Appraisers coerced to raise valuations

Appraisers coerced to raise valuations

There are 264 comments on the The Honolulu Advertiser story from Feb 11, 2008, titled Appraisers coerced to raise valuations. In it, The Honolulu Advertiser reports that:

This is an excerpt from an appraisal order received by a local appraiser. Personal information was blacked out by the appraiser to preserve confidentiality.

Join the discussion below, or Read more at The Honolulu Advertiser.

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ipj737

San Diego, CA

#1 Feb 11, 2008
Appraisals are ordered by the BUYER'S lender. So why would it have to be the appraiser INCREASING valuations to get a deal to go through? Could an appraiser DECREASE valuations (i.e. below the contract price) in order to get a BETTER deal for the buyer? Appraisals that don't come out at the contract price often result in leverage for the buyer. Let's say you're a buyer and enter escrow on a home for $500,000. Appraisal comes out at $480,000. Is this good OR bad for the buyer? Hmmm. Will the seller reduce the price to meet the appraised value or would they cancel escrow and try to sell at a price that's higher than market? What does all this mean? It means appraisals can be influenced both UP or DOWN. It just depends on who is doing the influencing.
Dan -

United States

#2 Feb 11, 2008
No kidding? Who woulda thunk it ...
fearandloathing

United States

#3 Feb 11, 2008
the legislature lacks focus

but at least there not hung up some hot button issue that will propel more Gabbards into office
EastSide

San Diego, CA

#4 Feb 11, 2008
It is revealed, the process of appraisal is under pressure. Market comparison is only based on sales in the area. If units across the street are comfortable condominium units and have sold during the recent say 5 years, the price of 'mom and pop land' across the street is based in this price. Tax values are based on the rising or falling property prices.
Hash

Hilo, HI

#5 Feb 11, 2008
ipj737 wrote:
Appraisals are ordered by the BUYER'S lender. So why would it have to be the appraiser INCREASING valuations to get a deal to go through? Could an appraiser DECREASE valuations (i.e. below the contract price) in order to get a BETTER deal for the buyer? Appraisals that don't come out at the contract price often result in leverage for the buyer. Let's say you're a buyer and enter escrow on a home for $500,000. Appraisal comes out at $480,000. Is this good OR bad for the buyer? Hmmm. Will the seller reduce the price to meet the appraised value or would they cancel escrow and try to sell at a price that's higher than market? What does all this mean? It means appraisals can be influenced both UP or DOWN. It just depends on who is doing the influencing.
It is bad because the buyer must make up the difference between appraised value and purchases price with the down payment. So the higher the appraised value, the less down the buyer needs to qualify for given loan. The practice is also bad as it raises prices artificially and leads to more people being upside down on loans when they try to resell or refinance.
Kalli

Winchester, KY

#6 Feb 11, 2008
Anyone who has bought or sold real estate knows this has been going on for years. It was always so amazing that the appraisal would come in exactly at the same price of the property. Coincidence? I don't think so.
Former Maui Resident

Kapaa, HI

#7 Feb 11, 2008
In a 'hot' real estate market, values are rising and properties are scarce. Sellers ask more for their properties and buyers are willing to pay more. Buyers usually have a limited down paymnent, and NEED the property to appraise at least for the offer value in order to complete the purchase. All of this does allow for the market to appreciate more quickly (appraisers often appraise far below the current asking / selling prices without this pressure). This is really nothing new, and has, IMHO, very little to do with the suprime mess we're in now.
Concerned Citizen

Honolulu, HI

#8 Feb 11, 2008
I wonder who appraised Turtle Bay?
RayEm

Kailua Kona, HI

#9 Feb 11, 2008
It's about time to prosecute all the players that are involved to artificially inflate home prices or committed fraud including real estate agents, appraisers, mortgage brokers and lenders. Other states and the FBI are already prosecuting them? Why not our local government? Our local officials can learn from here:

http://flippingfrenzy.com/

BTW, as I said before, home prices are way above fundamentals that it will fall back to the pre-artificially-inflated price.

Anyone wants to buy a home now with the true market value is unknown?
ohaiboy

Hoolehua, HI

#10 Feb 11, 2008
seems that the appraisers are now fearing getting caught and wish to cover themesleves. the tax assessor's here in hawaii are in the same boat. these are the ones who decide that once your neighbor paints his house, his value goes up and so does yours since you are next to him. appraise or assess the TRUE value of the property and then everyone gets a fair deal.
Stephen

Indio, CA

#11 Feb 11, 2008
Actually, appraisers don't need coercion to commit fraud. It's a given in the industry. The state agencies support it.
kwek

San Rafael, CA

#12 Feb 11, 2008
I knew this story did not come from Andrew Gomez
Arlen

Indio, CA

#13 Feb 11, 2008
Read: "The Truth About Real Estate Appraisal" by S.G. Bishop.

“Live Aloha”

Since: Oct 07

Kaneohe

#14 Feb 11, 2008
Aloha,

The Sh_t has hit the fan here in Long Island, NY as we attempt to recover from a midler form of trouble the Japanese people endure with in the 1990's.

It goes beyond unrealistic appraisals and more likely a combination of facts and I believe many are many underlying factors that remain behind a veil.

The fine Mortgage Tools are failing, Ballon payments taking its toll and I believe Greed scratching at personal savings.

There was an awesome article in the NYT's this weekend relating to this matter.

I felt that something was wrong with the market when it soared above 12K and apparently inflated for one reason or another.

It's a sorry feeling to understand too that the American Dollar is so weak and many countries now not accepting our currency that was once a treasured note.

Folks for bordering Canadian provionces are loving it and the shoe now on the other foot.

With our heating costs escalated too, many in my community have made adjustments and tweeking their spending as required to pose minimal impact to their routine.

The Rental Housing market will be booming again.

With Aloha,

Moke Young
Martin Turow

Honolulu, HI

#15 Feb 11, 2008
The whole think stinks from the bottom to the top. It's all a house of cards built on lies. It's easy to assess the true value of a home---if what you could rent the home out for would cover the mortgage, then you're getting a fair value. If the rent won't cover the mortgage, then to that degree you're overpaying. Hawaii was the last to run up in prices and will be the last to correct. This is not the time to buy and shame of the appraisers for being complicit in all this.
ese

Honolulu, HI

#16 Feb 11, 2008
Is anyone surprised by this, especially in Hawaii?

Since: Dec 07

Hilo

#17 Feb 11, 2008
ipj737 wrote:
Appraisals are ordered by the BUYER'S lender. So why would it have to be the appraiser INCREASING valuations to get a deal to go through? Could an appraiser DECREASE valuations (i.e. below the contract price) in order to get a BETTER deal for the buyer? Appraisals that don't come out at the contract price often result in leverage for the buyer. Let's say you're a buyer and enter escrow on a home for $500,000. Appraisal comes out at $480,000. Is this good OR bad for the buyer? Hmmm. Will the seller reduce the price to meet the appraised value or would they cancel escrow and try to sell at a price that's higher than market? What does all this mean? It means appraisals can be influenced both UP or DOWN. It just depends on who is doing the influencing.
Only the "professionals" (buyer agent, seller agent, and lender) benefit from a higher appraisal because the all get paid and measured by the amount of the sale. If the seller sets a price at $500k, the buyer needs the appraisal to meet that in order to be fully financed...or like Hash said, pay the difference. When the buyer doesn't, they usually pull their name out of consideration and the seller waits until they get a qualified buyer. Either way, more $ for all the "professionals" involved.

By the way, I believe there is no licensing process including continual education for mortgage brokers. That means no ethics and law classes required by the state.
djs

Honolulu, HI

#18 Feb 11, 2008
For years, industry insiders have always invoked the myth of the free market in an effort to deflect their role in driving up prices and inflating values.

The only way to resolve spiraling housing prices is to eliminate the cause - eliminate commission in real estate transactions.
Hal Matthews

United States

#19 Feb 11, 2008
I am a retired Oregon State Certified, Licensed Real Estate Appraiser. All of the issues mentioned by the appraisers in this article are a everday business problem for them. All appraisals are reviewed by the lenders in house appraisers, and are subject to random review by the state. There are serious consequences for the appraiser if USPAP rules are violeted.

Why are there no rules governing the conduct of lenders, mortgage brokers, and realtors. It is their behavior,their greed to make money that fuels this problem.

Shame on those that break the rules that impact all of us.
NoMoHouse

Honolulu, HI

#20 Feb 11, 2008
So the appraisers were in bed with the real estate agents, who were in bed with the mortgage companies, who were in bed with the major banks, who were in bed with Wall Street, who are getting into bed with the government. There's a lot of something going on in the bed, don't you think.
Make a change this election year. Vote for whoever's not already in office.

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