The Stupid Appraiser

Home Valuation Code of Conduct - HVCC

Well, if you’re reading this, you’ve probably heard of it in the past few months. If you haven’t, you must’ve been living under a rock .

The media has had another field day, including a feeding frenzy of appraisers. Somehow, they’ve managed to still make “IT” all the appraisers’ fault - the delay in recovery of the economy, which supposedly would pick up if only the appraisers weren’t impeding the appreciation of Real Estate values - upon which the whole dang economy rests. Ya, right.

So, I was right!

In an earlier post I derided the HVCC (and it’s “cohorts”), mocking that, yes, that will make it all better. And - here we are. QED.

Low appraised values = faulty appraisals!

I’ve pulled two quotes, below, from this site, RISMedia.com, - see them in context:

Confronting New Appraisal Rules, Impact on Housing/From RISMedia

Bill Garber, director of government and external relations for the national Appraisal Institute, said appraisals are meant to be a risk-management tool for lenders “who typically don’t want to lend beyond what the value of the collateral is worth.”

“Appraisers don’t make the market. They simply report what is occurring within the markets, and they are sort of the eyes and ears of the lender,” said Garber, whose organization is the nation’s largest association of appraisers. “In the end, it’s really a lending decision.”

Read those two quotes again and let them sink in. Bill Garber is with the AI, my “nemesis”, but those words are “appraisal truths”. They are the job description for an appraisal assignment for mortgage lending purposes - the kind of appraisal most people are familiar with and complain about. Particularly important is the last sentence in the second quote: “In the end, it’s really a lending decision.” The lender could offer different terms, if they wanted to, but they may end up with a non-conforming loan they wouldn’t be able to easily pass along to third-party investors (FNMA, Investment Co’s, Private Party Investors, etc.). They don’t want the added risk of carrying that loan. as it might affect their stock - which, by-the-way (?) may be part of your 401k investment portfolio. The profits don’t all go into those smelly rich CEOs’ pockets, see. You DO want your 401k to perform well, don’t you?

You’ve got to connect the dots in life!

I pulled another quote, below, this one from LendingCentral.com, to shed a little more light on the trickle-down effect of regulations. Read this in it’s full context, then tell me whose fault it all really is.

US Report: Suspended home lender big blow to US mortgage brokers

Pair went on to say that new appraisals would need to be ordered for borrowers who transfer to another wholesaler as a result of requirements under the Home Valuation Code of Conduct.

“The issue of Taylor, Bean and Whitaker has shed more light on problems in the marketplace,” Pair stated. “Together, the HVCC and the MDIA disclosure requirements are causing unintended consequences and slowing a housing recovery. NAMB will continue to work to ensure the consumer will not be hindered or delayed.”

Well. Seems to me that the whole industry is being micro-managed to death by regulations.

I think we need to start over, from scratch. Seriously. Crooks will always find a way, no matter what or how much you regulate - it just makes it harder for the honest person to stay in business. To catch a crook, you’d have less loopholes to contend with, you’d just apply the intention of the underlying law. Of course, you’d need unbiased judges who’d throw out frivolous law suits - but we need them, anyway!

Oh, no - I think I’d better stop. Now!

There’s Knowledge.
There’s Experience.
There’s Understanding.

You impart knowledge.
You give experience.
You assess understanding.

If you’re lucky, you’ve just trained yourself a great new appraiser!

I’ve been lucky several times in my career, where the trainee just “got it”. Obversely, I’ve been unsuccessful many times, too. There’s nothing more frustrating than looking to turn on the light and not even finding the switch. Back to one of my favorite sayings: “There’s more than one way to skin a cat”. As it applies here: It’s not my way or the highway, but your way has to lead somewhere - if it doesn’t, you’re not going to be a successful good appraiser in the long run. You may be successful and you may have enough book knowledge to pass exams, but you won’t be a good appraiser.

Many saw the promise of easy money from appraising during this last R.E. boom. Licensing classes are not cheap, meanwhile you’ve got to find a “Mentor” who will guide you through the experience part and sign your work to make it count in the eyes of the Authorities. Your fee to get your actual license is another chunk of change, so by the time the Law figures you can stand on your own two feet, you’ve got quite an investment, both in dollar cost and time. Even if you didn’t “get it” and you’re on a road that leads to nowhere, you’re not likely to let it go at this point.

DAMN!

NOT damn YOU, - damn what “they” have done. And - damn us “old-timers” who let “them”.

I guess with licensing the appraiser profession became more respectable and more mainstream. In the -80’s it was a mysterious occupation - “what do you have to do to become an appraiser” and “you’re the first female appraiser I’ve ever known” were not unusual comments back then. Even a little non-client-specific banter about the appraisal process, itself, would often take place. Overall, it was a friendly climate. It has changed over the years, generally it has devolved into a “us vs. them” type of relationship - much like we’ve all been taught to despise management. Divide and conquer. I digress….
So, anyways now you can just go ahead and become an appraiser. “Anybody can become an appraiser…” - right? Apparently. Why else does USPAP keep squirming? Federal Laws & Regulations? Beloved FNMA? I’ll say it again and again: the more laws and regulations, the more insidious the crook. Only the stupid crooks get caught, the rest keep poisoning the appraisal pool and making it harder and harder for honest people to stay in business. Not because it is hard to be honest (unless you’re not so inclined to begin with) but because a lot of time has to be spent on convincing and proving that you took all the steps that the laws and regulations deem necessary to prove that you are, in fact, honest, and that you’re not in cahouts to mislead the world. Oh, and only honest appraisers care enough to truthfully go through those steps.
Now - an often overlooked fact: you really only hear about these conspiratorial appraisers in the context of mortgage lending. The whole profession has taken a hit, though, because that’s what most people associate an appraiser with. Unfortunately, lending work has been the main-stay for many appraisers for so many years that to loose that type of client easily pushes you out of business. That’s what happened to me - pressure was rising on the lenders and AMC’s loomed on the horizon. My main clients saw the writing way before HVCC came down and switched to AMC. AMC’s haven’t changed their way of business - their $ cut to the appraiser was shitty then, just as it is now. For the rest of the story, look for my “POOR ME” entry…
Ah, :::sob:::
BTW - the “easy money” part, think again. As an independent, self-employed appraiser your overhead is quite substantial. Back in the full-fee days, i.e., before the “mandatory” AMC’s, I did make a nice gross income, but easy - no! It was long hours, 6 days a week, sometimes 7. Four hours of sleep was often all I could squeeze out. Any and all weather conditions (in Southern California that’s not too bad, but it does get HOT!).
More on “easy money”: appraisers work on a flat fee which can vary from job to job, by bid. Usually, a standard fee is agreed upon for lending work with a particular client. This often varies from client to client, and of course with the type of appraisal assignment.

I’d love to see the appraiser’s compensation being a percentage of the appraised value - and then see who’s still being honest!!! I’d bet there’d be plenty of work for a few proven appraisers. But the most fun would come from watching “them” trying to legislate that honesty, hehe.
Hey - everybody else involved with mortgage lending is being paid on a percentage basis, why not us? It is obvious from existing legislation and regulation that the “serving the public trust” part of our commitment is not being trusted, anyway, so what the hell?

Thank you, I feel better now. I’ll sit down.