Don’t push around that appraiser!
Do you know what a real estate appraiser does?
Appraisers aren’t home inspectors. They’re not looking for flaws or code violations in a house that’s on the market. Their job is to see how much a home is worth.
Appraisers are a key part of the mortgage-lending process: Lenders require property appraisals before passing out money to homebuyers. There’s a good reason for this: Lenders need to know that the property, if it went back on the market, would sell for at least the same amount of money that they are loaning.
Appraisers use many tools to determine the value of a home. You can learn more about how they work by visiting the home pages of the American Society of Appraisers or the Appraisal Institute.
There is a dark side to appraising, though. Mortgage loan officers, eager to make sure that their deals close, have pressured appraisers to value homes at the point just high enough to make sure that their loans can be made. This excellent story at CNNMoney from earlier this year highlights the problem.
One state has taken action. Earlier this month, Gov. Schwarzenegger signed California’s Senate Bill 223 into law. The new law makes it a crime in California for any interested party in a real estate deal to pressure an appraiser to hit a predetermined amount when valuing a property.
In a press release, Abel Morales, an accredited senior appraiser of the American Society of Appraisers, said that many appraisers risk being blacklisted, not paid for their work or not being hired again if their appraisals come in at a lower amount than what the loan officers ordering the valuations request.
Will this law and others like it have an effect? Maybe loan officers in California will think twice about requesting specific values, and hinting strongly that such values will result in business, when ordering appraisals. But I doubt that any law will completely stop the pressure.
Loan officers are under incredible amounts of pressure themselves to close deals. If they don’t close them, they don’t get paid. It’s human nature, then, for them to do everything, even it means pressuring an appraiser, to get a deal done.
I’m sure most loan officers and appraisers work well together. I’m sure most of them are ethical and would never rely on inflated housing values to pass through questionable loans. But there are undoubtedly others who have no qualms about manipulating the appraisal process.
Both when we sold our starter house and when we applied for a refinance, our appraised values came in, miraculously, at just slightly over what we needed the numbers to be. Were those figures accurate snapshots of what our home was worth at the time? Maybe. But who knows what happened behind the scenes?
Tags: appraisal-fraud, appraisals, appraisers, California, lawRelated Stories
POSTED IN: Breaking News, Buying a Property, Educational Tools, Insights and Commentaries, Mortgage, Real Estate Scams, Real Estate Terms, Real Estate Tools, Rights and Laws, Selling a Property
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