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Why It’s Not Unusual to Buy a House for More than the Bank Appraiser Values It

November 26, 2012

P R O P E R T Y   S E A R C H

R E S T I V O – H E C H T M A N    T E A M

Several recent appraisal catastrophies almost derailed a handful of home sales for our buyers and sellers. Keeping those transactions on track took effort and creativity.

Appraisal issues are way too common!  Wondering why?

Phil Spool, an appraiser who writes for appraisal magazines, has contributed a series of articles about the current appraisal climate for our website …  MiamiRealEstateCafe.com … that we will post this week.

1st in a 4 part series on Appraisal Woes …. By Contributing Author,  Philip G. Spool, ASA

“For many years appraisers were complaining that mortgage brokers were interfering with their conclusion of value, pushing the appraiser to come up with a higher value.

On May 1, 2009, appraisers got their wish with the creation of the Home Valuation Code of Conduct (HVCC) requiring all lending institutions to go through an intermediary in ordering appraisals.

This meant that mortgage brokers were no longer allowed to order the appraisal and banks had to either have someone within the bank not associated with the lending department to order the appraisals or to go through the intermediary.

Most banks decided it was easier to go through an intermediary and thus appraisal management companies, commonly referred to as an AMC, to order the appraisal and submit it to the lender.  Ironically, what the appraiser believed would be total appraisal independence turned into a nightmare for them.” 

“Almost immediately, the fee for the appraiser went from an average of $350 to around $175, or a 50% decrease in their income. The AMCs were charging the banks around $500 and pocketing around $325 for their fee.

Many of the good appraisers were unhappy with fee reduction and either left the appraisal industry or no longer did appraisals for lending institutions.

This resulted in AMCs maintaining appraisers who were happy with just $175 to $200 and willing to complete an appraisal report within a 48 hour turnaround time.

With the reduction of good appraisers, AMCs were contracting appraisers who were either not properly trained or were located in areas far away from their assignment.

But this is not the main reason why appraisals were resulting in much lower values, enough in many cases to either cause a sale to fall apart or for the buyer to come up with additional funds due to a reduced loan based on the lower appraised value.

There are actually two reasons why you see an appraiser these days go from being very generous in their values to ultra conservative.”

Tomorrow’s MiamiRealEstateCafe Blog  by Phil Spool is a continuation in a four-part series, and will detail why appraisals are coming in with such wide discrepancies in value.

Miami Real Estate Cafe.com   …  Real Estate Website by local Miami Real Estate Experts,  Vicki and Alexandra Restivo, for our buyers and sellers  and other real estate professions  …  Are you looking to buy or sell?  We would love to work with you !   …  Call or email us at 305 793-1365 or restivo.v@ewm.com anytime.

Phil  Spool has been appraising in Miami-Dade County since 1973, is a state-certified general appraiser, is vice president of the Greater Miami Chapter of the American Society of Appraisers and has published numerous articles in Working RE Magazine, a national appraisal journal, and through  MiamiRealEstateCafe.com. He can be reached at pgspool@bellsouth.net.




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