I’ve been trying to figure something out the past six months.
Real estate appraisals have seen a change in how they get their assignments and its costing you more. (Petria Follett/sxc)
What happened to the price of appraisals?
In the first 3-1/2 years, I was in the business I could tell a client that your appraisal was going to cost $300 – $350 and would be paid to your mortgage professional before closing.
Suddenly, the price was up to $400 – $450 in early January. I couldn’t get a straight answer from anyone. Everyone blamed the government – but isn’t that the organization that usually gets the blame?
Thanks to Supreme Lending’s David Eckert, I finally got a good answer. It’s essentially … the government — but they meant well really they did.
There are about 1,000 different arguments for “what/who” led to the housing bubble and its subsequent bursting. However, one that many have focused on is the connection between appraisers and lenders in regards to getting loans approved.
In January 2010, a new policy ruled out that changed how banks went about getting their appraisals done. Gone was the ability for the bank to call “its” appraiser to get an appraisal done. Keep in mind that appraisers are licensed by the state and being caught in mortgage fraud is more than likely going to cost the appraiser his license. So, a vast majority of appraisers are honest and above board.
That said, if I get 100 appraisals a month – at $300 a piece — from Bank X — am I going to be a little more lenient towards making sure I continue to get those jobs? Human nature says “yes”.
Today’s market is requiring that lenders “randomly” select the appraiser from those that are included in the pool for their greater area. Now the government is putting this in place to protect the consumer — but it also puts the fear of the good lord into the banks.
Well the problem is solved. Up pops these “appraisal management” companies which are essentially taking the responsibility of assigning the appraisal to an appraisal in their network. Guess where that extra $100 just went? Yep. The “appraisal management” company gets $100 of your money to theoretically give you a fair and balanced appraisal.
This past week, FHA issued an adjustment to its appraisal ruling basically saying that it never required that banks use these “appraisal management” companies. The banks just have to be able to show that the loans are not being assigned to a single appraiser.
Which is good. Because, a major issue with the appraisal management companies — beyond pocketing $100 of your hard earned money — is that they didn’t take into account geographical locations when assigning the appraisals. Again, they “choose” their person based on criteria — quickest response time, least complaints, etc. — that will make the transaction as easy as possible for — the appraisal management company. (Wait, wasn’t this supposed to assist you as the consumer?)
It is going to be interesting to see how the new FHA announcement changes how the banks assign their appraisals. But I think we’ve seen the end of the $325 appraisals.
And that’s too bad.
