of the property in question. In other words they are engaging in unlicensed practice of appraising.
This practice is also in violation of FIRREA (Financial Institutions Reform Recovery and Enforcement Act of 1989). Appraisers cannot list and sell homes without a Realtors license, so Realtors should not be allowed to value property without an Appraiser's license.
BPO's by law are only legal when they are used to determine a list price on a property....PERIOD. So check your states laws on this as you may be breaking the law!
Also of note in the State of Georgia and likely many other states it is against the law and in violation of FIRREA for Appraisal Management Companies (AMC's) to order appraisals from appraisers as they are NOT the CLIENT. Appraisal orders should be coming directly from the client or in this case THE BANKS!
I urge every Lender and Realtor to check the laws in your state to see if you are in compliance with FIRREA and state laws regarding BPO's.
I urge every Appraiser to contact your local appraiser boards to find out if AMC's (appraisal management companies) doing business in your state are allowed to send you orders. I don't know about you, but AMC's are a lose/lose for everyone. They cut our fees in half, they use those appraisers who will do it the fastest and the cheapest without regard to expertise and they charge the LENDERS more than what we charge them for the typical appraisal report!
Another thing everyone should know is the AMC's have ZERO regulatory oversight. In a nutshell they can do what they want with no legal repercussions. Same thing with BPO's they do not have any regulations like we do (USPAP) to ensure that they are producing credible information and if the banks are allowed to accept BPO's as valuations for home, this is a major source of concern for everyone!
Realtors are pros at listing and selling properties and providing an idea as to what the home will sell for but they are not trained to value homes for banks, Fannie, Freddie or HUD. They are not trained to know what adjustments should be made for the numerous amenities a property may have. I get asked all the time from Realtors what adjustments I make for basements, pools, garages, etc. etc.
One other very important point: If Realtors are conducting BPO's for lenders for a potential listing of the home, they now have a VESTED interest in that home, therefore this makes for an unbiased opinion of its worth. As appraisers we are not allowed to appraise property that we have an interest in unless we fully disclose our interest and quite frankly I would reject this assignment and most banks would reject appraisers doing appraisals on properties in which they have an interest.
Many issues here and with the horrible state of affairs that we are facing in the housing market, now more than ever we need proper valuations of these homes so that they can be sold or re modified.
As I stated in my last featured post, about foreclosures and the appraisal process, if we are left to do the jobs for which we are trained, we will provide accurate valuation services for Banks or anyone else. There is no reason not to!
We cannot afford to put ourselves in further hot water here, we must follow the laws and utilize those people that are best suited for the job at hand....Appraisers.
I ask everyone here to write to your commissioners and advise that Lenders need NOT take the easiest and cheapest way out here when it comes to the loan re-modification process or foreclosures or we will suffer further loss. Lenders are losing big bucks and they want to save money, but using people who are not trained to provide opinions of value is salt in the wound and promotes further risk and losses to these lending institutions. I DO hope you agree!
Realtors: Do you even like doing these BPO's? What I hear from our local Realtors is they hate them, the lenders want them yesterday and they want them CHEAP for all the work you do on them. You are in business to SELL real estate, not do desk top evaluations/ BPO's all day for lenders.
Let's put this valuation where it belongs...with the Appraisers.
Please re post and pass this along to as many people as you can! I am contacting TV stations, local government officials and I intend to write a letter to Obama himself. His stimulus package is supposed to create jobs and in effect he is putting many appraisers out of business!! I know Realtors are suffering big time too, but PLEASE make sure you are not violating the law in order to put some money in your pocket and creating further issues down the road.
Thank you for your efforts and past support of my posts here.
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