It appears that a battle is being waged over who will control appraisers and the appraisal industry.  Will it be the federal government, the state government, some agency or group of agencies within the financial system, the real estate industry, or an as yet unidentifed player?  It really does make a difference, if we are controlled by real estate agents or mortgage brokers we might as well do something else, because its no longer about providing an unbiased opinion of value . . its about bringing in the numbers.  That's not providing an appraisal its just using a rubber stamp.

There are articles on this site that discuss the increasing use of broker price opinions BPOs, they are now being used to establishing short sale values and for mortgage lending purposes.  The use of BPOs for these purposes is a recipe for disaster.  

2010 may well be the year that ends the residential real estate appraisal business as we know it.  If broker price opinions are the future, there is no way that having a residential appraisal license makes any sense.  The appraisal organizations have sounded the alarm, but is anyone listening? 

Alternative valuation products appear to be the answer that some are offering up to appraisers.  I guess that the process is fine, you just have to conclude a value using it, shorten the report and take twenty cents on the dollar to survive.  That may sound like a great solution, but personally I don't think residential appraisers will want to become competitive with $ 25 BPO's, but I could be wrong.  » Read More

2009 has been a long year, and it is nice to see that it is nearing an end.  Appraisers have generally struggled this past year with the ups and downs of the HVCC, the seriously bad market conditions that make almost no one happy and the drum beat of government regulators and court suits from unhappy home owners as we all worked our way through a market in recession / depression.

What will 2010 bring?  It's easy to say another bad year, but no one really knows that for sure.  I would like to remain one optomist in a world full of those spreading gloom and doom.  Maybe 2010 will be the year that AMC's fail, the national economy does a 180 degree turn around and banks release the Trillions of dollars they have been hoarding.  Well maybe that wouldn't solve all of our problems, and maybe it would create more, but it sure would stimulate the appraisal business.

Keep thinking positive thoughts and have a happy holiday season.

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If we haven't hit bottom yet, it is hard to imagine just how hard the bottom is going to feel.  The latest bank (Colonial Bancorp), described as a "warehouse bank" due to its involvement as a holder of residential mortgage, failed and has been taken over by the FDIC.  The bank was reported to have assets of around $ 25 Billion.  The FDIC indicated that the losses from the bank will be around $ 2.8 Billion.

As an optimist looking for upward ticks, I can't find hope in bank failures and continued record breaking unemployment.    

Home values appear to have reached a near bottom in Nevada.  There has been a relatively strong demand for foreclosured properties with discounts 50% to 70% of their original 2007 sales prices.  The strength of the demand is untested, and there may be further declines, but we are no longer in a "free fall."

So the news for appraisers is that there isn't much in the way of market strength.  Forecasters are simply rolling the dice that things will get better in 3 to 5 years, but no one really knows how long it will take.  » Read More

I'm sure that you have heard of the new legislation pending in the House that is meant to protect your finances.  If you have not, follow this link to the Washington Post article "Will a New Agency Protect Your Finances?"  From an appraiser's perspective, I welcome checks on the influence of large financial institutions that have used their influence to force appraisers to "make appraisals as instructed."  If you have followed the news you have read that Countrywide is being sued in a number of states for influencing appraisal outcomes. 

With the free fall of real estate values, the game that is currently afoot has to do with the banks working with "conservative" appraisers.  Low-ball appraisals can be used to force foreclosures, gain deficiency judgments and get potentially bad loans off of the books, or they can force borrowers to "ante up" and put more of their assets at risk to secure their existing bank loan.  

I have been asked, "do banks ever influence the outcome of an appraisal?"  My answer . . of course they do.  They don't pick appraisers from a blind pool, they pick their "go to" appraisers who they know have brought in the most conservative numbers in the past.  Banks don't have to ask the appraisers they work with to bring in a low value, they already know the result of the assignment before they order the report from them because they have a pile of work from the appraiser already on their desk.  That is one of the reasons why banks establish and close their list of "qualified" appraisers. 

Anyone, including a self-righteous appraiser, who thinks that they have absolutely no bias when forming an opinion of value is simply wrong.  The process of forming an opinion of value is frought with making decisions that will bias the outcome of the report one way or another, from the selection of comparable sales, the weight given the sales, to the cap rate selected and the list goes on and on.  While an appraiser may not conciously make choices that are biased, the overall result concluded base on his choices can be quite biased.     

Many appraisers argue that they are selected by banks because they are "qualified, competent and consistent," but in reality they are hired because their opinions are consistently biased to the low end of the value range, and that benefits banks and not borrowers.  It's hard to believe that just months ago banks were working with appraisers who brought in consistently high values, or was it the same appraisers, who have now changed their outlook? 

Government intervention in the financial markets can't be, in my opinion, a good thing.  If the government icreases regulation on every single agreement, on every rate charged and on every transaction processed, it is only going to become more difficult to conduct business.  The trend, however, is in that direction and the past banking fiascos have invited the government into our daily lives. 

It is likely that with the advent of a new Consumer Financial Protection Agency (CFPA) will come new appraiser regulations.  Appraisers fought hard against Mr. Cuomo's HVCC, but I have a feeling that a newly established  CFPA will look at the appraisal business as a prime target for new regulations.  If the CFPA becomes a reality, it will be interesting to follow how a newly formed government agency with powers in the real estate area makes regaulatory choices.    » Read More

Just when we needed the government to recognize that their involvement in the private sector caused the current banking crisis and the subsequent recession, due to political pressure that caused funding to flow through Freddie Mac and Fannie Mae like it was water, we now have them meddling in the valuation business.

Nevada's establishment of new Broker Price Opinion (BPO) rules that take effect on July 1, 2009 will allow about 20,000 real estate agents to express "price opinions" upon which decisions will be based by buyers, sellers, lienholders and third parties "making decisions or performing due diligence related to the potential listing, offering, sale, exchange, option, lease or acquisition price of a parcel of real property."  In other words, for almost any purpose besides an application for a new loan.

One might ask, "are there any special qualifications required of an agent beyond the 1 or 2 weeks of real estate training required of agents for licensing to express such opinions?"  The answer would be no.  One might also ask, "is there any penalty for unqualified agents expressing opinions that are in error, and that may cost buyers, sellers, lienholders and others thousands or millions of dollars in losses?"  Again the answer would be no.

So what the Nevada State government has done with this law is allow the entry of thousands of untrained individuals into the valuation business at a time when valuing real property has become more difficult than it has been in the last 10 years.  Who exactly has this law been written to protect?

I have been a real estate broker for over 30 years and in 1991, after our country's first financial fiasco with Savings & Loans, appraiser licensing was adopted based on a federal mandate.  The appraisal business has come a long way since then, and appraisers are so much better qualified than agents with regard to the valuation process that the professions have parted ways.  By allowing any real estate agent to act as a value expert is a giant leap backward.  

One wonders if this new law and its timing has anything to do with the fact that appraiser's have not been willing to provide market value opinions high enough to support higher listings and the upward pressure on prices (see "Realtors Say Low Appraisals Sinking Deals").

For those party's buying "broker price opinion" products from real estate agents in Nevada, I guess the government has set up a situation for you where its "let the buyer beware."  An army of unqualified real estate agents will be giving you a chance to purchase their opinion, but if it's inaccurate you only have yourself to blame.           » Read More

If its not clear to you yet that an inflation is coming, you must be living in a remote location without TV reception and you are just not reading what is being talked about online.  A bill has been introduced in the State of Montana that would place them back on the gold standard because not having gold and silver coin “abridges, infringes on and interferes with the sovereignty and independence of this state … and exposes this state and Montana citizens, inhabitants and businesses to chronic problems and potentially serious crises that may arise from the economic and political instability of the present domestic and international systems of coinage, currency, banking and credit.”  See the WorldNetDaily article on this proposal by following this link. 

The purchasing power of all of that cash that was removed from the stock market before, during and after it's unsettling and dramatic drop and is sitting in people's money market accounts will be destroyed with the passage of time.  Inflation is a silent and deadly destroyer of your money.

There appears to be few who will, however, talk about the fact that the Federal Reserve and its recent monetary policy which has opened the flood gates.  

From the perspective of a real property appraiser, cheap dollars will again play havoc on the markets.  There is not need to worry about Automated Valuation Models (AVMs) or Broker Price Opinions (BPOs), because they will (again) be trying to catch the curve.  Cheap dollars will likely bring us another wild ride. 

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Milton Friedman noted that U.S. Dollars are held by foriegners because they are "free of political risk."  It is hard for others to substitute their money as a global currency for ours when it is so easy for others to use the switch for their own political interests.  So there is a benefit to maintaining a "status quo" with regard to the U.S. Dollar. 

On the other hand, Mr. Friedman also noted that the only reason that foriegners would likely be inclinded to dump Dollars is if we "engage in an inflation."  He noted in a December 26, 2005 interview that, "If our monetary authority lost its good behavior and started to print too much money, that might do it."  When interviewed Mr. Friedman could not envision that the U.S. would ever put itself in a position where printing Trillions of dollars was considered an answer to our economic problems.

The question for us now is, how much money is too much money?  We have seen the beginning of Trillions of dollars being spent by the Treasury.  So far, we haven't seen the inflation or the super inflation that has been forcasted.  Per my last news article, we remain in a waiting mode. 

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The U.S. finanical system is now waiting to see whether the dollar will remain the preferred world currency, and retain the support of global investors, or if confidence fails and the failure brings us to new financial depths.  The rest of us are waiting to see if government intervention in the markets leads to a recovery or a prolonged adjustment period, but some don't realize that our finanical system's health will dictate the future.

For appraisers thing have changed dramatically, many of the banks have failed and even more private mortgage companies have closed their doors.  No one really knows what to expect, but many realize that with 2009 upon us, it doesn't look like we are going to get a great start into the new year.

On a positive note, we have added a number of FREE appraisal articles that you may find useful.  There is no fee associated with their use, so you can pick and chose those that work for you.  There are articles in the works that will discuss; golf course, limited gaming and apartment appraisal topics.  We are open to feedback, if you don't agree with something that has been written we will post your counter point article. » Read More

Here is a short list of benefits available to authors.

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Welcome to AppraisalArticles.com, a recently established site that serves appraisers and the general public by providing articles on appraisal related topics. 

If you are an author of appraisal articles, we welcome your submissions.  This site was developed to provide you with the benefits of having bio links back to your website.  We will promote your articles and increase your Internet visibility. 

This site is not being developed to provide breaking news stories about the appraisal industry.  We are trying to offer our readers, including the non-appraisal public, with information they will find valuable, information developed from an appraiser's perspective.      

This site is owned and managed by an independent fee appraiser and not a software developer, appraisal service firm or appraisal management company.  We welcome your contributions.
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