A Loos Blog

This months Q&A: Don’t appraisers have to follow some standard?

I am almost embarrassed folks had to ask this question. My red faced answer is yes, of course. If an appraiser performs an appraisal for a federally regulated loan (conventional bank, credit union, FNMA, FHA or VA) then that appraisal must meet guidelines set forth in the Uniform Standard of Professional Appraisal Practice (USPAP.)

The appraiser must be competent to perform the appraisal and competent in the geographical area, and must provide an appraisal similar to that expected by market participants and peer appraisers. In other words, the appraiser must consider the same physical and legal characteristics, market conditions and comparable properties that the buyer, seller, broker and other appraisers would in estimating a value on the same property.

I was recently sent a copy of an appraisal for a home in a gated golf course subdivision where the appraiser did not use one comparable property within the development.  I have seen too many of these appraisals where the appraiser was obviously inexperienced, ill-trained, or simply negligent.

So how does this happen, and what can you do?

Since the now infamous HVCC was adopted by the Feds, lenders have moved a huge amount of the appraisal process to unregulated third party appraisal management companies. As many of you have found out the appraiser who shows up is not always “on the ball” for our market area - and spends all of 5 minutes at the property before rushing off to the next appraisal. And, once a faulty appraisal makes its way to a lender there is little chance to plead your case and obtain a new appraisal; the credit market is far too jumpy.

If you come across an appraisal that does not meet your idea of a good appraisal (it’s like a rattlesnake; you know one when you see one) there are two things you MUST DO.

First, let the lender know in a professional and easy to understand manner why the appraisal did not provide a credible result; inappropriate comparables, missed or miss-stated facts, an appraiser who is not familiar with the area, who spent far too little time looking at the subject property or who acts in an unprofessional manner, etc. Don’t complain that your deal died because the appraiser missed a value; this is not proof the appraisal is inadequate, especially in this market. Also, don’t complain to the management company who sent the appraiser. It is the lender alone that has final responsibility for appraisal quality, and the lender will care that this happened.

Second, send a copy of the appraisal to the Office of Real Estate Appraiser at www.orea.ca.gov. I know it’s a pain, but we have to fix this situation, nobody else will. The OREA and DRE are taking this very seriously, as are professional trade organizations such as the Appraisal Institute, CAR and NAR.

The good news is that there are lenders and management companies that seem to be getting things right, or at least trying and new regulations are addressing some of the problem areas. If you have a question regarding appraisals give me a shout. If I don’t know the answer chances are I can find someone who does.