Want to get an accurate value on your house? How to find an HONEST appraiser.
Yesterday, we got an inside look at the appraisal side of the business courtesy of a long time appraiser in the Orange County area better know to us as OC Appraiser. That post sparked some good comments and e-mails. One of the most common questions was “how can I find a good appraiser?” that will give me an honest representation of the value of my home at any given time.
There was also quite a bit of discussion as to how internet sites like www.zillow.com were having an impact on things.
Well, OC Appraiser had even more good info for everybody. From how to find and research a good appraiser, to the impact and shortcomings of internet sites such as zillow.com. Instead of having that valuable information buried in the comments, here it is for everybody:
————————-
From OC Appraiser:
I’ve been trying to do my part by sending emails and calling local newspapers, to no avail. Several months ago the Wall Street Journal ran an article on appraisal fraud that I found to be very accurate. Unfortunately, it did not gain much traction.
Currently, I have activly been in contact with honest, professional, appraisers throughout the country.
One of these appraisers has contacts with the FBI and Justice Department in Washington, amoung other agencies. A database is being put together listing all suspicious addresses and names of participating appraisers and brokers nationwide. From what I hear it is beginning to yeild results. Point being, (we) are trying to clean things up and rid the industry of the bad players. It just takes time. Wish we had more media help, then things would snowball much faster, and crooks would most likely run to another profession.
One way to find an honest appraiser, or at least one that you know is NOT on the take, is to go out and personally hire him/her yourself. DO NOT call to find an appraiser from a list that the agent gives you. Just search yellow pages, or go to www.asc.gov for the national registry of licensed and certified appraisers. On this registry you can search by city, county and state, and it will give you all the appraisers in that city, as well as if they have active licenses or not.
You can also search www.orea.ca.gov for the California list, and narrow it down to your city. On this site (OREA - Office of Real Estate Appraisers), you can also search to see if appraisers have ever been busted for any wrong doing.
Other tips: Find an appraiser who is Certified, and check their ID, so you can check the websites to make sure they match. In Orange County, most of the appraisers running around arent even licensed. They are trainees who are working for some other licensed appraiser who just signs off on the report, more often than not, that the supervisor also inspected the house, when in fact he did not. There are tons of “skippy mills” in OC, for this is the fastest entry into the profession, and the easiest. The scary part is these trainees learn nothing but how to “pump” value, and their goal is to become newly licensed so they can go out and hire a hand full of trainees themselves. They typically give the trainee 50% of the fee, and the cycle repeats itself. That is why more than half of all appraisers in OC are either trainees or newly licensed, and mostly unqualified to do anything.
If an appraiser comes to your house or calls before coming and asks you what “you” think your house is worth, or what “value” you are looking for, find another appraiser. This guy is just looking for a baseline starting point so he knows what values to look for in the area. Thats because he doesnt really know how to appraise, rather he conducts searches by value, not by property comparability.
This is NOT appraising. Competent, professional appraisers do not need a starting point or target value. They go to your house, analyze the data, and form an opinion, applying various methods and technical analysis. The value may come in high, it may come in low, it may be right on target. But rest assured, what you at least have is an unbiased professional opinion.
————————-
Now that you know where to go to find a good appraiser, it is time to look at the other side of sites like zillow.com. The internet is an excellent tool, but nothing is going to replace a trained professional actually spending some time on site to find the actual ‘value’ of your home.
————————-
From OC Appraiser:
Web sites like zillow are currently facing litigation by homeowners who relied on zillow for accurate valuations. The problem with web site valuations, BPO’s and all other desk-top valuations, is that they do not account for subject location. Zillow cannot tell if a property backs a freeway, which in some markets can account for a 15% discount. AVM’s cannot tell a panoramic catalina ocean view, from a peek thin southern coastal view, which can be as much as a 20-30% difference, depending on how close to water the house is. Computer and desk-top valuations cannot tell the difference between higher end Bosch, Viking and SubZero appliances, versus the Sears specials.
Computer valuations cannot determine over-improvements, superadequacies, physical, function or external obsolescense influences, who’s value contribution or discount cant be as high as 40%. Now I dont know about you, but if I am borrowing 100’s of thousands of dollars to buy something, you better believe I want to make damn sure its worth what I paid for it. And I aint gonna trust the appraiser who is hand picked by people who stand to gain a commission when the deal is closed. $350+ dollars, to potentially keep from making the biggest financial mistake of your life seems like a no brainer to me.
I’m not worried about the appraisal profession or my role in it. The cream always rises to the top, and profesional investors (lenders and others who actually loan out their own money and keep the assets in their portfolio) always want an actual qualified professional appraiser doing the inspection and analysis.
Shadash, I can certainly understand how you think appraisers will be replaced because they cant be trusted. But the fact of the matter is that professional money managers and debt holders do understand the importance of a professional valuation. Its just that in recent years they have been more risk tolerant and because they have been shuffling the loans down the line, they did not need accuarate valuations.
I suspect however, that this packaging of loans, and passing the buck down the line will cease, when the end holder does not get paid what he thought he was supposed to make. Look at it this way. If you loan money to someone, even if its not your money, you will stop loaning out the money if you stop getting paid. Because if you dont get paid, how is the guy who loaned you the money going to get paid? And so on and so forth.
The only way to insure coverage is to know that the collateral will cover the debt burden. And the only way to sleep soundly at night as a lender, is to have full faith in the value of the collateral. Computer valuations will be around to do the low loan to value deals, but with people continuing to borrow against their homes, inceasing loan to values, there will always be work for the honest appraiser. Its all about being selective in the clients you have. The clients that I do have all loan out their own money and want real valuations. I quite doing work for brokers 12-18 months ago, because they just stopped caring, and their competition heated up.
————————-
So there you have it. More ‘real world’ info on what you won’t hear about the appraisal business. So again, take this information and use it to make the best decision for your particular situation. If you think we are making this stuff up, that is fine. But if you think there ‘might’ be some truth to what you are hearing here, I would seriously consider spending an additional $350-$500 bucks to get an ‘additional’ appraisal by an unbiased 3rd party before I was on the hook for hundreds of thousands of dollars. Why take the the chance of overpaying for a property, when for about .1% of the purchase price of the property ($350 on $350,000), you could have some solid information in your hand regarding the ‘real’ value of the real estate in question. Sounds like a no-brainer to me.
**ATTENTION ORANGE COUNTY READERS**
For all the Orange County readers, I have something you might be interested in. If you would like to have your property appraised by OC Appraiser, send an e-mail to me at socalmtgguy@gmail.com and put ‘OC APPRAISER’ as the subject. I will pass your contact info along, and let OC Appraiser take it from there. I have never met OC Appraiser, but we have traded quite a few e-mails and their posts on this site and Ben’s blog speak to their credibility. I was never an appraiser, but I did spend a decent amount of time in the appraisal review department of a major lender, so from what I have seen, I feel confident that OC Appraiser is the real deal and will give you an honest appraisal of your real estate. So, send me an e-mail if you would like me to pass your contact info to OC Appraiser.
For those of you who have been checking in less frequently because I was on a posting ‘haitus’, there were 3 new posts this week including this one. So be sure to scroll down and catch those. Lots of good info in the comments as well. Look for more frequent posts from me in the future. Just remember 2007 is the year when things WILL get interesting.
BE INFORMED… be patient… and stay tuned…
SoCalMtgGuy
November 17th, 2006 10:52
SoCalMtgGuy and OC Appraiser…
Thank you for all your efforts. If everyone was as honest as you appear to be we woulnd’t be in this mess.
If my comments seem a little harsh it’s not my intention. I’m just tired of all the lies.
Shadash
November 17th, 2006 11:07
Shadash,
I understand your sentiment. But the only way for things to change is if the marketplace (the masses), do their research and get informed. Since most people are not informed and ‘go along’ so easily with the ‘expert’ broker/realtor/appraiser there is no need to change. If the market starts to ‘demand’ honestly and integrity, and only takes their money to people who do that, then things will start to change.
Unfortunately, that time is quite a ways off in my opinion. So the best I can hope for is helping the people that ARE doing thier due dilitgence so that they can make a more informed decision for themselves and their families.
That said…have either of us said anything that comes across as ‘truly unbelievable’? or after what we have seen with this RE boom, does it seem somewhat plausable that what we talk about is going on, and affecting the market?
I am presenting information based on my personal experiences and what I have seen…do with it what you will. Either way, I sleep well at night.
Thanks for your comments and for reading the blog.
SoCalMtgGuy
November 17th, 2006 14:55
Very good information here and a true story of the state of real estate appraising. It really is a big mess. The advice about choosing a Certified appraiser is a good one. I would recommend appraisers who have been in the business for at least 5 to 10 years or more. They have the experience and have a stake in their own reputation.
It is a shame that many cannot trust the appraisers used by their mortgage brokers. If your lender is a bank or savings bank, you can better trust your appraiser and the value. At most of these banks, the loan officer is separated from the appraisal process. They cannot contact or have any influence over the appraiser. The appraiser getting future work from the bank is only dependent on their quality of work.
I know it sounds self serving, but this really is a reason to get your loan from a bank. I have had real estate agents very upset when their client comes to me instead of the agent’s recommended mortgage broker. They fear the loss of control, especially over the appraised value. They do not care that their client will save rate and get an accurate appraisal. This is not all agents, but a large percentage of them do not put their clients best interest first. Always take the time to educate yourself and shop. Shop your bank and mortgage brokers you know and trust, and get your own appraisal if necessary.
November 17th, 2006 15:03
SoCalMtgGuy: Thanks for the more frequent posts. This blog is one of my regulars, and I appreciate the updates.
SoCalMtgGuy and OC Appraiser: I do appreciate the efforts of you both.
A few months ago (and before the market slowed), I overheard I guy who owns a contruction company giving advice to a young man in seek of employment, telling him to consider becoming an appraiser because “that’s where the really good money is”.
Although I certainly want people to have good jobs and to be decently reimbursed for what they do, I do think that fields suffer when they get the reputation of being very well paid for the amount of training and effort required for entry. This causes a rush of people into the field who enter it with unrealistic expectations of compensation, which encourages everything from cutting corners to the frankly illegal. I imagine that it increases the competition, too, to an extent that makes it tough for those who just want to make a decent living doing decent work. It must also be a frustrating thing to watch for those who are in it for the long haul.
November 17th, 2006 17:10
Nitpick: $350 out of $350,000 isn’t 0.001%, it’s 0.1%.
Otherwise great work!
November 17th, 2006 18:12
Fannie Mae, Freddie Mac, FHA and other lenders have their blacklists, meaning appraisers, brokers, title companies, and other bad actors who can never have anything to do with them ever again. I am pretty sure this is public record. I have seen the lists before and I’m sure it will only get bigger.
November 17th, 2006 19:30
Hey SoCal:
Here is another idea… how about a subject called : How to find and honest Mortgage Broker??
Thought you may have some insight into that one as well, and well I could use an honest appraiser as well as an honest mortgage broker.
- BB
November 17th, 2006 19:31
ooops meant to say: How to find an honest mortgage broker.
bad spelling.
November 17th, 2006 23:29
Bubble Butt…
Here is the thing about mortgage brokers…
The best way to get what YOU want…is to BE INFORMED and know what you want, and what is going on. Don’t let the mortgage broker try to ’sell’ you something else. If the mortgage broker won’t LISTEN TO WHAT YOU WANT…then move along.
It is OK if they try to mention something else…but that is also where being informed comes into play. You can give reasons why such-and-such a loan is not what you want. After that, if they won’t help you find what YOU want…then move on.
Try to find brokers that have been in the business BEFORE the real estate boom as well. Not a ‘guarantee’ by any means…but it should eliminate some of the quick-buck artists that got in the business the past 5 years.
Hope that helps some…
SoCalMtgGuy
November 18th, 2006 01:55
I am qualified to do appraisals for other “real property” but not for real estate. Just speaking from my own viewpoint, it can be really tricky getting an honest appraisal. Not only does the appraiser need to know real estate, he needs to know your market; particularly in an area like Southern California where you have old homes, new homes, and remodeled homes sitting side by side.
I’d probably look for an appraiser who has been in the business for a long time too.
November 18th, 2006 02:00
Oh, and everyone should have realized that “real estate appraising” was becoming a lost art when the “drive by appraisal” came into vogue. What kind of a joke is that?
November 18th, 2006 06:27
Bubble Butt,
Sounds like you might want to have a chat with ‘Sensible Lender’.
November 18th, 2006 07:50
Sensible Lender -
I disagree that getting your loan from a bank will prevent getting a fraudulent appraisal. Last Spring, my husband and I had a loan through a national bank to purchase a new home which we found out had a significant amount of standing water and mold in the crawl space. I didn’t trust our realtor since he didn’t put in any contingencies in our contract as I had requested. I notified our loan officer who’s a VP at the national bank branch of the mold and standing water so that the appraiser would be aware of this. Our appraisal report came back stating that the appraiser did not check the crawl space as part of his inspection. I don’t think the bank had anything to gain by helping me killing this deal. Since banks can sell bad loans like this off, they would still make money and can get rid of the risk.
November 18th, 2006 10:47
Take a look at my market history report for the Bakersfield and Los Angeles at
http://homepricehistory.blogspot.com/
Additionally, if there’s enough interest I’d be willing to do a similiar report for San Diego.
November 18th, 2006 18:24
Atlanta,
The home inspector should have caught the standing water and mold. Appraisers are not inspectors they assess market value at the time of inspection. That said, the appraisal inspection should catch “obvious and readily visible” problems and then call for an expert in the home inspection / building trades field to evaluate it further. If the appraiser avoided the obvious to get a loan to go so he and the loan skell could get paid, sue his ass. Appraisers acknowledge on their certification page that they can be liable to civil action for intentional misrepresentation or negligence. Sound like he may have covered his but already by telling you he “did not” inspect the crawl space as it is not part of a standard inspection for a conventional loan. Most serious appraisers also have “boiler plate” statements in their reports clearly telling all readers of the report that it is “their responsibility to satisfy themselves as to the specific and in depth condition of the house through the services of a licensed home inspector”.
November 24th, 2006 14:55
Ric:
I have never seen an appraiser do the things you described. This goes way back to the 1970s when I was an appraiser. They specifically say in their reports that they do not do those things. Home inspectors do them. Inspectors crawl under the house, attic, fill tubs and showers, check for dry rot in the flooring around toilets (very common), check wiring, circuit breaker panels, plumbing supply lines, and more. Home inspectors are trained to do these inspections. When you buy a house, you always choose your own inspector and get his report directly (you also pay for this report.)
The appraisal report is completed for the lender to establish value to support the loan collateral. The buyer/borrower pays for the report and receives a copy. If you pay cash for a house (no loan), you are not required to get an appraisal, but you probably should. You definately should get a home inspection report.
November 28th, 2006 00:38
I want to apologize to a few of you…
I was doing a massive SPAM clearing on the site, and I accidentally deleted a few posts on this thread. I tried to recover them, but the damage was done.
Again, I apologize, and I thank you for your contribution to this blog.
SoCalMtgGuy
February 20th, 2007 08:17
asdfghj
February 20th, 2007 09:18
asdfghj
February 20th, 2007 22:02
asdfghj
March 12th, 2007 04:40
Hello. I love your!
car insurxance [url=http://car.zb-1.com/car-insurxance.html]car insurxance[/url]
April 8th, 2007 18:14
sesso gratis yo1 ッ
June 2nd, 2007 14:30
Thank you!
alaska fishing lodge alaska fishing lodge booking
June 3rd, 2007 02:14
interesting thank you…
car deal enterprise rent alaska fishing lodge
June 4th, 2007 07:58
Greetings!..
breast augmentation chat rooms alaska fishing lodge booking
June 6th, 2007 13:40
Thank you!
QQQQQQ555555 QQQQQQ555555
June 6th, 2007 18:05
Please, do not delete the given message. Money obtained from spam will go to the help hungry to children Uganda
June 10th, 2007 03:42
This is really fresh idea of the design of the site! I seldom met such in Internet. Good Work dude!
June 16th, 2007 13:07
Thank you!
enterprise rent a car sales alaska fishing lodge kodiak
June 16th, 2007 16:20
Greetings!..
forex review system trading forex performance system trading
June 16th, 2007 19:34
Thank you for your site.
enterprise rent a car sales forex software system trading
June 17th, 2007 09:44
very interesting
DDDDAAAAABBBBKa DDDDAAAAABBBBKa
June 28th, 2007 04:16
Thank you for your site.
car deal enterprise rent car enterprise rent rental
January 31st, 2008 05:18
Hi, my sites:88377d5df3dfe2bd5301c9f7b1627724