Appraisers the Convenient Scapegoats
Anytime the real estate market takes a hit, 99% of the time it is because of banking and lending practices. The appraisers are the convenient scapegoats every time.
During the 1980s it was the commercial side, yet residential appraisers received both barrels of double-odd buck. Then in 2008 again: stated income, 40 year loans, predatory lending (REFINANCING), NO money down (no skin in the game); people used their homes as a slot machine that paid out every time; that is as long as the market values continued to rise. Predatory lenders had a field day. Until the market topped out and prices became linear and started to fall. People who had a $500 a month mortgage which they barely could afford, suddenly found themselves with a $1,350 per month loan. So they walked away. Others lost their jobs and had paid 22 years for their 30 year mortgage to have it foreclosed upon.
So here we are again, this time it’s “racial discrimination – red lining”. NO appraiser compares a modest home or a shack to a mansion outside the general market area and calls them “comparable sales”. I know that read absurdly stupid, but this is EXACTLY the perceived discrimination. NO ONE is ever satisfied. NO ONE.
Census tract(s) are used by “banks” not appraisers. I have never researched sales by census tracts. Why do you suppose they are in your reporting requirements? This is a banker/credit union item. So exactly who would be doing the actual discriminating?
Now we find ourselves with yet another bullseye on our backs. So glad I’m nearing retirement age. Bankers want to do away with appraisers, yet they won’t lend without assurances/insurance i.e. an appraisal for their risk. What a conundrum we find ourselves in. People who have expressed interest in becoming an appraiser: I tell them to FLEE!
We get beat up because we are not represented capably!!!
Well said Pat. You hit the nail squarely on the head!
As an appraiser who has been doing it for 50 years, I’ve seen the good, the bad and ugly. The S & L debacle of the 80’s, the crazy market in 2003-2007 when the rates dropped from 18 & 20 down to 4% and again in the rapid increases in sales prices the last few years. When the current market goes downhill and properties won’t appraise at the value that is wanted it won’t be caused by discrimination it will be caused by greed and appraisers will be blamed again.
Greeting, I have been following the whole discrimination thing and for me it brings up 2 issues, with 40+ years in the field I can attest to the fact that no mortgage broker has ever, and I mean never, instructed an appraiser to low ball a property, it is exactly the opposite. These guys would lend on a property in hell if they could get the fee, the first phone call after they get the report is usually “can you do a little better”. My second thought continues to be – if a comparable house is available in a different neighborhood for a lower price, I mean all else being equal, would not the smart buyer purchase that lower priced house? I mean really, take a step back and tell me why the price differential exists, are the buyers paying more for the comparable house in a different neighborhood all just stupid? Maybe what the legislators don’t want to admit is that they are the ones who neglect certain neighborhoods in favor of others, think infrastructure including, and in my opinion most importantly, schools. Such BS, if they want AVM’s well the door has opened, see if that does anything to improve the alleged discrimination BS, spoiler alert, it will not because there was never such discrimination taking place. Happy New Year All.
Yeah like which is it? The people demand more affordable rates, and then demand higher housing values, then complain about affordability of housing, decry out of reach prices, demand more welfare while fretting about inflation. It’s important to consider that whenever a government person is involved, they’re probably advocating for higher taxation which means the larger number is always the preferred figure. Any sensible buyer will tell you, low prices is where the better value is at. Oh, if only somehow we could get through to these people that price is not the same as value. And discrimination or something like that. The public worldwide appears to be hopelessly financially ignorant now that central planners have been in control of banking systems for about a century.
Great article. It’s happening yet again as home prices decrease. American Enterprise Institute (AEI) just warned the public in a December 2022 report “Government lending policies are encouraging lower-wealth, cash-constrained homeowners to give up their valuable current low-rate mortgages and use cash-out refinances to meet other financial obligations. This use of “the house as an ATM” particularly during this rising mortgage rate environment can pose inherent risks for borrowers.”
And who will be blamed when these people refinance then can’t afford the new payment because of the recessionary economy? Appraisers…again! We were blamed for the Great Recession aka Great Financial Crisis. Today they say that was actually because of “racial discrimination by appraisers.”
These people are intentionally misinterpreting statistics. Yes, POC are more likely to lose their homes in foreclosure but it’s not the fault of appraisers. It’s a fact POC make less income than whites. People with less money buy less expensive homes. Politicians should fix the income inequality if they really care about POC. They won’t because that’s too hard and it’s easier to blame appraisers. Because of income inequality POC have less wealth, fewer assets, higher debt and no generational wealth. They generally put a low down payment with the help of government loans. They were also encouraged by the government to get student loans to “get an education to increase income and wealth” which hasn’t worked. They just ended up more in debt. The government is actually the one making these people more poor by causing them to lose what little money they have.
When these people refinance, they take out and spend all their home equity while increasing their monthly payment sometimes above their ability to easily repay it. The government even tells them it’s a great way to get rid of expensive credit card debt which encourages credit card debt. Values go down and they owe more than the home is worth. When you have no emergency savings, other assets, home equity and have an emergency, you will lose your home in foreclosure.
It’s not the fault of appraisers! Politicians, other say these lies to win votes and support from POC and low income people. They created this non existent racial problem just so they can say “I alone can fix it.” They hire like minded people to run HUD and other government programs. These people encourage and spread the false “government backed” narrative. They promote Andre Perry’s fake “paper” about racial disparity in home ownership. Years back we were just “deal killers.” Now we’re all allegedly “racists.”
Always great to see you on the boards here Mary, appreciated. Well it’s also a matter of location and perspective. What you say is true in urban centers, sometimes. The largest quantity of the most impoverished body of people in this country is rural white Americans. What exactly is wrong with lower prices? Governments actively encouraging over investment in housing is precisely the root cause of these problems. All this ‘appraisal modernization’, yet these entities although they want to reduce appraisers responsibility to not even being trusted to draw a simple honest sketch, or make personal inspections, slash a zero from a $500 fee and make it $50 if not half that, they still demand the full and complete benefit of appraisers insurance.
It’s not over just quite yet although the next cycle in the pump and dump cycle is taking hold right now. It seems these progressive jukebox 501c companies hoping to cash in on grant money to give our tax dollars away to their own preferred people and projects did not ram this latest iteration of taxation without representation through fast enough, so appraisers resistance like yours has mattered, perhaps more than you’ll ever actually know. The narrative will continue to unravel as the economy slips, the dollar devalues, inflation continues, etc, etc.
The problem with laying the entirety of blame at the appraisers feet is there is a logical fault, as if we’re the wizards controlling this entire economy, only the low information voters whom don’t have any sway without the backing of corrupted 501c non profit groups like Brookings would buy into that nonsense. Smart money is actually buying record levels of real property right now, via first in line special interest favors as FNMA and HUD are both right now selling the majority of all defaulted stock directly to hedge funds and investment firms before regular people can even make a play at them. The liberal progressive movement made a big deal about this in 2015 and the GSE’s at the time made a commitment and promise to limit the practice and make more houses and special programs available to citizens, via such examples as first look programs and sales party type limitations applied for at least the first few weeks of market exposure, assuring these properties were actually exposed to market in the first place which right now is not actually happening.
What’s happening now is so devious, because when hedge and investment firms pick up discounted properties at a discount ahead of regular citizens whom never have even a purchase opportunity to begin with, they essentially prop up the market and artificially hold prices and values higher while never returning value and savings back to citizens. Now over a decade on into these practices, these companies have likely with held untold volumes of value from regular citizens hoping to invest in real property. They have simultaneously with held trillions of dollars of savings from citizens, actually made housing availability factors much worse, and are among the root causes of housing over valuation as well as continued housing affordability factors. The liberal movement to blame appraisers has an identity crisis, as hedge funds and investment firms don’t even use appraisal services. They won’t be able to blame appraisers when they dump hundreds of thousands of units back to the market if they need corporate write downs. It’s not over just quite yet.
Andrew Perry is just another in a long line of sycophants whom know how to tap into other peoples money via the insanely corrupted 501c and grant programs which have already reached into unsustainable levels and are the root causes for kickback schemes such as the FTX scandal helped people understand better. It is well deserved and appropriate to question the integrity of any government person promoting non profit groups or the cause of ‘appraisal modernization’.
Great post. I agree with you. The appraiser just reports on the market with historical data. Our values are primarily based on past closed sales. We don’t control or drive the market or home prices. Buyers and sellers do that along with government agencies such as the Fed affecting interest rates. We are just the easy scapegoat, the public whipping boy for anything that goes wrong in the market.
Well said.
Appraisers need their own non profit to get some of that grant money. Oh wait, that’s right, we already have several of them. They don’t give back, they sell us down the river at every turn, and earn more than heads of multiple other government agencies combined. They are however, working on a new ‘social equity program’ to provide the illusion they actually care, but mostly it’s fear of them losing their lofty positions and fear of criticism from these outside swindler groups. Every single licensed appraiser in America should be able to vote for who heads the ASB and the TAF.
Appraisers are only guilty of one crime: Incompetence (a refusal to fight for control of their profession and their fees).
All appraisers still paying dues for whatever letters which follow whatever designation they obtained well you rather should have supported and focused that money to Phil Crawford. He 10 years ago tried to correct the issue. Meanwhile today any money spent is useless against the inevitable. Incompetence is not accurate. Phil tried.
I fought on the front line over the hijacking of appraisal fees for 4 years (2009. – 2012). Not once did I run across Phil Crawford’s name during those years. He arrived at the party with his pod cast much later in the game.
Ten years later, you’re still personally invested and care about the outcome of this industry. That’s because you understand it’s more than an individual job, but rather an important component of the overall checks and balances system. That says a lot. Picking up the license again is no big deal for an individual like you. Consider it something akin to a part time endeavor, of which you are well suited with relevant experience. You never know… Every time someone tells me the fat lady has sung, some sort of unexpected opportunity keeps popping up. I was all serious about lawn moving and even lined up multiple positions but don’t you know it, the orders are back.
Banks, Avms, amc they want appraisals, because like the saying goes garbage in/garbage out. Where will everyone get their data and their condition, quality and somewhat accurate GLA. Appraisers will become the new inspector for this with the photos. No more driving comparable like Google. The big question will be, does the inspection pay enough.
Utopian dreams, passed down to the masses. Go to google and request your property image and data be blurred out and removed today, lol. Like all data driven systems, there is no permanent database which will remain fixed in time and forever helpful, nor will it remain current. Just in case any technocrats are reading this post, nope, we don’t want robots or third party people charging into our homes with lidar tech either. How do these people even internalize any measure of supposed public acceptance of these programs? They’re drunk on their own kool aid, which we never partook in, and never will either. Take those discount orders if you want them, myself and a tens of thousands of other appraisers will not be in competition with you for that particular line of work.
“the Convenient Scapegoats” I loved the title even before reading it. My hopes were down the toilet with this profession long time ago. Its so sad since we invested so much brain power. Good luck to those survivors.
Hey, that’s me! Senior appraiser at your service. It’s not over yet, stay frosty.
You are correct. They want to get rid of appraisers and just have them sell their signature for a few bucks (for desktop appraisals, etc.). That way you’re 100% liable for a 10% fee.