Banks manipulating appraisals?
Just had a nice long conversation with an appraiser who is getting alot of REO and short sale appraisals. Out of frustration, I called him to seek understanding of a recent appraisal that we just got for an REO property. The property is worth 450,000 to 500,000 in repaired condition at best, assuming we used the highest priced sales in the neighborhood. The home is in very bad disrepair. We had 13 inches of rain the two days before the appraiser did his report and the house filled with water from a major roof leak. Enough water that your pant legs would be we up to 4" up. The home needs about 150,000 in repairs and updates minimum to make it worth 450,000 to 500,000 and then 450,000 might be a long shot.
The appraisal came in at $495,000 in as-is condition. No repairs were mentioned and the home was considered to be in average condition.
House has been on the market for 4 weeks, we had two offers come in, both at 250,000 and one countered at 275,500. Bank rejected because they were too far off from appraised price.
When I met with the appraiser, he was very excited to get these appraisal orders. He went on to tell me that the bank tells him which comps to use and what adjustments to make and that he rarely gets to do an appraisal based on the comps that he thinks are closest.
How would the bank benefit from overvaluing a property and letting it sit on the market? Insurance? MI? Anyone care to guess?
Replies to This Discussion
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Permalink Reply by A.W. on
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In reality a short sale transaction is no longer a short sale by the time the banks finish putting their greedy hands into the process. That is their intention to never sale it at a low price and will continue to reject and prolong offers until they get what they want.
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Permalink Reply by ALLAN ARTHUR on
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A system to track the Banks and Appraisers actions may be the answer...
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Permalink Reply by Jan Sanderlin on
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@Allan: Really??? Isn't this the reason we arrived here right now where we are??? More oversight usually equals more opportunity for special interests to gain more power and control to manipulate the system more...there are laws in place that simply need to be enforced...
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I have seen evidence of Banks and Builders propping up values in particular neighborhoods. I am not aware of any clear "collusion," but it is clear that they are using similar marketing strategies.
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Permalink Reply by cynthia holiday on
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I think a system to track data is very important. Collected evidence is extremely powerful and will prevail because it cannot be ignored. We could hold the banks to task. They would think twice about committing fraud of any kind if we collected data on transactions. In 2008 I spent over 100 hours investigating appraisal fraud for a relative who had been defrauded on 4 condo conversions in TX. The evidence I found was sent to his attorney and the result was full recission of the foreclosures. Deeds in lieu and all references to the accounts removed from the credit. Clean slate. It was due to extreme appraisal fraud and I uncovered the appraisals and existing cases against the appraiser. albeit it was origination appraisals not BPO'S but my experience illustrates that the banks do take hard evidence seriously.
It can be done. But it takes time. If we all took the time we spend complaining about this situation and input the data we currently have on hand we could start a nice data base right now.
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I've heard of this in AZ so it's not an isolated scenario.
I think tracking it would be adventitious.
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Permalink Reply by Kevin Wilson on
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If the appraiser is taking advice like this from the bank, they should be reported. It's illegal for an appraiser to manipulate his report based on the customers inputs. Appraisers are supposed to be TOTALY non-biased.
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Permalink Reply by Jim McCormack on
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Look at FHA's appraisal guidelines for the HUD PFS Guidelines. They greatly restrict use of distress sales. In my opinion all FHA appraisals a suspect if the appraiser would use those distress comps since that changes the outcome. If the subject property is a short sale that looks distressed then the closest comps are other distress sales, not some nice retail sales. Clearly, the appraisal rigging is built into the housing and banking systems.
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About the comment "The appraisor is violating the "ethics"" Why shouldn't he? The big banksters are feeding him.
Anyone who is surprised about this behavior, doesn't really know what was happening prior to the big crash of 2007-2008.
ANY appraisor who had, any about of business back then was in on the scam. So fast forward to 2013. The big banksters and those who went along with them, should have been kicked out of the business, lost their lincenses, paid fines and/or done jail time. But the banks got bailed out. The VERY SAME people who crashed this economy are still in the business.
So what happened in 2007-08 will happen again and again and again. The only way to stop this type of behavior is to levy fines in the amount of money they took and/or put them in jail. Someone mentioned that what needs to happen is for Glass-Stegal to come back. This is a very good first step
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Permalink Reply by Julie O'Brien on
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Thanks All, but I feel we need to continue to do what we know is "right" and don't allow any person or bank to lower our standards or morals. It is not worth it in the long run. It not only hurts us as Realtors, but it effects the market that we all work in as well.
We all have to close our eyes at night and know that we have done the best we could for our clients, our families and ourselves.
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I did BPO's for a couple different banks for about two years. In the last year of doing it (2012); I had the bank "kick back" several BPO's because they wanted a different amount. They did go as far as telling me which comps to use. When that happened; I told them ~and cc'd my manager; that the comps they were asking me to use were in reality not comparable. I explained in detail the differences between subject property and their comps. The response I received was "if you are not going to use the comparables we have found; then we will pull the order and submit somewhere else." I told them to go ahead because I had standards I was held to as a Realtor and I wouldn't lie for them. There was no way I was going to risk my RE License either since this is how I support my family!
I did about 40 more bpo's and when it came up again; I decided it wasn't worth the argument and I left.
It's unfortunate that there are plenty of agents out there that are willing to do what the bank tells them to. We need to hold our heads high, tell them "NO" and try to get a healthy RE market back.
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Good for you Julie!
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