Saturday, May 23, 2009

HERE COME THE APPRAISAL HEADACHES

In March, I wrote in this space about the big changes coming in the appraisal industry.

In short, Fannie/Freddie regulations which took effect May 1 now require mortgage brokers to assign appraisal work through newly-created appraisal management companies (AMCs), which then randomly distribute jobs to licensed appraisers in their appraisal network.

In the past, lenders could contract directly with competent appraisers with expertise in certain geographical areas or with certain types of properties, such as horse properties, duplexes or other unique dwellings. Now it's a crapshoot.

The Denver Post ran a story today about the problems this system is already creating, and they have to do with out-of-area appraisers attempting to value homes in unfamiliar areas, or worse yet, having struggling, semi-competent appraisers taking assignments away from some of the hardest working and most skilled appraisers in our area.

The intent behind this new rule was to create more transparency behind appraisals and keep unscrupulous lenders from partnering with unscrupulous appraisers.

What we now have, already, are problems caused by appraisers who no longer have accountability and who are operating outside of their areas of expertise.

Pass the Tylenol.

In an effort to stop the bad guys, regulators have stopped the good guys too.

And frankly, I feel bad when a client spends $350 on an inspection and then another $350 on an appraisal for a correctly-priced house that he or she loves... only to have an unqualified appraiser torpedo the deal.

Most appraisers are skilled, and most work very hard to correctly value the property they appraise. But the playing field has now been leveled for both the highly skilled and barely competent... and that means there's now another wild-card in the "under contract" process.

Once again, we're all going to pay for the behavior of the cheaters.