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Appraisal Angst

Now for a little bit of good news. A lot of people are ticked off because appraisals are coming in lower than expected. In other words, the appraisers are actually appraising homes again.

It was no secret during the boom that a little bit of shopping around would get you the appraisal you needed to get the job at hand done. Between a lot of rookie appraisers and the sheer volume of paper flowing through the mortgage lenders offices the profession saw its standards slip mightily which contributed not insignificantly to our current problems.

Now with some new rules and the rediscovery of religion by the nation's lenders things are changing. An article in the WSJ describes the angst that's accompanying the new regime:

Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines.

During the housing boom, appraisers often complained of pressure from lenders to inflate home-value estimates to justify dubious mortgage lending. Now, some people in the mortgage business -- and some borrowers -- say the pendulum has swung too far the other way.

Lenders burned by huge losses from defaults now are pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes.

"If history is no longer valid, then it is very difficult to get good and accurate values," said Mark Rattermann, an appraisal trainer in Indianapolis.

John Rooney, an appraiser in Phoenix, said about half the recent appraisals he has done for people seeking to refinance have been too low to allow it. Applying to other lenders is likely to cost borrowers $350 or more for another appraisal.

All of this is being met with more than a little grousing. Naturally, owners are upset when they find out that their home isn't worth nearly as much as they believe it to be and the appraisers continue to fret about the hit that they're taking to their bottom line.

The appraisers' gripe arises from the fact that mortgage brokers, loan officers or real estate agents from any role in retaining an appraiser. Lenders now order the appraisal through third party management firms that farm the work out to independent appraisers. The appraisers don't like it because they have to give up a portion of their fee to the management firm though they couch their complaints in righteous arguments that allege the process degrades the value of the appraisal. Rest assured it's all about money.

We can only hope this state of affairs persists for some time. One suspects that homeowners unhappy with an appraisal have probably been the victims of an honest assessment of valuation.