Los Angeles Times – Despite Federal Reserve regulations that took effect April 1 requiring lenders to pay appraisers fair fees, many appraisers say they are still offered $200 to $250 by lenders for work billed to consumers at $450 or more.

MAKING SENSE OF THE STORY

• Last year’s Dodd-Frank financial reform law mandated that appraisers receive fees that are “customary and reasonable” for their local market areas, yet the Appraisal Institute says that is not happening.
• While a portion of the difference between what consumers are billed and appraisers are paid goes to the management companies that connect lenders with local appraisers and take a percentage for their services, often times lenders make a profit from the appraisal as well.
• Home buyers should care about this for several reasons.  For starters, accurate appraisals are a concern for consumers, as appraisals can be deal-breakers if the appraisal comes in too low. When performed competently, appraisals can be accurate measures of the equity in a home when the homeowner refinances or seeks a second mortgage.
• Most experienced independent appraisers refuse to work for $200 to $250 because they can’t pay their overhead at that rate, leading less-experienced appraisers, who sometimes travel long distances and are unfamiliar with the area, to conduct the appraisal, which can lead to inaccurate, appraisals.
• The Appraisal Institute is seeking to persuade the Federal Reserve to tighten its regulations, which created a loophole for lenders and management companies that wanted to keep paying low fees to appraisers.  In the meantime, consumers should demand transparency, asking how the appraisal fee was distributed and why.

Wall Street Journal - Home appraisals, which were blamed for being too generous during the housing boom, are now being criticized by some homeowners for being too stingy, preventing them from refinancing or borrowing against their houses.

The criticism is being leveled at computerized real-estate appraisals, which depend on models that use prices from home sales and other data to determine the value of a house. Because of the volatility in the housing market, they are underestimating prices, some homeowners, real-estate agents and fee appraisers say.

Read the entire story here.

From the San Francisco Chronicle – Across the country, agents and homebuilders are complaining too many appraisals are coming in low, scuttling deals.

Hi there!

If I had my property appraised in Aug. 2005, do you think the appraisal is still good? Also, do you think the value is better today? The appraisal had 2 separate figures, one for the land and one for the house. I’m not ready to sell, but I’m curious as to the value of my property today.

Thank you!
Linda Kittlitz

Our reply:

An appraisal from August of 2005 is definitely NOT valid for today’s market. In San Francisco and especially Bernal Heights, I would assume the value is now higher. Of course, I do not know what properties the appraiser used or if that appraisal was a true “fair market value”. Sometimes appraisals are not really what the property would sell for in the open market because the appraiser is using comparable sales that can be months old or the appraiser did not see the comparable properties.

Appraisers do not usually go and see homes that are on the market like real estate agents do so they are not necessarily aware of the differences that make one house sell for more that another one even though they looked like they were the same.

Also, in a hot market your property could sell for much higher than the appraised value and in a declining market it could sell for less because the market is moving so fast the comparable sales from 3-6 months ago can be out of date. From August 2005 until today we have gone through a decline and an upswing. So the best solution would be to get a new appraisal based on the latest sales.

- Janis Stone