Appraisers have been relegated to form-fillers. The easiest source of new business is the mortgage broker (wholesale lending) pipeline. I don’t want to stereotype all mortgage brokers because there are a number of good ones out there. The appraisers who deal with this client base are in a catch-22. Its simply common sense that an appraiser who comes in “low” on a refinance valuation or “kills” a sale, won’t get repeat business from that mortgage broker. Afterall, the mortgage broker is paid on commission. Appraiser makes number, gets more business. I often chuckle when appraisers are described as a “good” appraiser. That usually means that you “hit the number.”
Here’s a recent letter to the editor on this subject as seen in the New York Times:
July 3, 2005
A Disservice to Clients
To the Editor:
I am writing in response to the article that appeared in the Real Estate section concerning appraisals that don’t match the sales price (“When the Numbers Don’t Match,” May 29.).
Mortgage brokers who order appraisals until they get one that works for them are doing a disservice to their client, not to mention the lender.
It would be interesting to know how many mortgage brokers engage in this practice without disclosing their actions to their clients. If the appraisal comes in low and the mortgage broker orders another appraisal that makes the number, the question has to be asked why one appraiser could make the deal and the other couldn’t.
Is it possibly because one appraiser has taken sales outside the subject’s market in a higher-priced market or may have misrepresented the size or condition of the comparables?
The appraiser’s job is to provide the lender with an opinion of value supported by the market. The appraiser gets paid whether or not he makes the deal. The mortgage broker gets paid only if he makes the deal.
The appraiser does not have any interest in killing the deal. After all, when the appraiser makes the deal, he or she doesn’t have to take irate calls from the buyer, the seller, the sales broker or the mortgage broker. Plus, he doesn’t make any enemies, stays on the mortgage broker’s list of approved appraisers and remains on good terms with the sales broker.
Scott H. Gallant
Park Slope, Brooklyn
The author is a real estate appraiser and consultant.