Inflated appraisals have been a huge issue in real estate for many years, and real estate commissions all over the country have had enough...
In response to complaints about too many appraisers being too cozy with lenders who routinely ask them to bring properties in "at the number" in exchange for more business, new regulations are coming soon that will force lenders to give up their existing appraiser relationships and, instead, order appraisals from "pools" of pre-screened appraisers who will not be permitted to have direct contact with the loan originator.
The two arguments against this are as follows:
1) appraisers who specialize in certain areas or certain types of properties will not be readily available to appraise in their areas of expertise, while those "out of their league" on certain types of properties will be asked to submit binding appraisals, and
2) this "appraiser pool" system will break down accountability between appraiser and lender and probably lessen the overall responsiveness of appraisers, who often will expedite appraisals or otherwise accommodate clients working off of tight timeframes for lender partners they know, trust and value.
The upside, in turn, is a perceived end to corrupt appraiser-lender relationships that are focused more on saving deals than protecting a buyer's interests.
In my opinion, however, the answer here lies with the consumer. If buyers do their research and choose to work with ethical, trustworthy lenders, these problems would not exist. I understand there have been plenty of not-so-ethical people in the lending and appraisal business, but any buyer should do some research on who he or she is dealing with before signing anything.
In the age of the Internet, there are very few secrets. Seeking out a personal referral from someone you know and trust is always the best way to find a competent service professional. Ratings agencies like the Better Business Bureau or a simple "Google Search" of a person's name or company may be all you need to do to get the answers you need.
Every piece of legislation always has unintended consequences, and while I'm sure there will be cases where shady appraisers are squeezed out of the market, we're all going to have to be prepared for extra delays and a few more headaches with some of our appraisals.
Since full licensing (with fingerprints and background checks) for mortgage lenders went into effect in Colorado two years ago, we've already flushed most of the cheaters out of our business. Now new regulations are just making it harder to do business.
