There are about 80,000 real estate appraisers in the U.S. and they play a key role in most home sales.
1. We’re working under a cloud
Until they weigh in with a determination of a property’s value, the buyer typically can’t finalize a mortgage. (Appraisers also play roles in property-tax appeals and home-equity lending, among other transactions.)
The profession got a reputational black eye, however, during the housing boom and bust. In numerous instances, including federal lawsuits against real estate data companies, appraisers were accused of fudging their numbers so that unscrupulous lenders could approve loans for unqualified buyers. “Appraisers were no more innocent than lenders or their CEOs,” said Phil Huff, CEO of Platinum Data Solutions, a real estate appraisal data company in Aliso Viejo, Calif. “They share the blame, too.”
As a reaction to such allegations, the Dodd-Frank Wall Street Reform and Protection Act of 2010 required more state and federal supervision of appraisers, and put more pressure on lenders to work through appraisal management companies, or AMCs. These independent firms are designed to keep appraisers and lenders from getting too cozy, explains Sam Heskel, manager of appraisal firm Nadlan Valuation in Brooklyn, N.Y.
But real estate appraisers say that new rules have made the process slower and more complicated for consumers—and that they haven’t stopped some appraisers from yielding to pressure from banks.
2. We don’t know your neighborhood
One unintended consequence of the Dodd-Frank reforms: AMCs are increasingly sending out-of-county or out-of-state appraisers to calculate property values. This happens because AMCs in some cases assign homes to appraisers essentially at random, says Huff: “They may not know the area all that well, and not use the right [comparisons],” says Huff.
This matters because inaccurate appraisals can hurt consumers. An appraisal that undervalues a property may keep a seller from getting a fair price; one that’s too high could put a mortgage
out of reach for a buyer.
3. We work for the bank, not for you…
The typical appraisal costs between $350 and $500, according to Zillow, and it’s paid for by the consumer (usually the buyer). But while home inspectors, real-estate agents and contractors technically work for the consumer, the appraiser’s work is owned by the bank. And in some cases, homeowners and buyers are adversely affected by appraisals they never personally see.
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