This commentary on appraisal inflation comes to us from Jonathan Miller at Matrix. For those who are not familiar with Mr. Miller, he is the President/CEO of the Manhattan-based real estate appraisal firm, Miller Samuel.
Why does the appraisal inflation issue get so little play in the media? Likely because most real estate mortgage industry people close to the issue downplay the problem since there has not been a quantifiable cost to be held accountable to.
Their recommended solution of self-policing is a cop-out and rarely works in any profession. The appraisal industry is one of the most fragmented of all.
This don’t ask, don’t tell attitude has created the appraiser mantra – Get work. Hit number anyway you can. Do it Fast. Get more work. Talk a lot servicing the clients needs. Repeat. If the appraiser doesn’t take this path, then they need to find other types of clients. A whole generation of experienced appraisers have been forced out of the business. Its the era of the appraisal factory. Inexperienced personnel cranking out the reports is the norm of today. Some firms have appraisers that can generate 40-50 reports per week. Think about the time spent coordinating the appointments, travel to and from the property, inspect, visit all comps, confirm data, write up report, review, deliver, follow up on client questions and concerns, field irate calls from clients or borrowers if the appraisal is too low to make the deal, re-work report, re-send new final version…times 40 in a week?
There is virtually no appraisal oversight of appraisers on a state level (which is responsible to administer the federal law) because there is limited funds available for it and to make matters worse, many states take a portion of the revenue from licensing fees and allocate it to other purposes.
The appraisal inflation problem is much more serious than reported yet it can’t be proven by stats since the market has kept rising, hiding the problems. Most of the players connected to the process are generally happy.
The appraiser has no independence in the appraisal process, in any way shape or form. The entire structure of the mortgage appraisal system is seriously flawed. I find it absolutely amazing thats its been able to go on this long without some sort of regulatory concerns raised.