If we spent half as much energy focused on stabilizing home prices, as
we do on “fixing” the appraisal industry or coming out with new low
cost valuation services, the real estate crisis would be over. Every week,
another new company announces the latest and greatest computerized
home valuation service that will provide the best quality home values
for the lowest costs.
Why all the attention on home valuation programs? What are we
missing? We have a real estate market in the dumps and all we hear
about are ways to save money on home valuations (trying to get people
used to seeing and hearing this phrase “home valuation” instead of
appraisal). Between appraisal management companies and all these new low cost automated valuation services, the key to solving our national real estate crisis appears to be by lowering the price of appraisals. If I’m buying a new home, especially in this market, I want the most experienced appraiser in town. Hec, I don’t even want to rush him or want the discounted version. I want them to spend some time investigating the true market value. I want to know the current market value, based on the opinion of the most qualified person in the market. Maybe spend a few hundred and save thousands. Rushing and greed is what got us into this mess in the first place. The problems started with easy money and no money down loans and expensive appraisals was never an issue. A few bad apples that falsified appraisals helped the problem, but they had to have help from lenders, attorneys, and others; but we don’t hear anything about them being reformed or replaced. Appraisers were just the easiest target without the national clout to fight back, so they became the scape goat of the real estate crisis.
Now, it seems like the appraisal process is totally upside down. While we certainly should be demanding quality in the appraisal industry, it seems all the focus is on getting new ways to save money on valuing the most expensive purchase of our lives. Wow! Where’s the logic in that? The AVM army has lots of great ads about “quality” and “low prices.”
Guess what; ain’t happening. Sorry, you can’t have your cake and eat it to. It’s a sales job and it’s all about profits. Nothing really that complicated. The same greed that created the worst housing crisis in history is running this new show, just trying to create a way for them to make more money. Last quarter’s billions weren’t quite enough. And, didn’t somebody say the economy was in crisis… Can’t prove it by looking at big banking profits.
We’re just digging this real estate crisis hole a little deeper every day. All this talk about positive signs in the national market is just a smoke screen. Like most of the real estate business, “it depends” applies to every situation. Some markets will always do well, regardless of the economy, and including their statistics in the national outlook brightens an otherwise dismal picture. It’s always about location, location, location. In those areas hardest hit, the bottom is still not in sight. Sorry to say, but as jobs are lost and houses foreclosed, it’s going to be a very long time before those areas see an upswing.
Well enough is enough! Just say NO to big banking and their so-called “appraisal reform.” We can’t fix the real estate problems overnight. But, we can start with one common sense law that will make sure consumers get the best chance of getting a fair price for their home. We need to protect those that do venture into the housing market and make the system the best is can be. Let’s not save them a few dollars, only to find out later they overpaid for their house. Sound familiar? So, what can we do? Let’s take away the profits from appraisals in mortgage loans, from anyone outside the appraisal industry (which requires a license and a great deal of training) and all this talk of appraisal reform and computerized home valuations will instantly disappear. An Automated Valuation Service best serves the people who own it – NOT consumers.
Some big computer company, who knows zero about real estate; and, who will never even look at the house they offer a value opinion about, is really the one we want to tell us what it is worth? Come on! Every day we get another company joining the growing selection of automated valuation services, offering “home valuations at a fraction of the costs.” At a fraction of the cost of a traditional appraisal we are left to assume. When this AVM comes in, no appraiser ever looked at the house or the report. If any review is done, it is most likely done by a computer. And, even if an appraiser does review the file, they have never seen the property in person (outside or inside), so how accurate can the value really be? Is this really how we want to find out the value of our homes?
Maybe I missed all the consumers screaming for lower appraisal prices. I thought they were more upset by runaway housing prices and overpaying for their homes (and home loans), instead of worrying the price of their appraisal. And, they really don’t know what they paid for the appraisal, because the bank doesn’t have to disclose the fee the appraiser actually received. They may pay the appraiser $200.00 and then charge the consumer a $450.00 appraisal fee on the closing statement. I believe there is a law that calls for “Full Disclosure” in mortgage lending. However, this little issue seems to have fallen through the cracks. Wonder who makes these rules?
The only ones worried about lowering appraisal fees are those who are trying to take those fees away from appraisers. Big banks and automated valuation services are fighting over appraisal fees. The appraisal industry was created to be a watchdog for consumers. Consumer protection is being thrown out the window on these new valuation products. And then stomped on and laughed at all the way to the bank. Computer home valuations are the worst enemy of the home buying public. Unless this mad dash to let computers take over the appraisal business stops soon, we are going to reach a whole new low in the real estate crisis.
If there was one new law tomorrow, that prohibited lenders (or anyone without an appraisal license) from profiting from the appraisal portion of a mortgage loan, 99% of the appraisal reform hoop-la would disappear. Make no mistake, it’s all about the money.