Want to get an accurate value on your house? How to find an HONEST appraiser.
There was also quite a bit of discussion as to how internet sites like www.zillow.com were having an impact on things.
Well, OC Appraiser had even more good info for everybody. From how to find and research a good appraiser, to the impact and shortcomings of internet sites such as zillow.com. Instead of having that valuable information buried in the comments, here it is for everybody:
From OC Appraiser:
I’ve been trying to do my part by sending emails and calling local newspapers, to no avail. Several months ago the Wall Street Journal ran an article on appraisal fraud that I found to be very accurate. Unfortunately, it did not gain much traction.
Currently, I have activly been in contact with honest, professional, appraisers throughout the country.
One of these appraisers has contacts with the FBI and Justice Department in Washington, amoung other agencies. A database is being put together listing all suspicious addresses and names of participating appraisers and brokers nationwide. From what I hear it is beginning to yeild results. Point being, (we) are trying to clean things up and rid the industry of the bad players. It just takes time. Wish we had more media help, then things would snowball much faster, and crooks would most likely run to another profession.
One way to find an honest appraiser, or at least one that you know is NOT on the take, is to go out and personally hire him/her yourself. DO NOT call to find an appraiser from a list that the agent gives you. Just search yellow pages, or go to www.asc.gov for the national registry of licensed and certified appraisers. On this registry you can search by city, county and state, and it will give you all the appraisers in that city, as well as if they have active licenses or not.
You can also search www.orea.ca.gov for the California list, and narrow it down to your city. On this site (OREA - Office of Real Estate Appraisers), you can also search to see if appraisers have ever been busted for any wrong doing.
Other tips: Find an appraiser who is Certified, and check their ID, so you can check the websites to make sure they match. In Orange County, most of the appraisers running around arent even licensed. They are trainees who are working for some other licensed appraiser who just signs off on the report, more often than not, that the supervisor also inspected the house, when in fact he did not. There are tons of “skippy mills” in OC, for this is the fastest entry into the profession, and the easiest. The scary part is these trainees learn nothing but how to “pump” value, and their goal is to become newly licensed so they can go out and hire a hand full of trainees themselves. They typically give the trainee 50% of the fee, and the cycle repeats itself. That is why more than half of all appraisers in OC are either trainees or newly licensed, and mostly unqualified to do anything.
If an appraiser comes to your house or calls before coming and asks you what “you” think your house is worth, or what “value” you are looking for, find another appraiser. This guy is just looking for a baseline starting point so he knows what values to look for in the area. Thats because he doesnt really know how to appraise, rather he conducts searches by value, not by property comparability.
This is NOT appraising. Competent, professional appraisers do not need a starting point or target value. They go to your house, analyze the data, and form an opinion, applying various methods and technical analysis. The value may come in high, it may come in low, it may be right on target. But rest assured, what you at least have is an unbiased professional opinion.
Now that you know where to go to find a good appraiser, it is time to look at the other side of sites like zillow.com. The internet is an excellent tool, but nothing is going to replace a trained professional actually spending some time on site to find the actual 'value' of your home.
From OC Appraiser:
Web sites like zillow are currently facing litigation by homeowners who relied on zillow for accurate valuations. The problem with web site valuations, BPO’s and all other desk-top valuations, is that they do not account for subject location. Zillow cannot tell if a property backs a freeway, which in some markets can account for a 15% discount. AVM’s cannot tell a panoramic catalina ocean view, from a peek thin southern coastal view, which can be as much as a 20-30% difference, depending on how close to water the house is. Computer and desk-top valuations cannot tell the difference between higher end Bosch, Viking and SubZero appliances, versus the Sears specials.
Computer valuations cannot determine over-improvements, superadequacies, physical, function or external obsolescense influences, who’s value contribution or discount cant be as high as 40%. Now I dont know about you, but if I am borrowing 100’s of thousands of dollars to buy something, you better believe I want to make damn sure its worth what I paid for it. And I aint gonna trust the appraiser who is hand picked by people who stand to gain a commission when the deal is closed. $350+ dollars, to potentially keep from making the biggest financial mistake of your life seems like a no brainer to me.
I’m not worried about the appraisal profession or my role in it. The cream always rises to the top, and profesional investors (lenders and others who actually loan out their own money and keep the assets in their portfolio) always want an actual qualified professional appraiser doing the inspection and analysis.
Shadash, I can certainly understand how you think appraisers will be replaced because they cant be trusted. But the fact of the matter is that professional money managers and debt holders do understand the importance of a professional valuation. Its just that in recent years they have been more risk tolerant and because they have been shuffling the loans down the line, they did not need accuarate valuations.
I suspect however, that this packaging of loans, and passing the buck down the line will cease, when the end holder does not get paid what he thought he was supposed to make. Look at it this way. If you loan money to someone, even if its not your money, you will stop loaning out the money if you stop getting paid. Because if you dont get paid, how is the guy who loaned you the money going to get paid? And so on and so forth.
The only way to insure coverage is to know that the collateral will cover the debt burden. And the only way to sleep soundly at night as a lender, is to have full faith in the value of the collateral. Computer valuations will be around to do the low loan to value deals, but with people continuing to borrow against their homes, inceasing loan to values, there will always be work for the honest appraiser. Its all about being selective in the clients you have. The clients that I do have all loan out their own money and want real valuations. I quite doing work for brokers 12-18 months ago, because they just stopped caring, and their competition heated up.
So there you have it. More 'real world' info on what you won't hear about the appraisal business. So again, take this information and use it to make the best decision for your particular situation. If you think we are making this stuff up, that is fine. But if you think there 'might' be some truth to what you are hearing here, I would seriously consider spending an additional $350-$500 bucks to get an 'additional' appraisal by an unbiased 3rd party before I was on the hook for hundreds of thousands of dollars. Why take the the chance of overpaying for a property, when for about .1% of the purchase price of the property ($350 on $350,000), you could have some solid information in your hand regarding the 'real' value of the real estate in question. Sounds like a no-brainer to me.
**ATTENTION ORANGE COUNTY READERS**
For all the Orange County readers, I have something you might be interested in. If you would like to have your property appraised by OC Appraiser, send an e-mail to me at firstname.lastname@example.org and put 'OC APPRAISER' as the subject. I will pass your contact info along, and let OC Appraiser take it from there. I have never met OC Appraiser, but we have traded quite a few e-mails and their posts on this site and Ben's blog speak to their credibility. I was never an appraiser, but I did spend a decent amount of time in the appraisal review department of a major lender, so from what I have seen, I feel confident that OC Appraiser is the real deal and will give you an honest appraisal of your real estate. So, send me an e-mail if you would like me to pass your contact info to OC Appraiser.
For those of you who have been checking in less frequently because I was on a posting 'haitus', there were 3 new posts this week including this one. So be sure to scroll down and catch those. Lots of good info in the comments as well. Look for more frequent posts from me in the future. Just remember 2007 is the year when things WILL get interesting.
BE INFORMED... be patient... and stay tuned...