Appraisal Contemplations is a column written by native Californian and a certified real estate appraiser, Aaron O. Thomas. He began appraising in Arizona and eventually ended up in San Diego where he owns and runs San Diego Appraisers. His firm specializes in greater San Diego County area residential properties and his clients include mortgage brokers, CPAs, lawyers, businesses and homeowners. Aaron is very outspoken and passionate about real estate appraising. Colleagues on Appraisers Forum have long known him as “Tucson Appraisals.” Good thing it’s too warm in San Diego to have the wool pulled over his eyes to the unethical business practice of the day: “comp checks.” Like me, he experienced a growing frustration in recent years with the form-filler mentality that many appraisers and users of appraisal services have embraced.
Jonathan Miller

There is a lot to be said about the growing pains and transitions that the housing industry is currently experiencing. Surely there is enough blame to go around. The borrowers exceeded their budgets, mortgage brokers coerced/pressured Appraisers for value to make the deal work (regardless of the moral implications), banks offered faulty sub-prime packages with minimal qualifications or safeguards and Appraisers promised/pushed values like a rocket to the moon. But through it all, there has been one main complaint from the honest Appraisers who saw the light…comp checks.

Comp checks were visible at the heart of all these problems. Even throughout the housing crisis, instead of the focus being placed on risk management, it was always placed on value, i.e. “making the deal work”; whereas common sense should have indicated an attitude of making sure certain assets are protected. Surely, there are a good sum of Appraisers that are bitter and worn down on the comp check issue because it seems like we speak out constantly and nothing happens.

But is that really true? I think not.

When the original HVCC was written it addressed pressure, but not comp checks. We rose to the occasion and made our voices heard and now there is specific verbiage about comp checks included. Not only were our voices heard, but they were taken seriously well after the initial comment period of the original draft. Is this not proof that our voices are indeed powerful? That if we but simply do our small part and write a letter or two each, that we can accomplish great things?

For several years it seemed like Appraisers were split on how to resolve the many flaws in the industry. For the most part, we could not agree on any course of action. However, it does appear that we could agree on sending an endless stream of letters to our leaders and the people in charge of drafting these rules that would ultimately regulate us. The HVCC is not perfect, but one thing is clear, we brought about some of the changes that we so desperately wanted.

I think the power that has been lent to our collective voices has been augmented by that of the housing crisis and it still is. So why not take advantage of this great advantage (augmentation) and push the envelope this next month. We can push our law makers to not only make rules, but make comp checks downright illegal.

Over the past several years there’s been arguments among Appraisers on whether comp checks were in compliance with or against USPAP. There was arguments whether it was right or wrong. Or if it’s a disservice to the client or an actual service to the client. All of those arguments in my opinion should be moot, for I must point out that the bigger picture here is that comp checks were and still are being used for mortgages, thus focusing on hitting values; instead, the focus should remain on honest opinions of value in order to protect the banks assets.

It is bad enough we have this constant threat from borrowers and mortgage brokers looming over our heads if we don’t hit value, so with that in mind; it might just be the perfect time to hit a home run with illegalizing comp checks.

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3 Responses to “[Appraisal Contemplations] Change Made Easier By Crisis”

  1. Edd Gillespie says:


    Back in the day when there was still a Wamu and eappraiseit and LCI were falling all over themselves to get and assign Wamu’s mortgage business there was an enterprising appraiser in Florida who took it upon herself to solicit information from appraisers across the country about properties they thought might be appraised with a push the number appraisal.

    In the process of pursuing the information an appraiser in the group discovered that eappraiseit had opened her appraisal and changed it by redacting several pages that had contained information significant to understanding the appraisal.

    That information was published and disseminated on an appraiser bulletin board. Eapprraiseit found out about the publication of that information and sued the appraiser to get a restraining order. Discovery ensued. In the process of discovery, not only did eappraiseit admit that they opened and changed appraisals, but said that Wamu had told them to do it. Having admitted the truth of the publication, eappraiseit maintained that they were still entitled to a restraining order because having appraisers know their appraisals were being unlocked and opened by an AMC would not be good for their business!!!

    Incidentally, when ACI found out about the data base of questionable properties that the appraiser had put together one of its representatives got a hold of a copy and offered it to lenders as a selling point for ACI software. I am told no compensation was offered or paid by ACI to the appraiser who did all the work of assembling and organizing.

    Anyway that was before any attorney general anywhere would get involved. Then Cuomo did and he got ahold of the discovery from the Florida case. Cuomo subpoenaed information from Fannie and Freddie, and Fannie and Freddie stonewalled him. I don’t know how committed Cuomo was to this whole thing, but Havoc was ultimately written by Fannie and Freddie as an alternative to letting Cuomo see their files. It looks like don’t throw Fannie in the briar-patch to me. We know by now Fannie could apparently care less about consumers or appraisers or for that matter the lenders or the economy.

    I’ll accept your comment that the appraisal industry was heard and got what they asked for. But I think the only thing that was accomplished is that the AMCs got carte-blanc to assign mortgage appraisals headed for the secondary market. Personally I want the AMCs gone too, but corralling the mortgage brokers was a piece of cake compared to getting rid of the title company AMCs. They are extremely entrenched and very well funded.

    Would you please read Jonathan’s comment in Matrix and get back to us? I think SFR mortgage appraisers are out of the skillet and into the fire and I don’t think the appraisal profession or the public got any benefit from Havoc, nor will they.

  2. Aaron says:

    Hey Edd,

    There is undoubtedly suiteable alternatives that would NOT result in the use of AMC’s, but is there an alternative that all Appraisers can agree on? My point is that if Appraisers cannot agree, it will be harder to get something changed in the HVCC.

    I chose the topic of comp checks because I think it is one of those few things that most Appraisers CAN agree on and right now people are listening. Why not make this change that will have an affect whether it is a conv loan or an FHA loan?

    I applaud the comp check verbiage in the new HVCC, but is this really going to stop anyone from doing it anyways? What about FHA? Or all the other mortgages not going through fannie or freddie? Is this HVCC even going to stand up to the scrutiny of the courts once the law suits start flooding in??

    I only used HVCC as an example on how powerful our voices are and we are the most powerful when we can all agree on something and take a plan of action. And I think we can all agree that comp checks are a big zit that needs to be popped.

    HVCC on the other hand is another battle that must be waged and I am not disagreeing with that, but what is the alternative that most appraisers will back and ALSO make Cuamo happy? Your response would be appreciated. =)

  3. Edd Gillespie says:

    Well, I hear Cuomo is on the short list for the next Senator from New York so he may no longer be a force to reckon with in the apopraisal industry. I guess we’ll have to wait and see. As for organizing appraisers, a friend of mine once said getting a consensus among appraisers is something like herding cats. Frankly, given the current environment, I doubt we will see much of a positive effect from something like Havoc. It is built for the benefit of the AMCs not the appraisers. I agree with Jonathan that the medicine we got is far more dangerous to the continued health of the profession than the comp check disease we had.

    The major problem we had with comp checks is that appraisers who engaged in them had the advantage when we all knew it was wrong. And the referees did nothing to level the playing field. In fact I’ve heard USPAP instructors teach their classes how to spin comp checks into a virtue. And then the ASB has been known to say comp checks don’t violate USPAP. BALONEY! Anyway, I think the appraisers who backed getting rid of the comp checks were mostly concerned about equality in the competition for business. I doubt that it had much to do with concerns about predetermined value or independence. With the advent of the AMC competition for business will be fast and cheap.

    Experience tells me that a consensus among appraisers will not be coming about soon, but I do think we can get one eventually. I think we have to start with education and appraisers must have something valuable to offer their clients. The result of FIRREA was to impose appraising as a tax on a resentful and uncooperative lending industry. And then an avalanche of unprepared people got appraisal licenses and began to tell bankers and brokers what real property is worth. Nonsense. It isn’t working well at all and never did. I don’t quite know how or why the appraisal industry got saddled up with the mortgage mess, but it certainly was not prepared for it and is only now beginning to rise to the challenge, some 16 years or so after FIRREA became law.

    But, better late than never. When appraisers have some significant skin in the game by placing several years (like maybe four or more) of college education and preparation on the line things will change for the better. And staying in should get tougher as well, and that is happening too. And hopefully the regulatory and review process will make strides as well.

    I do not expect appraisers to support my thoughts, but that is what it is going to take. The profession has to make itself relevant and respected and we have got to have enough pride in what we do to avoid comp-checks, low fees and ridiculously fast turn times.

    From what I have seen so far, anything that Fannie is in favor of will most likely weaken our profession. My choice to refuse mortgage work is the only way I can figure out to make it work for me. I can’t figure out how to stay in appraising, keep the business going, make a living and follow the ethics and still do mortgage work. Just can’t figure it out and I don’t think Cuomo, Fannie or any group of appraisers has figured it out either.

    Until this passes I think we should all work on making ourselves useful, ethical and relevant. Appraisers must become more knowledgeable about the market than anyone else involved in the transaction. Then maybe somebody will take us seriously. In the mortgage end most of us have little to offer and the rest of the chain doesn’t want us there telling them what they don’t want to hear.

    We have better things to do than focus on comp checks and AMCs. Havoc is nothing more than employment security for title company AMCs. Lobby your state to require AMCs to be licensed as appraisers and your Congressmen and Senators to pass legislation making the AMCs responsible for the quality of the appraisals as well.

    And, in the mean time refuse their low fees and fast turn times. You must if you are to survive as a principled appraiser. You can’t follow ethics and do cheap and fast. Just can’t do it. Won’t work.