Second Appraisal Controversy

Michael Ford

Michael Ford

General Certified Real Estate Appraiser at Michael F. Ford Appraisal
Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory
Michael Ford

Second appraisal controversy - argument

On reading a recent post about agents telling their clients to just order a second appraisal when the values came in ‘low’, I’m reminded of an old saying that both my parents used to frequently address toward me, “People who live in glass houses, shouldn’t be throwing stones.”

I had no idea what they were talking about since when growing up I’m CERTAIN that ALL of my criticisms were well founded and deserved by those they were directed to. Teachers, government officials, world politicians, teachers, general authority figures, friends, enemies, and did I mention teachers? Basically most of the entire world that failed to anticipate my needs or wants well in advance of my having to voice them.

Before condemning, lets look at the realities. IF FDIC is to be believed that more than 97% of the 1/4 million WAMU & Countrywide appraisals were non USPAP compliant, and that 90% were “egregiously deficient” (whatever that means separate from non USPAP compliant), then it is a fair assumption to admit the possibility that collectively we are not as error free as we like to claim. I mean, of COURSE YOU and I are, but those ‘other guys’? Probably not so much.

A good agent SHOULD be asking to see the appraisal! It’s called due diligence. IF there are significant deficiencies, then they SHOULD be ordering a second appraisal and that second appraisal IS permitted under current guidelines. Now the fine points, such as documenting the bad appraisal and following up on it are ignored by most lenders (except RELS). Now, we are victims to our own collective pigheadedness here. Rather than looking OBJECTIVELY at the agents reasons & evidence why they believe the value should be higher, far too many of ‘us’ have said “Upon review of the additional information it was determined that there was / is no significant impact on value therefore the appraised value remains the same…”. It’s even worse now that admitting to a POSSIBLE error is tantamount to saying we did not do our jobs as far as punitive minded state regulators are concerned, or that we produced a misleading report.

Friends, IF we collectively ever get to a point where we can reasonably claim 90% of all appraisals are good, then I would STILL have to consider that 10% chance I ‘missed’ something. BEFORE I climb up on top of my high horse I’ve found it’s a real good idea to make sure my work is MORE than 100% defensible. In these relatively rare cases I try to DISPROVE my own results and value. THEN I use the opportunity to make sure the report & WORK FILE will pass State Review muster, via whatever addendums are required. I AM allowed to make a mistake.

It is how I deal with human failings and limitations that determine USPAP and regulatory agency compliance. I ALSO am NOT going to change value opinions gratuitously since doing so can also cause State Regulatory Board problems. However a value dispute instantly raises the risk of a state complaint claim from negligible to probable (in my mind). IF I believe the added data DOES warrant a change (particularly a change under 5%) then there is a good chance I am going to make a change “Based upon a review of additional information not previously available to the appraiser in the normal course of business, I concur that the market value is “X” rather than “Y” as previously reported.” Or, I may state reconciliation toward the higher end of the range is warranted based on whatever new data dictates.

I noted above that RELS follows, or purports to follow procedure for second appraisal ordering. Based upon numerous complaints I’ve reviewed it appears that when an appraisal is alleged to be low and the appraiser declines to change his or her opinion, they then produce or order ‘some type of review’ that finds “numerous discrepancies.” They then order the new appraisal and once it comes in on value they now have TWO appraisers inferring the Original Appraiser (OA) was wrong. THEN they forward the second appraisal to their parent corporate appraisal review department (Wells Fargo in Phoenix, AZ) with the new (spurious) support so that formal complaints can be made against the OA in his or her home state. THEY ARE NOT DOING THIS FOR THE BENEFIT OF THE PROFESSION!!! They are doing it to document THEIR paper trail in support of having ordered that second appraisal!

Folks I know times are hard, but anyone that still does work for people like this are damn fools! It’s only a question of time before you get caught up in their grist mill. Are $180 fees worth it? $250? The ONLY way THEY will stop doing this is if WE stop doing work for their AMC! I’ve never found their fees or terms to be acceptable and based on complaints from appraisers made to the Guild, I never will work for them. The only question I have is why anyone else does?

When we get a request for reconsideration, lets treat it as being ‘probably right’ instead of automatically ‘wrong’ or unsupported. Try to PROVE ourselves wrong and only when we cannot do so, climb up on that high horse. Even then make the extra effort to carefully explain WHY the new data is no good and ANTICIPATE and head off the future complaint! IE: three potential higher ‘comps’ were excluded because they were all on the west side of the street with unobstructed ocean views that paired sales or regression shows sell for 1/4 million more than similar houses on the east side of the street….OR GRID them and make the 1/4 million adjustment!

Just saying “value remains unchanged” is an invitation to get a state complaint…even when you did nothing wrong!

Just my two cents. FYI nearly HALF the cases where I get involved on behalf of the Appraiser’s Guild trying to help appraisers defend themselves against state complaints, OR mitigate the damage arose out of cases very similar to what I have described above. It is often the UNRELATED sloppy report discrepancies that are getting appraisers burned. Start thinking defensively folks! State regulators across the country are looking to impose $5,000 fines rather than remedial corrective education courses. The “gotcha police” are focused on raising revenue – NOT maintaining appraisal integrity.

Image credit flickr - jon collier
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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11 Responses

  1. Retired Appraiser Retired Appraiser says:

    Congratulations Mike Ford!

    You’ve just taken your first baby step towards the real solution to the fee problem; boycotting AMCs en masse.  I am firm believer that given enough time even the most die hard opponent of boycotting will at least come to see the solution. (I am not saying that they will participate in solution).

    In the end I expect that it will come down to the last two appraisers standing.  One will choose to quit while the other is still accepting $50 AVM confirmation inspection orders.  We all know that there is no chance these last two appraisers will agree to boycott AMCs in an attempt to increase their fees.

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    • Mike Ford Mike Ford says:

      *G* RA I’d also add Flagstar to that list for anyone that read WorkingRE’s article on LREAB and C&R fees today. Excellent article by Mr. Peck. Not likely my comments will get posted since as some may be aware, I AM just a tad too windy for them. Anyway, well worth the read.

      Generally though, I oppose boycotts until those being boycotted prove themselves to be deliberate, knowing scoundrels.

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  2. Tom D says:

    under want ads “appraiser” please put this article.  that should decrease our numbers to the point of maybe me & just mike working.  hey mike, how about a game of shuffle board on this cruise of the damned.

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  3. Chris says:

    Write your reports like you would have to defend them in court.

    Turn down low paying clients. They need us more than we need them.

    Don’t think your fellow appraisers are doing jobs for $200-$275, that’s what they WANT you to think.

    The days are coming back where we will be giving them OUR Service Level Agreements for them to sign. NOT the other way around. They turned us into THIER agents and pay THIER costs.

    Hurry up and retire you old guys. The faster we get to a shortage of appraisers the sooner we can get back our profession. ITS ALREADY HAPPENING !

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  4. Mike Ford Mike Ford says:

    Chris, I liked your post…its the old guys comments gets the thumbs down *g*.

    You ARE aware of course that they are trying to raise the threshold for federally regulated transactions to $1,000,000 before a full appraisal is required, aren’t you? Right now it is $250,000 but few will lend with nothing in the file; hence we see AVMs and AAVMS. Everyone-ask yourself the same thing P. Turner of Virginia asked me last night: “WHEN was the last time you had a simple cookie-cutter assignment?”  Neither of us could remember one.

    For those that can wait it out, (ten years or so) the normal market forces MAY correct the current low fee problem, but don’t count on it.

    In the mean time, you may be better advised to join some of us “old guys” at the American Guild of Appraisers (AGA) OPEIU-AFL/CIO. I am seeing more and more requests for responding to state board complaints where appraisers did a decent job with value; left themselves mildly vulnerable on technicalities where the lenders turn them in for no other reason than to justify their own actions in “shopping” the appraisal after it came in low (meaning at market value)!

    Frankly, I COULD spend full time forty hours a week dealing with these and similar problems for Guild members if I hadn’t developed such a fondness for eating and a roof over my head. Chris, why don’t you join me and lend a hand? (Same offer goes to any other seasoned appraisers out there that want to help their peers). The pay is non existent; hours are long, but the rewards are priceless.

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    • Chris says:

      We are almost done with the A & B paper. FHA has geared up their inspection for only one reason. They are going to lend to the C and D’s.  They are the ones that cant afford to fix their appliances.

      Our industry was taken over for 1 reason….Money. Not better appraisals, Better appraisals are the result of lawyers handling mortgage buybacks. We write them now to AVOID the dreaded mortgage buyback.

      They want to pay us $30/ hr. And keep the rest. That is what bit them, you can NOT run a company after all the overhead and all the time spent to run such company without being able to set your fee’s.

      Simple economics. They don’t get it, they don’t care. They just want that statistic to say less than 5 day turn time. And by the way, we save so and so on appraisal fees by shopping the job around….ya…and pat themselves on their backs while they drown out the appraisers.

      When the appraisers are gone, or not enough to handle the industry is when THEY will throw Millions of OUR dollars at the congressman to pass National AVM’s. That’s what they are after, faster turn times so the borrowers don’t have time to SHOP the deal around to other lenders.

      Our congressmen WILL take their money and WILL pass the bill.

      But will the investors out their want loans based on a computer……I know they wont, especially the C and D paper.

      Stick to your fee’s. Say NO to the lower paying clients WHEN you can. Good paying companies are out there. When the lower ones can’t find appraisers THEIR clients will look for other AMC’s to handle their work.

      Hurry up and retire you old timers, Simple Supply And Demand will solve ALL of our problems. Every One !

      I know an appraiser who was raised to $375 a job (without asking) from $330. HMMMM….I guess they don’t have a lot of appraisers to call anymore. I begged her to do it 6 months before though.

      Wait till spring boys, just wait till spring.

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    • Chris says:

      Mike,

      I am currently in Thailand for 3 weeks. I have decided to live life. I gave 23 years to an industry that showed us no respect unless the deal was made. I had a hundred clients none of which ever called to say hello after hvcc. I was then absorbed by a National Bank who treated us with less respect than janitors. They maximized their income by making us drive an hour North, South and an hour East. When we got back to the office there were three more assignments 1 to the North, south and east. You may have heard that we’ve won a fifty-million-dollar class action settlement against them. I am currently working for the VA. The system is extremely Fair yes I do complex assignments but we also get cookie cutter assignments. I consider it a shame that the majority of the appraisers cannot organize themselves. While the nude models that stand in front of the art classes organized themselves across the country for better wages, warmer working conditions as well as other things. I consider appraisers the dumbest smart people there are. I did reviews for The Big funders in his country for 5 years I saw the most deplorable reports ever.  The elimination of these appraisers is warranted. While the level imposed is extreme at least we will get appraisals that are properly written. I just heard from a friend that conventional appraisals fees were raised to 425. These companies are now afraid of being taken to court over customary and reasonable fees.

      Times Are A-Changin.

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      • Mike Ford, CA AG, SCREA, AGA, GAA, RAA Mike Ford, CA AG, SCREA, AGA, GAA, RAA says:

        Good for you Chris! Too many of us just accept no vacations as a necessary part of the business. Many I know have to rebuild their ties with the same clients when they go. Seriously. Its as though they are punished for not being available; even though they may be preferred appraisers with exemplary work quality.

        Chris we’ve all said it over and over again. We are in fact our own worst enemies.

        I was reading the NAR comments from appraisers the other day. One said we ought to form a union! Now if I could just reach out and smack him! Where has HE been for five+ years?

        (For those that do not know, there IS an appraisers union and Im not talking about the one that caters to government appraisers only formerly headed by an embezzler either!

        I AM talking about the American Guild of Appraisers, OPEIU/AFL-CIO and for those that don’t know (apparently there are a few still), the reason we get things done is (1) we are lead by volunteers-not high salaried opportunists. (2)  We are in fact lead by appraisers. (3) The key to our success is commitment AND a membership that includes not only the appraiser members, but over thirteen million members, their families and retirees a well!

        Those thirteen million members are also tax payers and consumers. Right or wrong, when THEY speak, even Congress has to listen.

        Chris, you have a great time over there. Hopefully other appraisers will follow your lead!

         

        PS anyone else notice that Blog Hosts fixed the annoying capchas? THANK YOU!

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      • Retired Appraiser Retired Appraiser says:

        “I consider it a shame that the majority of the appraisers cannot organize…”

        “I consider appraisers the dumbest smart people there are”

         

        My God you echo my sentiments towards both appraisers and the appraisal profession for the last seven years!  Where hath my twin been for all of these years?

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      • Chris says:

        Trying to survive under the economic oppression of a greedy national bank called Bank of America and their Appraiser Economic Oppressor Landafe. Did you know they held a deal for 3 days to save themselves $10.00?

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