Dear Editor,
We are writing in response to Scott Van Voorhis’ column, “Realtors Unkind in Appraising Appraisal Situation” that appeared in the August 22, 2011 issue of the Banker & Tradesman.
Mr. Van Voorhis accurately described the underwriting attitude of lenders in today’s market. Faced with the prospect of billions of dollars in loan repurchases ordered by Fannie Mae and Freddie Mac for deals done 5 or 6 years ago, lenders have constricted all aspects of underwriting, including appraisals.
Appraisal management companies (AMCs) are a primary culprit behind many of the appraisal problems experienced today. Since the Home Valuation Code of Conduct was invoked in 2008, AMC’s share of the appraisal order market skyrocketed from about 30 percent of all orders to more than 70 percent today. It is our members’ experience that national, big bank lenders and their captive AMCs place greater importance on how low a fee they can pay an appraiser. Profit takes precedence over selecting an appraiser who has the experience, education and geographic knowledge to best complete the assignment. Realtors should be taking lenders to task for placing profit ahead of quality when it comes to appraisals. We also believe the Massachusetts legislature should act quickly to hold AMCs more accountable by passing MBREA’s legislation (House Bill 124) that will place AMCs under state supervision.
Appraiser competency is core to appraiser professional ethics and is addressed in the Uniform Standards of Professional Appraisal Practice. Knowledge of the market in which the property being appraised is located – geographic competency – is a provision of the Standards. An appraiser is permitted to appraise in unfamiliar territory provided he or she spends sufficient time to become familiar with the market. With lenders and appraisal management companies demanding that appraisals be completed in 48 hours, the time to gain local knowledge is non-existent. In this case, the appraiser who is unfamiliar with the market should decline the assignment.
Real estate appraising today is more challenging than it was a few years ago and it is more important now than ever before for competent, knowledgeable appraisers to be involved in the process. In addition to the overlapping guidelines and the risk-averse attitude of lenders, comparable sales are harder to find. One MBREA member recently pointed out that if the number of home sales year-to-date in 2011 are down 25 percent compared to the same period in 2006, that means one out of every four sales that might have been a good comparable in 2006 is gone in 2011. Sometimes, there may be no acceptable comparable sales in smaller towns.
We asked our members for ways the Realtor and appraiser communities could work better together. Despite the myths existing about who may speak with whom, Realtors and appraisers can talk with each other. Realtors know their communities intimately and should be prepared to be an advocate for the property. Provide the appraiser with details about recent homes placed under agreement and new listings. These can be used to help support a value. Don’t hesitate to assist or explain the positive attributes of a particular property explaining why buyers prefer one neighborhood over another.
There is no easy solution to what ails the mortgage market these days. The goal should be to find ways to have appraisals performed by geographically competent appraisers with the best possible information available.
As a result, the deals that should be made, will be made.
Sincerely,
Stephen J. Dunn, President, Massachusetts Board Of Real Estate Appraisers
Dedham
