Posted by: jeb1 | September 1, 2011

The Value Debate: Combating Low-Ball Appraisals

Builders and appraisers weigh in on the equation used to determine what a home is worth.


At a time when home prices seem to be fluctuating by the day, the question of what a home is worth and how that value is determined has become a fiery debate, with appraisals at the eye of the storm. While appraisers have been condemned for inflating home prices during the boom, many builders believe that the pendulum has now swung too far in the opposite direction as appraisers hand out price tags for much less than builders or homeowners were expecting. Add in energy-efficient and green features and the equation gets even worse, builders report.

And builders aren’t the only ones complaining. “Banks are hiring subpar appraisers,” says Ken Chitester, director of communications at the Chicago-based Appraisal Institute. The problem, he says, harks back to 2009, when the federal government responded to the inflated values of the boom by stipulating that firewalls must be placed between a lender and an appraiser. That led to the rise of appraisal management companies (AMCs), which act as middle men for appraisers, generally on a contract basis.

The trouble comes in, Chitester says, when AMCs take a large cut of appraisal fees, keeping prices down by forcing the appraisers to take a smaller cut than experienced appraisers used to be accustomed to. “You don’t get on the list if you don’t accept bargain bottom fees and conform to very fast turn-around times,” which encourages use of the least experienced appraisers, he says. When more experienced appraisers are used, he argues, the lower rates pressure them to skimp on quality. “If you were making more money, you have to make up in quantity what you were making in higher charges.”

Read more…

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s


%d bloggers like this: