Bogus Home Appraisals May Derail Real Estate Recovery

[marmar]

from 24/7WallStreet:



Bogus Home Appraisals May Derail Real Estate Recovery
Posted: June 24, 2009 at 5:10 am


A huge number of home value appraisals may be wrong, with most of them being much too high. That is causing banks to back away from mortgages. A house that has been appraised for $400,000 might support a $350,000 home loan. If the bank looks a the property and says it is only worth $300,000 the mortgage application gets put into the waste basket.

The over-valuing of homes could kill a turnaround in real estate and make the persistent and hard drop in property values continue longer than many economists predicted that it would.
National Association of Realtors chief economist Lawrence Yun said the appraisal problem is serious.

One of the by-products of the appraisal problem is that sellers often have to take less money for their homes than they had planned. This further depresses the value of real estate and often makes sellers take on debt to pay the difference between their mortgages and the amount that they get for their homes. People who take on new, large debt burdens are not likely to be consumers. Real estate values are directly linked to consumer spending.

The problem is hard to solve. Banks almost always rely on outside firms to handle appraisals. If lenders believe that the information that they are getting is routinely inaccurate, they may sharply curtail their overall mortgage operations. Risk and leverage are not words that bankers want to hear right now. The financial debacle of the last two years has cut lending to unprecedented lows. Bogus home valuations will only make that worse. ...........(more)

The complete piece is at: http://247wallst.com/2009/06/24/bogus-home-appraisals-may-derail-real-estate-recovery/

[ixion]

1. to derail a recovery, don't you have to be recovering? and where was the banks concern

in the midst of the over-heated real estate boom? It was obvious that a $150k house was being valued at $330k, but the bankers and mortgage fraudsters weren't saying diddly back then.

Nothing. Zip. Zilch. Nada.

You had hucksters running around "appraising" a house at or beyond the asking price, and having nothing whatsoever to do with actual value.

They said nothing.

And yet NOW, during 'recovery' it's a problem. :eyes: :wtf:

Our society is corrupt at the core, IMO.

[ThomWV]

2. Realized this - if Real Estate Appraisers had done their job there never would have been a bubble.

[Vinca]

4. My husband's appraisal business has been in the toilet for several years

because banks were not ordering full appraisals. Instead, they would find someone with a pulse to drive by the property and take a picture and that was about it. Some lenders weren't even doing that much. There are bad eggs in every basket, but there were many more that weren't appraisers.

[Vinca]

3. My husband is an appraiser and after the meltdown a new form

was added to the mix that explains the state of the market - number of properties on the market, number of days on the market, number of sales this year compared to last, prices then and now, etc., etc., etc. The numbers are taken from government and MLS records and should give the lender an idea whether the property they're giving a mortgage on is within the ballpark. IMHO, lenders need to take a hands on approach to the process and not delegate the appraisals to a third party management firm on the other side of the country.

[connecticut yankee]

5. I'm an Appraiser

and I received a lot of "Professional Value Reconsideration" requests. The loan officers would try to push the values so they could close the loans. They're paid on the basis of their performance.

Most of the time, I turned down these requests. But I'm sure there were many appraisers who succumbed to the pressure. In many cases, there were hints of losing the client's business.

Don't blame the appraisers -- most of us are just trying to make an honest living.

BTW, I don't receive these requests lately. If anything, the lenders have become over-scrupulous.