Blaming Appraisers
…deal falls through and everyone involved is convinced the appraiser ruined everything…
We hear all about low appraisals, but we never seem to hear about homes that are flat-out over priced, often by an agent who wants to prove they are smarter than everyone else and will take advantage of any unusual feature or circumstance to push the value beyond any other homes in the local market.
For example:
A buyer finds a house in need of some updating. Medium sized market and things are selling between 90-120 days on average. The neighborhood is good and the house has a three level deck that cost twenty-grand and a $10,000 water garden running beside the deck. These features are way above other things in the neighborhood, but they are still desirable. They buy the house for $220,000 and spend $45,000 on renovations; kitchen and bathrooms, paint and flooring, etc.. The agent tells them they can list the house at $394,900. The most expensive house in this area sold for $450,000. It was 1,418 sqft larger and sat on two lots, and had been totally remodeled. It was probably the best comp available. There were several other comps closer in size and age, but they all needed updating. They sold between $295,000 and $315,000. So, how much does remodeling add to a house? Of course, there are a lot of “it depends” with any real estate deal, but with an investment of $265,000, with a $394,900 list price, that could be a profit of around 50% in four months. We would all like to find a few of those investments! However…
The house appraised at $346,000, which was still a great return for four months work. But, this agent chose to file a complaint against the appraiser for “killing her deal.” Two other appraisals were ordered later in this transaction. One came in at $349,000 and the second at $334,000. The agent still bad mouthed only the first appraiser and told everyone she knew what an idiot he was. She said he didn’t understand the local market and she was the expert. She didn’t care what other homes had sold for because she is the local expert. She set the price and found a buyer willing to pay it and that should be enough. She knows better than any appraiser and they should listen to her experience. Her Blog post said “All my hard work was wasted by a backwards appraiser.”
They are too many examples of where agents push values just to see what they can get. The deal falls through and everyone involved is convinced the appraiser ruined everything for everyone. There are usually two agents involved in each transaction. One working for the seller and one for the buyer. The buyer’s agent is supposed to be watching out for their clients’ best interest, but far too often they only want to make the deal go through so they can get paid. They say the buyer is okay with the value and that’s all that matters. Consumer protection is lost in the rush to commissions.
Of course, every real estate valuation is partially subjective. But, most values can be logically developed with the experience and skill in the local market. No buyer should want to pay more for a property that it’s worth, but it happens every day, all across the country. And, Realtors® seem to push the pricing wheel higher and higher all the time. It’s like a numbers game about who can get the most. It’s very personal when you price a house. And, once you put that price out there, if someone comes along and says you were wrong about the value, well those are fighting words. “How dare you, I am the expert here.”
The listing agent is part of a much bigger problem no one seems to want to talk about. Realtor® education and responsibility should be a high priority in this day and time. After a decade of real estate problems, there are agents who still have not been properly trained and get into the business only to “make a little extra money.” A part-time agent is dangerous when it comes to most people’s single largest lifetime investment. I would think after all the discussion of appraisers and mortgages, and runaway real estate prices, this topic is something that should be on the radar. Blaming appraisers for every real estate problem is not the answer and it’s time to look at the heart of the problem – Realtors®!
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The blame is on the agent for impersonating a Licensed Appraiser,, and two falsely accusing another real estate practitioner. Both of which is a NAR Ethics violation.
Hamp, before I became an appraiser I was an agent (1971-1975 and again 1984-88 though I stopped as an agent in ’86 when I got my first appraiser job).
An agent’s job IS to push the market. Always. Done honestly, it is an honorable task.
BUT it is also his or her job to inform the sellers “Look the closed sales only support $300,000. Scarcity of listings and recent increases make it possible (POSSIBLE – not definitively) we may be able to get $315,000 to perhaps as much as $330,000. What we don’t know is whether when the appraisal is ordered if we will then be able to support the higher values. Most buyers won’t pay more than an appraisal even if they have that kind of extra cash. You may have to consider a lower price if we get “cut.” I used to then show the highest closed comparable sale in the area to them and say “This is what we are currently working with.”
No agent should ever be complaining about the appraiser to a state board. Number one, they aren’t our clients, and they shouldn’t be permitted to. Aside from that, it is THEIR job to support the value for the price they sell a property at – not mine.
Keller Williams agents in Dallas Fort Worth; and Florida have been guilty of this of late. It’s unfortunate, and diminishes the brand. My own personal experience in California has been KW agents are usually professional (aside from one we recently beat in court).
Last week our AGA Member in Texas received a Complaint Dismissal Letter from TALCB. He’d had such a phony complaint filed against him by a DFW KW “Team” (They all use weird sub-group names in a feeble attempt to insulate the brokerage or to boost their own imaginary success images).
Now it’s OUR turn to file charges against the individual agents AND their snarky, dishonest supervisory broker. A broker that is supposed to ‘supervise’ the actions of 623 other agents and broker-agents. There are numerous issues we will request TREC to look into. What the hell, we may as well file against the Corporate Broker as well since THEY are the ones that are obligated to have a competent supervisory broker watching over their agents.
Did y’all know Texas agents are supposed to have CMAs in their work files when they advise an owner what to sell a property for? It is only by pushing back each and every time this happens, that we will ever stop it. Each state brokerage rules are slightly different. Appraisers need to learn them. Once NAR becomes aware of the push back, we can offer helpful solutions to deal with both sides issues. Honestly.
Successful, good brokers don’t have time to waste defending stupid actions of their agents before their licensing boards. They spend a lot of money on corporate advertising. Being known for over pricing listings is not a reputation most of them would want.
For appraisers that don’t want to be known as ‘complainers’, we understand. Use OUR name through your membership. We don’t mind a bit being known for pushing back on behalf of our members.
My call sign, “Seek the truth”, was in part started because if and only when the truth is known can we truly judge others by their action or inaction. I recently completed an appraisal where the property was not a 4 bedroom, 2 bathroom, 1,800 sf home as MLS and agent advertised, but rather was a 1 bedroom, 1 bath home (900 sf), with a 900 sf basement (3 Br, 1 Ba). In CA where ghosts are more common than basements, the resulting error reduced the subjects market value by over $150,000. Not surprising the deal was killed, however what is surprising is that the same agent simply changed the listing from pending to active with no modification to the properties true property characteristics. Perhaps the next appraiser will be a newbie AMC staff appraiser where he or she either ignores the truth (basement), doesn’t know the truth, doesn’t seek the truth, or simply doesn’t care as they need to complete 3 assignments a day to stay off of the naughty list.
Seek the truth.
Listing agent started out at $450,000, just finished the report – appraised at $279,000, sales price $359,000, inflated 15 k for seller help. Realtor sent sales at $450,000, (notice I didn’t say comps) so far BEYOND in every way what our house was. You just have to laugh. And they kept dropping the price for 3 years…..you just have to laugh. Dumb as dirt !!!
When are state boards going to start putting the kaibosh on revenge complaints?
State board also need to find a way to take actions against those who make the false accusations (such as real estate agents who did not do their jobs properly)
Oh I had a state board (somewhat similar situation) tell me the agent was just doing her job in trying to get the best price for her clients. This agent also sent my report to an appraiser friend of hers and told me his name. I called this appraiser directly with the first words out of my mouth were Did you read my report?! He stated no..no..I did not and don’t worry about her she’s a little flaky.
Nothing but a pain in my a**
Some states (Texas) will hold another appraiser accountable for filing a false complaint, but not an agent, broker or member of the public. Their position is the latter group are not appraisal professionals and don’t really know what is or is not a USPAP violation.
That’s better than most states that have NO provisions. Texas sill needs to consider revising as long as they have brokers specifically urging people to file whenever they don’t like the appraisal. A pretty strong argument could be made that their is a conspiracy to circumvent Dodd Frank and appraisal independence requirements.
I’ll repeat my prior suggestion: ANYTIME and EVERY TIME an agent files a complaint against an appraiser; OR urges their client to do so we should be filing counter complaints against the agent and their broker.
Well, I always look at this as the lender killed the deal. Just because an appraisal comes in below the selling price doesn’t mean the lender is not allowed to close the loan and keep it in their portfolio. What the realtor should do is convince the lender to go ahead and close. I wonder how that would go over?
It’s the realtor that is telling the sellers that the appraisal was bad and that they should leave it back on the market, their egos getting in the way and they could care less that the seller has to carry the house for more months.
That’s why I still run comp searches prior to accepting orders. Never under any circumstances use the order auto accept features… Agents have it easy with continually rising markets. Their advocacy can really shine. Now comes the pain, rising rates, increasing credit requirements, fewer deals, slipping prices, a tighter market.
That’s when real estate sales agents may reconsider their career choice, and they’ll play it aggressive to the bitter end. Hopefully the appraisers who thought this industry was an easy play that would bring about consistent income will reconsider as well. Tough choices between income and ethic are on the horizon. Roll the dice with your license and personal equity one last time?
Also, a standard retort to those scenarios is the sales agent is ‘an interested party’. They are in violation of federal standards on appraisal independence if they seek to influence appraiser selection.
Appraisers are PROFESSIONAL bastards. Our value is taking the blame as a balance between the parties involved. In residential sales pricing is an important part, too low has no solution, too high the property can be re-offered. The appearance off too low of a price can change according to the health of the market. The appearance of to hi a listing can either illustrate an increasing market or effect a reduced price. In a healthy market price reductions frequently prove the appraisers position. It can also point out incomplete appraiser’s analysis of the continuously moving market.
The lenders have a major position in this continuously moving market, they can be a cause of the de-, or increase of values. The larger the market the harder to predict, Hence Appraiser Bastardization.
A lender has reduced responsibility in an FHA or FNMA guaranteed mortgage market.
A major justification of a fair fee is accepting the lack of fatherhood, and adequately mothering are work.
keep your fees UP
What about appraisers that take so long to get their appraisal in that it tanks the deal?
Dead lines caused by both legitimate causes such as verifications, equipment failures, etc. or ill legitimate ones such as a hangover after a hot date and laziness.
Appraisers are subject to either or both.
Dead lines are a one of the reasons I retired.
Well its definitely a sellers market, with buyers eyeing historically low mortgage rates. Many buyers are “buying a mortgage payment” and the “sale price” is a secondary factor. RE agents do not understand (or want to acknowledge) the appraisal constraints lenders place on appraisers. We all know that the lender constraints, many times impacts the ultimate value conclusions vs. say a private appraisal prepared without lender requirements. Thus, with the lender’s dominate control of the appraisal process, RE agents should be blaming lenders and the AMCs that carry out the lenders requirements. But, its a lot easier to just blame the appraisers who have both minimal influence and political clout. Not much has changed in 40 years, except the means to the ultimate blaming target.
Appraisers are Professional Bastards. Perfection is pissing off both sides equally.
MY father started selling R.E. as a part-time agent, and later as a broker around 1965. I started selling real estate in 1971. For about a two week period I was the youngest licensed R.E. Agent my state (under 21)…which has nothing to do with the story other than I’ve been exposed to the marketing of R.E. for more than a few decades.
Even back then agents knew that the upper limit was going to be what the property would appraise for…not what it could be ‘sold’ for. We ALL prepared CMAs (real ones) before we ever got out brokers’ signatures on listings to be submitted to MLS.
We became VERY good at documenting paper-pathways that lead to our concluded prices. We were more concerned about termite and repair costs than low appraisals. Not because ‘low’ appraisals never happened, but because they usually happened to incompetent agents that took any listing just to “get on the office scoreboard”.
Over the years a growing trend developed where agents stopped trying to educate sellers about the realities of Real Estate “Numbers”. Even experienced agents sidestepped their fiduciary duties to all parties until it became expected that each side MUST necessarily screw the other side, or they aren’t doing their jobs.
It’s ok to take an ‘over priced’ listing. As long as all parties to the listing KNOW it is an overpriced listing that the broker is going to expose and “see what happens”, BUT if it doesn’t sell a reduction can be expected. Or, if it DOES sell, that it may not appraise and in most prevailing NORMAL markets the majority of buyers don’t have cash to bring to the table for any possible collateral value issues. Thats just being a good agent, advocating for a client. It’s also where carefully considered concessions become important.
The problem comes about when that first conversation is never held with sellers OR when agents are so desperate for a closing (settlement) that they think intimidation and dishonest complaints about appraisal inadequacy, is going to get them paid.
The “Game” of R.E. can be challenging. Even fun. Extremely satisfying when as an agent, you “win”. On the other hand, those that bluster and intimidate to try to ‘win’ are likely to win nothing other than a heart attack and the animosity of everyone involved.
IF I sell my property, I will not likely do it as a FSBO. There are many valid reasons for this. Nor, as an appraiser will I presume to set the expected market value for it. I will be informed about area values, but the market ‘pulse’ …up or down is best determined by good local area agents.
Ray thanks for reminding me about the olden days *g*.