The National Association of Realtors released their May Existing Home Sales Report today and reported:

>The Realtors said that home sales rose 2.4 percent to a seasonally adjusted annual rate of 4.77 million last month, from a downwardly revised pace of 4.66 million in April. Prices, meanwhile, were 16.8 percent lower than a year ago.

That’s all well and good, but there was a new wrinkle this month. Someone to new blame for continued weakness in the housing market.

You guessed it: The Appraiser.

>“We have just been flooded with e-mails, telephone calls on the appraisal problems,” said Lawrence Yun, the Realtors’ chief economist.

>“Poor appraisals are stalling transactions. Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan.”

This unleashed a flood of appraisal coverage today.

The NYT’s Floyd Norris writes a great blog post on this topic called Realtors: Blame the Appraisers

ACRONYM Alert!!! AMC = Appraisal Management Company.

I was on Fox Business last night with Neil Cavuto. Don’t have the clip yet but the topic guessed it…appraisers and whether we are killing the recovery.

Most of the good appraisers I know don’t work for Appraisal Management Companies nor are they getting much work from the national retail banks. Why? Because they don’t agree to work for half the market rate, crank out work in 24 hours that doesn’t allow enough time to research and cut corners because of their low fee structure.

But they likely got most of the appraisal volume during the spring mortgage boom with record low mortgage rates.

AMC’s are the unregulated byproduct of the Cuomo/Fannie Mae deal called HVCC or Home Valuation Code of Conduct. Generally, the lowest common appraisal denominator work for AMCs and you get what you pay for – usually garbage.

The likelihood of fragile deals blowing up because some out of area yahoo comes to bang out a dozen reports in one day and has no idea what is going on in the local market is likely to come in low on the value because they think that’s what the bank wants. And guess what? AMCs and the appraisers they use got most of the work during the spring.

NAR doesn’t seem to understand this – they seem to be inferring appraisers are singlehandedly stalling the housing market. Appraisers don’t all get together and say “Gee, lets all do a really bad job on our appraisals these days. It systemic. Banking wants to use AMCs. AMCs want to make a profit so they hire cut rate appraisers.

The NAHB press release today was even more silly. More on that in the next post. Like anything associated with appraisals, many know something is wrong, but they have no idea what it is.


  1. Charleston real estate blog June 24, 2009 at 7:05 am

    Jonathan, the solution is obvious. The AMC’s should immediately be brought before appropriate Congressional committees for questioning, an appraiser czar needs to be appointed and a new regulatory body should be set up by the government to oversee and approve every appraisal for accuracy.

    Do you think that will work 😉 Howard

  2. Edd Gillespie June 24, 2009 at 9:36 am

    The local rag joined the flood of appraisal coverage. You might be interested to know that, according to the paper, HVCC is a new law that appraisers don’t like.
    I E-mailed the reporter who had interviewed only one appraiser for the article, and offered to tell him what I know and think about HVCC. He didn’t take me up on it.
    Isn’t it amazing that Yun and Limbaugh still get press that quotes them as if they knew something? I have to wonder what Yun’s definition of a poor appraisal is. Does he know that is what the lenders are ordering?
    Blame the lenders Yun.

    I heard somewhere that the problem with the appraisals according to the Realtors was that they used the wrong comps. Apparently Realtors now consider “distressed” real estate to be a separate market and maintain that sales of those properties should not be used for comparison. I might be inclined to agree with them if I could figure out what the heck they are talking about. Seems a little hard to say the market is off 17% from last year and then say distressed sales are not comparable. How did the market drop 17% if you ignore distressed sales?

  3. Edd Gillespie June 24, 2009 at 9:45 am

    2nd comment.
    This is still about jobs. The US is adjusting to the world economy and a part of that has to be an income leveling. If you peg stuff to the dollar the gap in wages is huge. Either the others come up or we go down or both.
    So when the wages stabilize, which may be a long, long time then we can go back to appraisals that don’t have to be done in the moment. The Harvard article you posted said house prices are back to the late 1990s levels. Well so much for the “credit bubble” now on to the effects of outsourcing, globalization and enormous national debt.

  4. [NAHB] New Guidelines For Appraisers: Break Into Houses? | The Mortgage Shredder June 24, 2009 at 10:32 am

    […] my previous post, I address the swirl of interest in the appraisal part of the home sale process brought about by […]

  5. Top 5 real estate posts of the day for 6/24/2009 June 24, 2009 at 12:01 pm

    […] 2) NAR to come out against the HVCC – Anyone who follows me on Twitter knows my feelings of the new HVCC appraisal rules (not a fan). Here are some posts from yesterday about NAR trying to do the right thing. NAR anti appraisal reform lobbying effort, NAR blame appraisers fro stalling housing recovery. […]

  6. Al Gabberty June 24, 2009 at 4:40 pm

    Loan officers can no longer order an appraisal or exert pressure onto the appraiser and now the values are lower – looks like this supports the position that the lender and loan officer was at the core of this irresponsible lending.

  7. Lucia June 24, 2009 at 6:39 pm

    How much blame for sales blowing up is really due to the 1004MC data and the risk analysis by underwriters who rely on that same data? Realtors, again, think they know more about doing appraisals than appraisers. Perhaps a couple explanations by some intrepid underwriters would clear the reputation of the appraisal profession. After all, it’s all Fannie Mae’s fault.

  8. Edd Gillespie June 25, 2009 at 8:49 am

    The mortgage appraisal business orbits in a circle of blame held together and powered by money. The irony is that the one guy in the circle who is pledged to tell the whole truth is unwanted, but nonetheless hired and paid by those whose primary agenda is to make as much money as possible even if values and other things have to be fudged. No wonder it never makes any sense at the appraiser’s level of involvement.
    Nor will it.
    If you are going to appraise for mortgages you are inevitably going to be working for those who will never be satisfied with your very best efforts to tell the truth.
    Me thinks the underwriters could care less about the reputation of the appraisers or the appraisal industry.
    Get over it! Being an independent fee appraiser means you are on your own without support of any kind whatsoever and it’s rough out there.
    Actually, I’ll modify that a little bit. This is a safe place to come and vent. Others here understand, but they can’t do anything about the problem.

  9. Lucia June 26, 2009 at 2:18 pm

    Edd, I know, it’s a thankless task. But what doesn’t kill you will make you stronger as well as a pariah in your community.

  10. [In The Media] Fox Business News With Neil Cavuto 6-23-09 | The Mortgage Shredder June 26, 2009 at 10:36 pm

    […] Business News reached out to me after the NAR existing home sales monthly press release where they blamed appraisers for stalling the housing […]

  11. Edd Gillespie June 27, 2009 at 10:13 am

    Since the lenders have been the gate keepers, it may be that the real estate mortgage appraisal version of “the road to riches” mostly precludes the spirit of the Ethics Rule and nurturing the public trust is a job for someone who doesn’t need income.
    I have a friend in Tennessee who says the #1 requirement for an ethical independent fee mortgage appraiser is to first be independently wealthy.
    I agree that fighting off the seduction makes one personally stronger, but I wonder if the profession can survive.
    Recently Bill Graber, current President of the AI, rebutted these ridiculous NAR and NAHB comments with a comment that was called for, but wilted into the usual ad for designation. In the comment he said, among other things, that appraisers “protect” lenders. I am asking anyone to tell me what the basis for that comment is. Anybody know? I think lenders have shown that they need appraisers to protect them like Pharaoh needed the Israelites to protect him.
    If real estate appraising is a calling, then real estate appraisers must be competent and courageous enough to tell the truth regardless of the pressure applied by buyers, sellers, real estate agents, NAR, NAHB, loan originators, reviewers, underwriters and AMCs.
    And it might be helpful to be independently wealthy and enter the witness protection program as well.

  12. […] Source: […]

  13. Richard B. E. Beyer July 2, 2009 at 2:28 pm

    Let’s talk about the National Association of Realtors who is blaming the appraisers for low-balling values now and for contracts that are falling through because of increased appraisal turn around!!!

    What happened to the “over-valuation” battle-cry that the lenders, FSE’s and government were espousing?

    Increased appraisal time? Well what can you say about that except lenders, Fannie Mae and Freddie Mac want more, more, more . . . and it takes time, time, time to do more, more, more . . .

    Oh, by the way, loan processing has gone from 1 to 3 weeks now up to 1 to 3 months. What does that imply? That they can take their time and do their job properly to process loans, but the appraiser still needs to get the appraisal turned around in the same amount of time it took before with more, more, more to do on each appraisal, MAYBE?

    Highballing? . . . Lowballing? Make your fickle minds up!!!

    Talk to Fannie Mae and Freddie Mac for the worthless 1004MC form. All raw data . . . No accounting for the seasonal cyclical nature of the real estate market . . . Trending on absurd and insufficient data sets . . . Skewed or aberrational sales data . . . And sales within 90 days and less than 1 mile? In what part of the time continuum may I ask do you live Fannie and Freddie, 2005? Accompanied by lenders not lending money, no wonder values are dropping.

    I will tell you all that basing a loan value at 100% LTV or better on an “opinion of value” (which is what an appraisal actually is) or giving loans to borrowers in the past who would not be qualified by their own loan criteria as it stands today makes the lender culpable as well for the present problem, and not the appraiser!

    I am not justifying giving out knowingly risky or bad loans to borrowers who do not qualify like was done before. I do however suggest that strings which should be attached to any TARP monies for lenders include relaxing of present loan criteria – say back to some kind of middle ground; and cease-and-desist on current efforts to expand their operations (i.e., buying other assets) with possible TARP monies – which I thoroughly believe has happened since they had no money before!

    I will also tell you realtors who “Fire-Sale” property at way under market value without the proper exposure to the market, that you are the ones that are killing your own deals and cutting ALL of our throats in this business in the process. The appraiser only reports what is discovered in the market area through the MLS systems usually owned by the local realtor boards. Apparently you cannot wait for 3 to 6 months of market exposure for a property in order to cash in your commission on a sale. So you BPO the property at far less than true market value in order to undercut other competing listings; the sellers agree; and the property sells in 3 to 6 weeks . . . Money in the bank for you, Yeh!!!

    I am sick of everyone blaming the appraisal industry! Look in the mirror; you will recognize who is responsible . . . IF you have a conscience!!!

    Richard B. E. Beyer
    Accu-Rite Appraisals, Inc.
    Silver Spring, MD

    • Jonathan J. Miller July 2, 2009 at 2:30 pm

      Right on Richard! Appraiser is “Latin” for Whipping Post.

  14. Edd Gillespie July 2, 2009 at 8:00 pm

    If Appraiser = Whipping Post then I think I have been appraisered.

  15. Edd Gillespie July 2, 2009 at 8:03 pm

    Hey guys. Somebody tell the Realtors unemployment went to 9.5 today and is headed toward 10. I’m sure we could get a retort from Yun that if it weren’t for the appraisers unemployment would not be rising.

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