Real Estate Tug of War on Appraisals - 8 News NOW

Real Estate Tug of War on Appraisals

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LAS VEGAS -- Appraisers are supposed to be objective with no ties to the buyer or the lender when it comes to placing a value on a home. However, in some cases, their bias has thrown off deals.

Now, new laws are trying to keep them in check. In the meantime, a new type of independent appraisal company is benefiting big banks.

The good news -- a lot of the appraisers who were in the banks' back pocket are gone, according to a long-time appraiser. The bad news -- big banks have gotten creative establishing companies of inexperienced, speedy appraisers who don't always evaluate houses accurately.

"You just can't go on. You're stuck," said Gina Bryson, who is helping her parents sell their house. She is frustrated as she makes her third attempt to do a short sale.

"Hopefully, the bank will come in and we can get this out of limbo since that's where it's been for a year-and-a-half," she said.

Bryson believes the appraisal was trumped up and that's why the bank didn't approve the short sale.

"Now, we have a third entity involved in this whole appraisal value -- appraisers that are hired on behalf of the banks," realtor Amelia Keene said.

Legally, appraisers cannot be handpicked by banks. In fact, the Home Valuation Code of Conduct and Dodd-Frank Act created a firewall between appraiser and loan officers so there's no bias. But bank subsidiaries have created appraisal management companies so they can take a cut of the appraisal fee.

Lenders are required to use appraisal management companies for Fannie Mae, Freddie Mac and HUD loans, but not all loans. Appraisers, on the other hand, don't have to work with AMC's if they don't want to.

"If we're objective, then the people making the decision, whether or not to lend money, they know there's no bias one way or the other and they can feel confident in lending based on the collateral, the capacity, the credit and the character of the borrower," said Britt West, a certified residential appraiser.

"The way that they assign the work is not always based on competency or experience, their assignment criteria seems to be based on speed and fee, how much they can charge and how much they can make on the spread," said Britt West, a certified residential appraiser.

Still, realtor Amelia Keene has seen appraisals come in low which she believes is so banks can get the houses off their books.

"You're going to have to start dropping the price because you're not going to get an offer. They're going to start taking the offers that are lower. So, that's part of the problem, the dragging down of the values," Keene said.

"Contrary to popular opinion, banks are not asking us to bring these properties in low, nor are they asking for them to come in high, what they're asking for is market value. Most appraisers have discovered, over the years, they don't want to kill transactions," West said.

Bryson hopes that will be the case on this third try for her parents.

You can always challenge an appraisal. You can look up the appraiser's experience level or any prior sanctions. The appraisal business used to be booming with hundreds of people applying each year to be interns which is the first step in becoming an appraiser. This year, there were four applications.

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