Attack on Appraisers

Eliminating the Appraiser? Remember Liar Loans of a Decade Ago?

Remember liar loans of a decade ago? Those same people want to do away with appraisers.

My friend and appraisal colleague Ryan Lundquist and I authored a petition on to point out the growing reckless behavior that is enveloping the mortgage process.

There’s a proposal from the FDIC, Federal Reserve, and Treasury Department not to require appraisals for some mortgages under $400,000.

As we say in the petition, this change can impact several groups in particular: consumers, the taxpayers, the housing market and appraisers.

One group not explicitly mentioned in the petition but impacted down the road are real estate agents and brokers. Currently, 12% of mortgages that flow through the GSE (Fannie Mae and Freddie Mac account for 78% of residential mortgages right now) will have their appraisals waived. Those are “PIW” loans or have a “Property Inspection Waiver.” My good friend and appraiser colleague Phil Crawford says on his radio show “Voice of Appraisal” the acronym stands for “Pissing In Wind” which is more accurate. If the buyer realizes they overpaid for the property, the agents are now the professionals with the bullseye on their back. Liability insurers are already talking about a new target when things go south.

Years ago and again this morning, I heard a real estate agent say – what do we need you (appraisers) for? “The seller and the buyer determined the market value by agreeing on the price.” The problem with this logic is the buyer may not be fully informed (i.e., from an out of market area) and will also mortgage fraud supercharged. Ever heard of straw buyers? Agents must remember that they are perceived as biased even with the best intentions and the best ethics because they are paid only if the deal closes. When something goes wrong, they are completely exposed.

The direction that was taken by regulators relies heavily on AVMs (think Zillow’s Zestimate which is not within 4.3% of the actual value 50% of the time) and “hybrid appraisers” (which removes the appraiser from the actual inspection of properties) to develop a value opinion. The inspection of the property, when done, will rely on non-licensed individuals to fill out a checklist and give an appraiser at a desk the information without any standardization, direct contact or assurance the inspector knows what they are doing. I’ve heard of fees as low as $8 to do the inspection and $78 for the appraiser. As far as I can tell, a full appraisal (inspection and analysis) cost can represent as little as a hundredth of a percent of a purchase transaction.

This petition is for everyone to sign, not just appraisers. Please sign and help bring attention to a pattern we just lived through in the financial crisis. It’s happening again.

Please make your voice known, read about and hopefully sign the petition below:

PETITION: Remember liar loans of a decade ago? Those same people want to do away with appraisers.

There are lots of issues facing appraisers right now, so let’s focus on the big rocks first and sign the petition!

The FHA Attack On Appraisers Was Timed To Make Way For Getting Rid of Them

Inflated Home Appraisals Drain Billions From Government Insurance Fund [WSJ]

Federal Housing Administration says it expects to lose $14.4 billion in coming years, potentially raising premiums on mortgages insured by the FHA

FHA seems to be rewriting history. When the GSEs were bailed out in 2008, FHA became a “last resort” program for many home buyers that couldn’t afford a 20% downpayment and lending was rampant and reckless. Now that they are having problems, they seem to be singling out the appraiser’s role a few days before major appraisal rule changes are being proposed.

In my opinion, there are no coincidences when it comes to proposed regulations. See OFT below. Read more »

Jonathan Miller
Jonathan Miller

Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts.

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21 Responses

  1. Avatar Ralph says:

    Good article Jonathan, I once had an agent say the same thing to me on a very complex property, in a complex location. He said, I don’t understand why you need to be here, a house is worth what someone is willing to pay. My response was, your absolutely correct, if the buyer was paying cash! He looked at me funny and didn’t understand at all. I broke it down like this to him, The subject property is a 2,000 sf box, the bank wants to see what other 2,000 sf boxes have sold for, not what said buyer has agreed to pay. If you don’t want me here find a cash buyer. 95% of agents can’t see beyond their current commission!

    • Avatar bill johnson says:

      The agent thought “its worth what someone is willing to pay”, is not only incorrect, but is financially dangerous. I spent three hours yesterday (Reconsideration of value) making a bullet proof appraisal nuclear bomb proof, as the market value is $1,000,000, and is far from the sales contract price of $1,130,000. The issue is that the buyers agent talked the buyer into removing the appraisal contingency (not smart), and the listing agent I met, you guessed it, said “the property is worth what someone is willing to pay”, and he lived next door. I’m not throwing mud, but are the agents knowledgeable in this case, or were they blinded by the potential split commission ($56,500)?
      Lowering the standards, or eliminating checks and balances (appraisals), will not result in less problems, but more problems.
      Seek the truth.

  2. Avatar JW says:

    So glad you are mentioning everyone that will be affected by this reckless behavior because often non mentioned parties do not realize that they to will be affected. I have heard mention that AI will also attempt to do away with mortgage brokers. These are the big boys trying to push out every small mortgage company, credit union and community banks. We all need to stand up against the AI movement. At some point no one will be working so how will anyone be able to buy a house

  3. Avatar marion says:

    2,489,800+ people have signed the petition to Save Net Neutrality. Didn’t save that either. More than a petition is needed.

  4. Baggins Baggins says:

    Another great article. Per above commentary; It’s not the lender’s responsibility to loan more money so one buyer can beat out another. Value is rooted in resale value as if the buyer walks away the day after.

    In heated markets, there is a sort of quasi straw buyer effect as a myriad of llc’s and other resale focused participators play their hand in heated markets. They do not stop, until the rising market stops.

    A layman like myself might conclude that evals will sub full appraisal service in waiver and under demin scenarios? Related, click link, pg 7 & 8, link repost;

    Please educate on this matter. That reads to me, that in stable economic periods where real estate is steady, far fewer appraisals would be required. Supertalls around central park? I’m thankful to provide simple appraisal service in regular sf det suburbs.

  5. Avatar TruthBTold says:

    Great job Jonathan. I will include in my recurring posts to help inform the general public.

  6. Avatar Michael Curtis, SRA, AI-RRS says:

    Very good article Jonathan. It is a cycle that keeps repeating itself. I have been through several of these. In the late 80’s during the S&L crisis, appraisers were blamed, which lead to state licensing which caused lower quality appraisals. The only thing that kept us in business was the investor who actually loaned the money. Excuses for elimination of appraiser were many: saving the consumer money, speeding up the loan process, foreclosure rate of less than 7% being acceptable, etc. it is all happening again. Fees went up, middle man AMC taking higher % of fee when appraiser is taking all the risk, doing all the work and getting paid the least. This time it is hybrid appraisals. I will not do them. Example: borrower pays bank $700, bank pays AMC $350, appraiser gets $35, “inspector” gets $45. What a joke. Glad I am retiring in a couple of weeks from all this B.S.


  8. Avatar chris says:

    An agent told me she was selling houses for 10 years…The appraisal came in very light because they did not have a basement. As usual she was confused….So I asked her if when she ran her CMA, “did you take out basements in your search?” Obviously not. Then she said she had no idea of what a basement was worth. The sad part was most of the sales had finished basements….even more of a loss. Our agents are dumb as dirt ! Even the older ones. Not all though to be fair, but most ! And I ask them repeatedly why are they not taught this stuff in their schools with all the redundant classes we are made to take every year ??? They all say the same thing…they are not ! Part of my market is spot construction over 100 years, rarely 2 of the same. Many realtors call me and ask, they have no idea of what to list it for.

  9. Avatar chris says:

    From your writings, They are definite smarter than you. Sorry to say. You probably deal with a different type of commercial realtor though. Our residential ones out here were unemployed people who looked at the want ads, took 2 months of real state classes and then put on a suit or dress and pretend to the public they are professionals. They know more about valuations than me ???… ! You  probably think I am one of the dumb residential appraisers who was taught by my mommy or daddy…lol. I was given the most complex assignments by the gentleman who taught me, while he did the no brainier ones….He was even yelled at by the owner of the company for such, until I told the owner “keep them coming.” I love them. The ones I am talking about are the ones every one was scared to take. Please don’t respond, you will only make yourself sound even dumber than you already have shown yourself to be.

    • Chris,

      Sorry, but I take that as a compliment coming from you. I did not mean to hurt your feelings only educate you to the facts. You see I was an Agent, Broker, (never a realtor) with a BS in Real Estate before I decided to take on Appraising Full Time. I think more appraisers should follow this career path, our profession would be better off for it. For heaven’s sake, I have never been able to understand how you folks, with no real estate background, think you know how to appraise. TRULY DISGUSTING.


      All that stuff about your former employer really convinces me. Please do not bother me anymore with your silly nonsense.

      • Avatar chris says:

        You really need physiological help. Whats facts???…that realtors are smarter than appraisers ?? Sorry haven’t met any….in 26 years…dumb as dirt actually ! Just got off the phone with one. You have no idea of who I am, what my past was, the complex properties I have appraised in the multi-million dollar range with no comps…Sent all over 3 states and paid by my clients double because they didn’t want another appraiser handling their deals, I would tell you more, but it would be a waste of my time. So I wont bother, but your combative attitude, and seems like it is all the time on this blog. I will let the others say their peace. But seriously, you really need to go talk to someone, you make no sense. And I would rather not put on this blog your character deficiencies.

        My apologies to the other bloggers that make sense.


          • Live discussion is welcome here but please avoid personal attacks and be respectful to your fellow appraisers. If you disagree with someone, please express yourself respectfully. Snide or rude comments are not constructive and certainly not helpful.

            We are facing a lot of issues right now. The goal of this blog is for appraisers to come together, NOT attack one another! Thank you for your cooperation!

  10. I dispute Zillow’s claim that they are only 4.3% wrong at all. Ever, except by sheer happenstance. Tell me they are 50% wrong 4.3% of the time and I would doubt that as well-believing it to be understated as to frequency. I have only found them to be right about 5% of the time. Has ANYONE vetted their claim (& inferred accuracy) of only being 4.3% wrong 50% of the time?

    After all, who can claim to be 95.7% accurate all the time when values take place in a range that may well cover a 5% to 10% spread?

    We have once again allowed ourselves to be distracted by the shiny baubles. We seek to justify ourselves rather than exposing the Zillow (inferred) accuracy claim for the lie it is

    As for the FHA claim, it’s support was spurious, to begin with. When the metric for comparison is the contract itself an even more sound argument could be “that periodically, a property is sold 3.7% BELOW value.”

    If the name CoreLogic appears anywhere in the analysis of ‘data’ it really is necessary to view the claims with skepticism. The same skepticism we would view an interested parties representations when they have a stake in the property transaction we are doing an appraisal for.

    I’m not saying CL is always lying. Quite the opposite. I am saying they fail to support their analytical conclusions adequately and are frequently carelessly incorrect…yet I have never heard or read about them acknowledging egregiously incorrect data reporting such as is very often found in their RealQuest or Realist products.


    There’s a proposal from the FDIC, Federal Reserve, and Treasury Department not to require appraisals for some mortgages under $400,000. The Trump Administration wants to disrupt the role of appraisers, but that’s not a good idea. 

    • Baggins Baggins says:

      Clarification; The members of the current administration, which the president does not have time to oversee every single activity everywhere all at once, the responsibilities are delegated. Cabinets are regrettably staffed with insiders, always have been, always will be. You could fall for the propaganda and just blame one individual person. Betcha a pepsi that the problems were there before any given president was in place, and will continue to be there long after… The political landscape you see on fake news media is nothing but an illusion. We have one party; the party of debt, the party of war, the party of big government, all one in the same.

  12. I just did an appraisal where all the comps were in a wide multi-million dollar range. One in particular (not the highest btw) sold as a verified AND verifiable open market, arms-length transaction after adequate though not excessive time on the market. It sold for $15,000,000 and recorded on 12/01/2018.

    The CoreLogic RealAVM “value” (or price, or dart & or Quija board or whatever the hell it is) showed this ‘comps’ RealAVM value as $8,000,000 as of the exact same date.

    No matter how you look at it, the so-called RealAVM product by Corelogic was so far off the chart and out of range that this companies opinions on value, trends or anything else requiring experience based cognitive ability and skill should NEVER BE TRUSTED or relied upon.

    Certainly not for ‘Evaluations’; not for ‘state of the art algorithms to ‘detect value’ and especially not for reporting to or by government agencies as to whether appraisals are 3% high or 3% low or any other amount! This is NOT an isolated case.

    Let’s not lose sight of exactly what CoreLogic and all its purchased subsidiaries are. They are information collecting services. Bought out databases. So-called “aggregators” or collectors of the results on other peoples professional and or layperson ‘expertise’.

    They have never demonstrated any independently verified expertise in valuation techniques, principles or practices.

    They can’t even get physical property characteristics right, and none of their ‘services’ disclose any indication that they are ever wrong OR how often and by how much.

    If they ever did that, then users of their products would only pay what unreliable information is worth. I urge every appraiser that reads this to write to The Board of Governors of the Federal Reserve; the FHFA and FFIEC citing their own experiences with Corelamode’s misleading ‘value’ product.


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Attack on Appraisers

by Jonathan Miller time to read: 3 min