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Realtors complain about ‘low-ball’ appraisals
Fri, Jun 5, 2009 (2:05 a.m.)
Related story
Sun Archives
- Price of existing homes drops to '98 levels (5-22-2009)
- Report: Vegas home prices at 1998 levels (5-19-2009)
- Foreclosure filings drop (5-15-2009)
- Valley home prices plummet toward ZIP (5-15-2009)
Despite a 77 percent increase in existing home sales this year, some Realtors are complaining that low-ball appraisals are stifling sales.
First-time homebuyers and investors are leading the sales charge with home prices at their lowest in a decade, but Realtors contend that several appraisers are setting values that are much lower than they should be — and that those appraisals are killing sales.
Some call it an overreaction to the housing boom when some appraisers were accused of inflating prices on certain deals, prompting banks to lend more money than the property was worth. Appraisers contend they are setting prices based on what’s being paid in the market.
Mark Stark, owner of Prudential Americana, said he thinks appraisers are focusing too much on projecting what values will be instead of what they really are.
“The appraisers are being very conservative,” Stark said. “They are trying to cover themselves.”
What’s happening with appraisals has been felt the most in listings by homeowners who may, for example, have bought their home for $300,000 and are now selling it for $220,000, Stark said. If the appraisal came in at $205,000, that would force the seller to lower the price or the buyer would have to come up with $15,000 to make up the difference because the bank would loan only up to the appraised value, Stark said.
“The owner would rather tell them to drop dead than cut their price another $15,000,” Stark said. “I would say it is not causing us to lose all of these sales, but it is affecting 20 to 25 percent of the sales.”
About two-thirds of the existing home sales have been lender-owned properties.
Julie Burkart, an appraiser with Southwest Appraisal Service in Las Vegas, said everyone is surprised by the decline in values and suggested that the drop is not appraisers trying to cover themselves. They are basing their decisions on the data they have, she said.
“They are not worried about covering themselves if they are doing a good job,” Burkart said. “There are a lot of people out there who think their homes are excluded from the price drops, but they are not.”
But Mark Madsen, communications director for Raintree Mortgage Services, suggested some appraisers don’t want to come in too high with the values so that they can keep working.
“I think appraisers are scared to get blacklisted,” Madsen said. “If the appraisals are too high, then banks may no longer accept appraisals from that person,” Madsen said.
The issue of low-ball appraisals has been an ongoing concern of homebuilders, who said it has cost them sales. It has gotten to the point where appraisers aren’t even adding value to a home if it uses solar energy, said Monica Caruso, Southern Nevada Home Builders Association spokeswoman.
Low-ball appraisals are not having the same effect on foreclosure properties because banks don’t have an emotional attachment to a property, Stark said. Banks realize they have to lower the price if the appraisal comes in less than the agreed price, and the buyer isn’t willing to pay a greater down payment.
That, however, has created problems for some buyers who bid over the list price for a bank-owned home, only to lose out to someone who may have offered less, but was willing to pay cash, Stark said.
“The buyers are blaming us and asking what funny business is going on when banks are accepting an offer that’s $20,000 less,” Stark said.
He said he understands that appraisals are not an exact science, and it’s difficult to get the value down to the penny, but that doesn’t lessen his concerns.
“I am not trying to beat up on the appraisal system, but the pendulum has swung too far,” Stark said. “Maybe, they need to go after the problem with a scalpel.”
Nancy Tucker, a Realtor with Coldwell Banker Premier, said some of the fault lies with banks selling foreclosure properties. Lenders are listing initial prices that are well under the market value as a way to generate multiple offers.
The lender accepts the highest offer and other buyers fall by the wayside, Tucker said. But when the appraisal is completed for the home, it is well under the price agreed to by the lender and prospective buyer. That is forcing deals to get redone when there is no other competition left, she said.
The appraisers see the discrepancy between the list price and winning bid and that has an impact on them, Tucker said.
“I don’t have a problem with the appraisers,” Tucker said. “I don’t think it’s their fault. They can only go with what the comps are.”
Some are complaining new guidelines will slow the sales process and hurt the quality of appraisals. The guidelines went into effect May 1 and require that all appraisals for Fannie Mae and Freddie Mac mortgages be ordered through a third party. The new guidelines don’t apply to Federal Housing Administration mortgages, which are the bulk of the market, but some suggest that may happen in the future.
Stark said the new policies are a concern because there is no guarantee of appraisers’ quality of service because they are selected from a list rather than by the lender.
“You wouldn’t let a doctor operate on you if you didn’t know the quality of service he provides,” Stark said. “You have no say.”
Burkart said the intent of the new guidelines is to remove pressure that loan officers may have been putting on appraisers.
But the management companies selecting the appraisers are asking them to work for less and that is cutting out some of the better ones who are refusing the work. The ones left may be less experienced and that will cause further reviews and slow the sales process.
“This is not an easy market to work in, and if you don’t have a lot of experience, you could be in trouble,” Burkart said.
Las Vegas appraiser Scott Dugan said he’s worried about these third-party management firms getting too much power. By cutting fees for appraisers, that is going to mean less competent people doing the work and that will create problems, he said.
Madsen said he expects the new rules to push back closings by two to three weeks.
“With the amount of inventory we have out there, it is not good to slow it down,” Madsen said.
Tucker said the rules have pushed back her closings from about 30 days to 45 days.
Discussion: 34 comments so far…
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This is very sad that the realtors are blaming the appraisers for doing their jobs. Is it just greed that the realtors made good money this last go-a-round when the homes where over priced and now they can't settle with the current deflated prices? Now that the prices are, what might be said, back to normal, the realtors are screaming foul because their percentage is much lower than it was since '07. Even back then I read that people thought it was extremely abnormal the way housing prices were going up so fast, the realtors were really making the cash.
Now the realtors are complaining that the houses are being appraised to low. After making their money and watching homeowners lose their houses because of inflated prices that couldn't hold water, they should be ashamed at the way their acting now.
couldn't have said it better fremmasmind- greedy realtors. live in a world we all have to.
This is what the SUN chooses as front page news? Newsflash: real estate agents work on a commission, appraisers for a set fee. The higher the sales price, the more money the agent gets. Of course they want the value to come in high. The appraiser meanwhile doesn't get a piece of the action, so is not biased in the same fashion. So now when prices are low, it's the appraisers' fault that the agent is getting less money than they want? Please. This isn't "news"; it's more of an attempt to ridicule and manipulate a profession which is no longer operating as a lap dog for the Realtors.
And? At least now I can afford a house!
The appraisors are lowballing the home prices.
The inspectors should be included in all investigations. I reviewed an inspection report yesterday where the home inspector made the statement that window screens on the second floor are for safety to keep someone from falling out of the window when open. This is totally false and dangerous. Window screens help block a little sun and are for keeping insects out. There were also numerous errors about code violations. If the seller of that property loses the sale, he can sue the inspector for the erroneous report. The same could happen to an appraiser.
During the "boom", years ago, I could not afford a home in the area. The home prices rose from $130k, to $330k overnight. During these hard times, I can now afford one, as these homes are now back into the $130-150k range. Though I believe these prices will appreciate above the $150k range, I also believe the $330k home was aggressively overpriced, and buyers still went for it. "Supply and Demand"! If these homes could not sell, prices would have been reduced to reasonable amounts.
homes are never under priced or over priced, idiots.
they are sold at whatever price the market allows them to be sold at.
is a porsche over priced?
no...because people buy them.
is a $140 per column inch advertising rate in the review-journal over priced?
yes...because newspapers are going out of business.
I've got to agree that this is just Realtors throwing a temper-tantrum at the appraisers because they're losing their commissions. While maybe a couple of isolated incidents like the one cited have occurred, I seriously doubt that it's really the problem that Realtors are making it out to be. And besides that, haven't we seen lots of stories recently both here and on the RJ where Realtors are telling us now is the time to buy, because sales have increased so much that we're now almost at the bottom with prices poised to go back up?
Well now if figures are telling us that sales are really doing that well, how in the world are the appraisers really harming these sales by low-balling home values?
Hey all. This week on In Business Las Vegas, we get reaction to this story from the immediate past president of the Nevada State Appraisal Commission. That's on Las Vegas ONE, Cox Channel 19 at the days and times below:
Friday: 3:30pm & 8:30pm
Saturday: 7:00am & 9:30am
Sunday: 9:30am, 4:30pm, and 10:00pm
Monday: 10:00pm
"Well now if figures are telling us that sales are really doing that well, how in the world are the appraisers really harming these sales by low-balling home values?"
Because owners who are not in distress typically will not sell for a low-balled appraisal amount.
Appraisers are generally going to do the bidding of whomever has the momentum in the marketplace. Currently, that momentum belongs to the buyer who has cash or can get financing, so appraisers are going to try to please them. We are definitely not in a neutral market, or in one that favors sellers.
I think appraisers did the same thing years ago by overestimating home prices. It would have been nice if they had gone a little on the low side 5 years ago when I had to pay my ex half. Ha! :p
Appraisers have a job of giving the value of a property & if the realtor doesn't like the value-tough luck.
The price is based on what others are selling for, not what others are asking.
Let the appraisers do their job!
The values are low because comparable sales are low. That is all.
I would love to see a story where appraisers get to become experts in the real estate sales industry and then critique that side of the business.
WAH WAH - the realtors want the appraisals to support jacked-upped values (just like before) because higher prices mean higher commissions. It's not rocket science now is it?
Why weren't the realtors complaining when the appraisers were pushing appraisals, pricing people out of the market and causing lenders to over-extend themselves on homes that were supposedly going up in value by 10% a year, when the rest of the economy only grew by 4% or 5%?
Its a rhetorical question. The answer is, realtors get their commissions based on how high a price they can pass on to the sucker, I mean client, that they are helping to buy the house.
You don't pay a third party to help you make most of the other major purchases in your life. But, the real estate profession itself has created "local rules" and "customs" that necessitate hiring a realtor, over and above just making/accepting an offer, then hashing out the terms.
All the realtors I've ever worked with would show you 3 houses, then get frustrated if you didn't just pick one of them. Then, they put a 10 page form in front of you that was created by their trade group, and tell you how to fill it out.
For that, they get upwards of $50,000.
The buyer's agent gets paid more if you pay more for the house. The only times I ever paid less for a house than I was willing and able to pay, were when I refused to tell my realtor how much I was willing and could afford to pay.
There is a fundamental problem in the business model for realtors. I think many (most) of us look forward to the day when that profession/job experiences a huge paradigm shift, or just goes away entirely.
Comment removed by staff.
As the article states, banks and short-sellers are listing at low-ball prices to generate multiple offers and bidding wars, and then the appraisal comes in under the high bid (but above the listed price). It's the listing agents/brokers that are playing games, not the appraisers.
for example, have bought their home for $300,000 and are now selling it for $220,000, Stark said. If the appraisal came in at $205,000, that would force the seller to lower the price or the buyer would have to come up with $15,000 to make up the difference because the bank would loan only up to the appraised value, Stark said.
The bank should not loan up to the appraised value it should loan up to 80% of the appraised or 90% of the purchase price which ever is lower!
That, however, has created problems for some buyers who bid over the list price for a bank-owned home, only to lose out to someone who may have offered less, but was willing to pay cash, Stark said.
casinokid says I would think Cash is king! some people belive that this is a buyers market and it is only if you can pay cash!
But the management companies selecting the appraisers are asking them to work for less and that is cutting out some of the better ones who are refusing the work. The ones left may be less experienced and that will cause further reviews and slow the sales process.
casinokid says Good for the appraisers you want them to work for less and they got even with you by lowering you sales price. (I love It).
Oh by the way the banks don't have to accept the report, they can lend more if they want to.
House's are only worth what someone will pay for it, I paid more for a property than what it was worth one time simply because it was worth it to me and I paid what the bank would not loan on it as my down payment.
And doesn't the bank charge an origination fee based on a percentage of the appraisal, so there is an incentive for it to be inflated like in the past.
Realtors are the biggest cry babies and want their way on everything. There is weak job creation, retiring people in other parts of the country can't sell their houses, and so on,
people can live in a trailer in Quartzite, AZ for $165. a month for a full hook-up or for free on BLM land. There is a big glut of housing and people don't see it as an investment anymore.
these are the same people who wanted there appraisel to be high so they can make money F*** them
can't trust realtor can't trust lender i hope they all died and go to HELL
Surely there must be some appraisers reading this story who can relate horror stories about being "blackballed" when house prices were rising for the past several years.
When people were adding $10,000 per hour to their asking prices, appraisers routinely were being asked discreetly to "hit the number." The implication -- often explicity -- was, "Either hit the number I need or don't bother doing the appraisal. I'll get someone else, and you will get no more business from our brokerage if you are not going to 'play ball.'"
Well, now that the agents can no longer hand-pick their appraisers, they don't like the game, because they can't instruct (threaten) the appraiser to "hit the number."
Too bad, realty clowns. You should have saved your money when the housing market was going good and you were making huge commissions for being little more than a stenographer.
Prices were ARTIFICIALLY inflated during the housing bubble. Those houses were never really worth that and it was predicted and inevitable that prices would fall back to earth, it was just a question of when and how quickly. They still have a ways to fall, at least in some areas, because prices are still out of line with incomes which have been going down, not up. Now, with so many people being laid off or fearing that they will be, prices are going to have to fall even more. The housing and finance industries caused the bubble so a few could make billions of dollars--with no thought to the consequences of taking out the economy. The perpetrators of this scheme are largely getting away with it, though a few CEO's like Countrywide's Mozilo and KB Homes past exec have been accused of fraud. What usually happens is they pay the govt a fine to settle and buy themselves immunity, then go on doing the same things. A lot of fraud has been going on. The FBI was among those that should've been considered credible when they warned years ago that mortgage fraud was being done BY THE INDUSTRY and would take out the economy. But besides the FBI, even earlier warnings were out there by economists, bloggers, professors, and consumer groups. If these warnings had been heeded several years ago, we could've averted this mess. Instead, the govt was complicit, and the media ignored it. Unless you were an avid online reader of alternative news, govt reports, etc, you would've missed early-enough warnings to know that it was indeed a scheme and to stay out of it. Too many Americans get all their info from the TV set, from networks that are corporate owned, and will never report the truth in time to do any good.
Mark Stark YOU where silent when the Market was going the other way, were you not? Hurry up and buy prices are going up, you will miss out!! Now you feel hurt??? What a double standard you imply!!! Suck it up Mark. BY the way have you paid your creditors?
I am not here to bash appraisers or realtors. I am here as a seller you doesn't understand what is going on. I have priced my home to sell. well below the market value. Well below what I bought it for 7 years ago! I recieved an offer through an FHA loan. The last thing I was concerned about was the appraisal....I was giving my house away, selling for what I owe and the costs. I have a 15 year mortgage so I felt I was not upside down. But the appraiser used only short sales as comps. So he appraised my house at the highest short sale. I was told if only foreclosures and short sales are there for comps looking back 6 months, they are supposed to look back farther. A place sold in my community last November for more that twice what was appraised. Also, there are 2 homes that sold FHA less than a stones throw from my front door 2 months ago at more than twice the appraised value? What gives? How am I supposed to sell my house? The buyer felt she was "stealing it from me". I am not emotionally attached to the house. I have not inflated the value, I am one person who feels I have priced it correctly in the current market. I am taking a huge loss...but know it balances out where I am going. I am realistic. But the poor buyer is out the inspection fees, appraisal fees, and came away with nothing! Her lawyer suggested I take the appraised value and do a short sale? Can someone explain to me how appraisers are using comps these days? How can my house, that is not trashed by the way, be worth the same amount as one that was? And the appraiser ( and I am not kidding) spent 3 mins in my home. I feel what the complaint is here is not between realtors and appraisers and who makes how much money, I feel it comes down to this....the buyer was approved for an FHA loan well over my asking price. But was not allowed to buy my house because the appraisal was low. Where is this buyer going to find a house she can BUY? I am entry level housing. Where is she supposed to "enter" becoming a homeowner? If someone would explain this to me, I'd appreciate it. At the moment, I am not accepting any FHA loans. Why bother? Why waste my time off the market and why waste the poor buyers money?
Everyone seems so angry on here. Angry because they thought they were going to make all kinds of money buying a house and appraisers and real estate agents didnt stop them? Come on.
And to think that real estate agents are complaining about an appraisal being $5k-$10k low? You are talking about a couple of hundred dollars to them. I can see why someone might think that their motivation is that, but without the transaction going through, there is $0. Furthermore, since we are on the wagon that real estate agents are fat cats, also realize that appraisers arent the only ones taking a hit. Generally every bank is cutting commissions down too, so not only are the homes selling for $50k, but the % is cut down as well. Receptionists net more money than most real estate agents now.
What the article is discussing is how frustrating it is to work on a deal for 4-8 months, and an appraisal ceases everything an agent and their clients put into it, including money and time.
Amen to cbr600rr. Seems to me no one is making money and yet spending alot of time working. I am still hoping that an appraiser will be willing to answer my question and explain to me how come my house wouldn't appraise out? Here are some numbers for an appraiser to look at. My asking price, $88,900. FHA loan approved for $98,000. Appraisal came in at $62,000 which was the highest short sale price in my community. The home in Nov. of 08 sold for $139,000. The 2 in the past 2 months behind me, $120,000 and $130,000. ????? Doesn't there seem to be a problem here? My home is in excellent condition, new roof, new furnace and air, extra bath added, hardwood floors...one of the nicest ones in the community. Thanks in advance for taking the time to explain things to me.
I have to say that this is a true statement. My brothers and my self spent a year redoing my moms house and in October of last year we had it appraised at $129,000, We had a deal made @ 110,000$ and the appraisal came back @ $60,000 so we are going to make the house a rental. The low ball APPRAISAL KILLED The DEAL. Zillow on 6-8 has it valued @ 139500 and the appraisal came back @ 60,000 something is sideways.
Yea. My house as of today 6/9 on Zillow is priced $130,000. FHA Appraisal? $62,000. Something sideways for sure and I am still waiting for a real Appraiser to help all of us understand what is going on. We need to know so we can deal with our homes....meaning...CAN I sell my house? Do I need to TRY and refi? Will a conventional loan appraise out or am I just wasting my time?
Sadly, many of the posters are seeing this issue as "Wah Wah Cry baby Realtors". It's not.
You need to shift your perspective. Realtors can do just as well, selling more inventory, as they did when home prices were "too high", and they sold less inventory (just as long as the inventory actually moves.)
Appraisers are trying to stay ahead of the trend, or in many cases being complacent in their comps, not taking upgrades and home condition into account.
The real victims are the people who are selling their homes. Short Sales especially. Think about what it is like for them to have their houses on the market, priced competitively, for 50+% (Seen some that are 100%) less than they purchased it for, suddenly being told they need to sell it for another 50% or more less.
Most people simply can't afford to go any lower, or if they are short sellers, can't get the bank to agree to it, or they just plain run out of time and the bank forecloses. Mean while plenty of bank owned properties take the hit, and home values go down even more, then the cycle continues.
It's easy to shrug this article off, if you don't own a home that you plan to sell some day.
Wow, great conversation happening about the Las Vegas appraisal values.
I just wanted to jump in and thank Brian Wargo for putting this story together and bringing a huge amount of attention to the pain we're all feeling here in Vegas.
Realtor.org, as well as several other online publications picked this article up, which means that people care to listen.
It is obviously very challenging to fully explain in one article all the politics and economic conditions that are impacting our appraisals.
I put together a quick article on my blog as well to help further articulate some of the more complicated factors, such as the Home Valuation Code of Conduct (HVCC). Video included.
http://www.myfhamortgageblog.com/2009/06...
Bottom line, we are all dealing with a big mess in this city. I feel that there are several responsible parties to blame, but we all have to move forward together and focus on the things that we can control.
HVCC is something that all real estate professionals, buyers and sellers need to be aware of. Whether you are pro or con, it is important that you hear both sides of the issue so that you can make your voice count.
Thanks
mm