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Appraisers Under Pressure By Charles L. Drecksler, IFAS
How much pressure does an appraiser receive from either the brokers/agents or
the lending institutions to make the numbers work? Many appraisers had hoped
following the experience of the savings and loan crisis of the late1980’s and
the advent of state licensing of appraisers, some of the appraisal related
problems in the lending industry would be solved. To the surprise of the
industry, this has not been the story. Many believe the problem is worse today
than before licensing. I would be remiss in this article if I did not mention
that there is an Appraiser Petition signed by over 7,800 appraisers on
www.AppraisersForum.com regarding
appraiser pressure. It is my understanding that the secondary market including
and not limited to Fannie Mae and Freddie Mac, the
National Association of Independent Fee Appraisers and the
Appraisal Institute are aware
of the petition and trying to work to solve some of the problems facing
appraisers. It takes a great deal of pressure to get that many appraisers to
agree on anything and sign such a petition. Let’s take a look at some of the
types of pressure that are applied to appraisers.
First, many large lending institutions own appraisal management companies. Their
vendor agreements are just too one sided to even think about signing. There have
been numerous posts and discussions on the appraisal chat rooms regarding this
very issue. Many appraisers have decided not to sign these vendor agreements and
seek other types of appraisal assignments or are just getting out of the
appraisal business. The other concern here is that these same appraisal
management companies are taking a greater percent of the appraisal fee and
taking the profit out of the profession. Are many of the lenders taking a
short-term approach by making appraisals a profit center? How many of these
appraisal assignments are being completed by trainees and the low fee provider?
I cannot tell you how many well-qualified appraisers have stopped doing work for
this type of client. The quality of appraisal reports being submitted to these
lenders concerns me. If appraisers are required to sign these one-sided vendor
agreements, then what other items are the appraisers being forced to overlook or
value to hit in order to get appraisal assignments? Education, experience,
residential designations and integrity are no longer factors for getting
appraisal work. Appraisers who sign the vendor agreement and accept work at 1980
fees are the ones getting the appraisal business. Can this be the start of
another savings and loan crisis with a different name coming down the road?
Second, lender pressure is not limited to mortgage brokers. Many large
institutions with tremendous clout also apply pressure. How many times are
appraisal requests sent with the following statement: IF THE VALUE ISN’T THERE,
STOP AND NOTIFY US? “An appraiser must not accept an assignment that includes
the reporting of predetermined opinions and conclusions” according to
Uniform
Standards of Professional Appraisal Practice. Appraisers are required to
follow USPAP guidelines. Our interpretation is that appraisers may not accept
appraisal assignments with terminology similar to what is noted above.
Appraisers are not to accept appraisal assignments with pre-determined value
conclusions. Payment for appraisal services is not subject to hitting a
pre-determined value or an event occurring. These are major violations of USPAP.
Both mortgage brokers and lending institutions send appraisal assignments that
include such verbiage on a daily basis. Many brokers/lenders fail to pay the
appraiser if the desired results, pre-determined value, are not concluded. These
are major forms of pressure applied to appraisers. Can appraisers continue to
make a living in this type of appraisal environment?
Third, appraisers are under tremendous pressure to “hit the number”. Appraisers
are to make the deal work or not get future appraisal assignments. The appraiser
who does not hit the desired results is not a TEAM PLAYER and labeled a DEAL
KILLER. Most likely you will stay on the lender’s list. It’s just that you will
be placed at the bottom of the list never to be heard from again. Kill a deal
and you most likely will not get another appraisal assignment from that lender.
You’re only as good as your last appraisal! It does not make a difference how
good your comparables are. Appraisers are told to make the deal work! Is this
common? More common than anyone wants to admit. Yes, this type of pressure is at
the heart of the problem. It works on taking the honest appraisers, well
qualified appraisers, right out of making a living. Appraisers have a choice to
hit the target number or you will not get future appraisal assignments.
Fourth, appraisers are pressured to ignore items. There is no carpet in the
subject property or it’s really in need of replacement. The house backs up to a
major freeway. Oh, the subject property is in the flight path of an airport! Can
we note external obsolescence in the report? There is major cracking in the
foundation. The basement has water damage and needs repair. Is that mold? There
is a room addition without permits, which does not meet code. Security bars on
bedrooms without release bars. Should appraisers dare mention any of these
items? The appraiser is threatened time after time either take this out or you
will not receive another appraisal assignment from us or any of our affiliates.
Is this put in writing? NO. Is this done all the time? YES, everyday of the
week!
In conclusion, vendor agreements, appraisal assignments that do not meet USPAP
guidelines, pressure to hit a pre-determined number and pressure to overlook
items along with non-payment for services rendered are just some types of
pressure applied to appraisers. Let me make note that there are many brokers and
lending institutions following the guidelines and are a pleasure to work with.
To our clients and others that fall in this category, thank you! Are there
solutions to stop or at least slow down these types of pressures applied to
appraisers? Yes, look no further than Fannie Mae and Freddie Mac guidelines.
APPRAISERS AND UNDERWRITERS ARE NOT SUPPOSED TO REPORT TO LOAN PRODUCTION. We
need to go no further than this to solve many of the problems facing appraisers
today. Many lending institutions / mortgage brokers want the appraiser to
solicit the loan officer for appraisal assignments. Or worse yet, the loan
officer is allowed to select the appraiser. As long as this trend continues,
pressure on appraisers will most likely continue and only get worse. It is up to
the appraisers to make the final decision as to what type of profession they
want. Hopefully, there are enough well qualified appraisers, designated and
non-designated, that are willing to step up to the plate and do the right thing.
Appraisers must just say NO. This will make a difference not only in the
appraisal profession but also in the quality of loans in our lending
institution’s portfolios. Do we dare risk another banking debacle?
Contact Information:
Drecksler & Associates, Inc.
Charles L. Drecksler, IFAS
444 Manget Street, Suite 400
Marietta, GA 30060
Tel: 770-916-1074
Fax: 770-916-1014
Appraisals@RealEstateAppraiser.com
First Published 01.2000
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