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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

I received a phone call from a home owner yesterday complaining about the last appraisal that was done on his home. He didn’t think the Appraiser should have utilized all bank owned comparables and that the comparables were inferior in condition compared to his home. After complaining for several minutes, the home owner finally said that he would give my information to the new finance company since the last refinance did not go through with the previous one. I told him it would be great to have the business, but I could by no means promise that I wouldn’t use bank owned comparable sales.

The reason I tell this story is because I knew that I had to respond in a way that did not take the side of the home owner or the Appraiser. Why tear down another appraiser for a report I have not seen? After all, don’t most home owners think that their home is gold? I am by no means saying that there was nothing wrong with the appraisal. My point here is that too many Appraisers are ready and willing to tear each other down in the name of more business with little proof or no proof that what people are saying about the “other” Appraiser is accurate. Another thing I see wrong with this picture is that this information mostly comes not from another licensed Appraiser, but from someone who desperately needs the loan to go through.

I can sum up this entire situation with one word; “biased”.
 
If I am getting these types of phone calls, I am almost positive others have as well. I just hope other Appraisers return the same professional courtesies I extend to them. Our industry sure could use more people that extend a level headed approach to have the awareness of where they themselves stand in the midst of the circle of bias that we are constantly surrounded in on a daily basis.

Tags: Soapbox Blog, Aaron Thomas, Appraisal Contemplations

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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.

Tags: Soapbox Blog, Appraisal Pressure, Aaron Thomas, Appraisal Contemplations

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A native Californian and a certified real estate appraiser, Aaron O. Thomas 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.

I am lucky to have Aaron contribute to the appraiser dialog on Soapbox.
– Jonathan Miller

Initially and some time after licensing was implemented there was talk of increasing the requirements of attaining a real estate Appraiser license. Regulators had some concern that if the requirements were too stringent, it would create a lack of real estate Appraisers. This of course would have made it a longer process to attain a mortgage. Needless to say, this extra criterion was never implemented until recently.

The real estate boom of 2004/2005 created a situation where there were more appraisal orders than there were Appraisers. This created an influx of Appraiser trainees that eventually outnumbered the amount of licensed Appraisers. They were depended upon to carry the weight of Appraisal orders that were flooding in from the higher rate of mortgage applicants. At the risk of making a generalization, these trainees were not given the amount of attention needed to properly train them because the licensed Appraisers were too busy trying to meet the demand of all the appraisal orders. This out of control situation created numerous appraisals that were inaccurate and in some cases downright fraudulent.

Now that mortgage applications have declined and more strict lending guidelines have been implemented from the collapse of banks across the nation, there are more licensed Appraisers than the market can support in appraisal orders. Appraisers are getting pushed out of the business and they are letting their licenses lapse.

Regulators (and others) have learned their lesson. Now that there is an overflow of Appraisers that can easily meet the demand for Mortgages, regulators are now implementing more stringent criteria on licensing without the worry of creating a lack of Appraisers. But, would they still have implemented these stringent qualifications criterion if there were a lack of licensed Appraisers? After all, we are tied to a larger system that still needs to flow smoothly. We are tied to it and governed by it more than people would like to admit.

Prediction: Licensing criteria will be loosened again when there is a lack of Real Estate Appraisers needed to supply the market.

Tags: Soapbox Blog, Aaron Thomas, Appraisal Contemplations

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