I am not a crook!
I have been ordering appraisals from Larry for the last ten years. Larry is a member of the Appraisal Institute and his valuations are accepted by all the lenders where I broker loans. Last week I called him to discuss a home’s value. I am refinancing a client’s loan and concerned if the property does not appraise high enough, my clients will not be able to refinance into a lower fixed rate mortgage.
“Hi Larry, have you had a chance to review the numbers on the property on Jenkins home? I really need $450,000 or I can’t do the loan.” “No problem Ken, it’s a stretch but I think I can hit your number.” “Thank Larry, I own you one. I will buy lunch next Friday.” Did I break the new law against influencing appraisers or was I helping my clients?
Earlier this month, California Governor Arnold Schwarzenegger signed into law, SB 223 -- making it illegal to pressure appraisers to arrive at a predetermined property value that's been set by mortgage brokers or homeowners to ensure a sale goes through. The new law also states that it makes it illegal for a licensed appraiser to engage in "any appraisal activity in connection with the purchase, sale, transfer, financing, or development of real property if his or her compensation is dependent on or affected by the value conclusion generated by the appraisal."
"This law helps deter some of the individuals from putting pressure on appraisers," says Michael H. Evans, real estate appraiser, Evans Appraisal Service and a Fellow with the American Society of Appraisers. But Evans is careful to add that it's only a start. "It'll help. It's not a cure all; I can guarantee you that."
The problem has been brewing for a long time and leaving appraisers and homeowners vulnerable. "Almost every order that would come through our fax machine would have some type of order on it saying, 'If it doesn't come in at this price, call me.' Or, 'If this doesn't make value, we don't want the appraisal.' We just send it back to them saying, 'Hey, we don't work that way. We're going to have to give you the value that it is; we can't change that and if you want us to work under those circumstances, we can't do the job for you.' And some of them go away, they'll try to find some who will," explains Evans.
But Evans says some appraisers fall victim to the pressure. "We have a lot of young appraisers … and they're hungry. You have some -- not all -- but just some unscrupulous lenders out there who are just hunting for a value. So the lenders go through the phone book looking for a young appraiser who maybe doesn't have the experience or the clientele and will do something that maybe he or she shouldn't do and lenders prey on them," says Evans.
The law now makes violators subject to punishment of license suspension or revocation with the potential of civil action. Evans says the new law will make will people think twice before they pressure an appraiser for a predetermined value on a property. It will also make appraisers who are tempted to accept the illegal offer recognize there are severe consequences.
As for homeowners, they too will stand to gain from this new law. "Homebuyers need to protect themselves by checking the credentials of everyone involved in the transaction and requesting that their assigned appraiser be state licensed and accredited by a national professional organization," says Evans.
He says that by selecting an accredited appraiser, homeowners will risk less because "accredited appraisers have got more experience and more to lose if they're succumbing to that type of pressure. They've invested more in their profession." Experts believe that inflated appraisals have significantly contributed to the mortgage-meltdown crisis. For that reason, numerous industry and consumer advocacy groups joined together to support the passage of the bill including: the Appraisal Institute, the American Society of Appraisers, the California Mortgage Bankers Association, the California Association of Mortgage Brokers, and the Fair Lending Alliance, and the Greenlining Institute.
“Hi Larry, have you had a chance to review the numbers on the property on Jenkins home? I really need $450,000 or I can’t do the loan.” “No problem Ken, it’s a stretch but I think I can hit your number.” “Thank Larry, I own you one. I will buy lunch next Friday.” Did I break the new law against influencing appraisers or was I helping my clients?
Earlier this month, California Governor Arnold Schwarzenegger signed into law, SB 223 -- making it illegal to pressure appraisers to arrive at a predetermined property value that's been set by mortgage brokers or homeowners to ensure a sale goes through. The new law also states that it makes it illegal for a licensed appraiser to engage in "any appraisal activity in connection with the purchase, sale, transfer, financing, or development of real property if his or her compensation is dependent on or affected by the value conclusion generated by the appraisal."
"This law helps deter some of the individuals from putting pressure on appraisers," says Michael H. Evans, real estate appraiser, Evans Appraisal Service and a Fellow with the American Society of Appraisers. But Evans is careful to add that it's only a start. "It'll help. It's not a cure all; I can guarantee you that."
The problem has been brewing for a long time and leaving appraisers and homeowners vulnerable. "Almost every order that would come through our fax machine would have some type of order on it saying, 'If it doesn't come in at this price, call me.' Or, 'If this doesn't make value, we don't want the appraisal.' We just send it back to them saying, 'Hey, we don't work that way. We're going to have to give you the value that it is; we can't change that and if you want us to work under those circumstances, we can't do the job for you.' And some of them go away, they'll try to find some who will," explains Evans.
But Evans says some appraisers fall victim to the pressure. "We have a lot of young appraisers … and they're hungry. You have some -- not all -- but just some unscrupulous lenders out there who are just hunting for a value. So the lenders go through the phone book looking for a young appraiser who maybe doesn't have the experience or the clientele and will do something that maybe he or she shouldn't do and lenders prey on them," says Evans.
The law now makes violators subject to punishment of license suspension or revocation with the potential of civil action. Evans says the new law will make will people think twice before they pressure an appraiser for a predetermined value on a property. It will also make appraisers who are tempted to accept the illegal offer recognize there are severe consequences.
As for homeowners, they too will stand to gain from this new law. "Homebuyers need to protect themselves by checking the credentials of everyone involved in the transaction and requesting that their assigned appraiser be state licensed and accredited by a national professional organization," says Evans.
He says that by selecting an accredited appraiser, homeowners will risk less because "accredited appraisers have got more experience and more to lose if they're succumbing to that type of pressure. They've invested more in their profession." Experts believe that inflated appraisals have significantly contributed to the mortgage-meltdown crisis. For that reason, numerous industry and consumer advocacy groups joined together to support the passage of the bill including: the Appraisal Institute, the American Society of Appraisers, the California Mortgage Bankers Association, the California Association of Mortgage Brokers, and the Fair Lending Alliance, and the Greenlining Institute.
posted by Ken Calhoon at 8:34 AM
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