Good morning Greg,

thanks for clairifying this "comp check" discussion so clearly ---

I'm a residential appraiser in Central Florida and constantly get requests for these little lovlies, spend 30 minutes or so researching, e-mail the results to the boiler-room mtg. broker with info on the subject he's working on and include 10-12 recent sales in proximity to it and then he calls back and asks that's great but what will it appraise for?  if I do 50 of these I might get 1 job out of the effort .......... arghhh

I'm sure you know the drill, again, thanks for the well written article

Tim  www.xappr.net

You mean value scans? lol

I look at a comp check, value check, hit the number check, etc much differently then most people. I understand that as a Mtg Broker you need to know what value your likely to get to see if your loan can close at the terms and rates you gave to the consumer applicant.

This is similar to you acquiring the applicants credit score for the same reasons.  Do you pay for the intitial credit report? I dont know, but I would imagine the credit bureaus dont give it to you for free. My guess is that you pay the credit bureaus or you leave empty handed.  On the  other hand, if an appraiser like me says no to your request for a free intial report you simply dial up another appraiser until you find one that will take a gamble an order might arrive. This goes to the heart of the comp check problem with most appraisers.  They dont like working for free and you dont like paying for something that may not work for you. 

Whats the solution?  I dont know, but I think there are possible solutions if both sides cooperate.  The likely solution is for you to continue to dial for dollars until you get an appraiser to bite. Another solution is simply offer to pay the appraiser for the initial report(their time) a nominal fee similar to the credit report. Its a gamble for you, but you will at least get an honest answer and can make an informed decison on the loans viability.  Standards are tightening and reducing loan rejection rates would seem to me to be a paramount goal for any mortgage professional.

My suggestion to mortgage professionals is to quickly figure out a way to work with appraisers equitably on how to solve your need.  The market over the next few years will likely be tough and you can not afford to spin your wheels chasing a loan that will likely never close.  Efficiency is going to be key for you to survive.  Dialing for appraisers is not going to work very well anymore as appraisers, not only have grown weary of this practice but are now being targeted by law enforcement for illegal activity(hitting the number garantees prior to the appraisal order).  Yes, law enforcement is indeed making comp check calls to certain prior identified appraisers all over the nation.  Dont make the mistake of blowing off what I just said.

What are your suggestions or thoughts?

Thanks for taking the time to read my very first post at this forum.

Andrew

www.CharlotteAppraisals.com

www.CharlotteAppraiser.net

First, welcome to MND!

I think you will find that the mortgage professionals here are not looking for an appraiser to "hit" a number, but they do want to make sure that the value they are working off of is indeed realistic.  We understand that if we ask you to take a quick look, there are no guarantees.

Let me give you one example that happened to me.  Five years ago, I worked for a company that did loans nationwide and I lived in IL at the time.  The property was in PA.  I called to find out if my customer's estimate of $300,000 was realistic because they had bought the property some 20 years earlier and never refinanced; thus I had little to go off of.  The appraiser told me that it sounded fine.  I got the appraisal back with a value of $180,000.  When I called the appraiser, he said there weren't ANY sales above $200,000, EVER.  He lived about 10 miles away.  You can't tell me that the appraiser didn't know that there was a huge problem if there haven't been any sales over $200,000 in that community.

I will grant you that appraisers have the most liability for the amount of pay they receive on a transaction and I understand that there were and still are originators that look for number hitters; but I doubt you will find them here.

Kent Mikkola:

First, welcome to MND!

 

I think you will find that the mortgage professionals here are not looking for an appraiser to "hit" a number, but they do want to make sure that the value they are working off of is indeed realistic.  We understand that if we ask you to take a quick look, there are no guarantees.

Let me give you one example that happened to me.  Five years ago, I worked for a company that did loans nationwide and I lived in IL at the time.  The property was in PA.  I called to find out if my customer's estimate of $300,000 was realistic because they had bought the property some 20 years earlier and never refinanced; thus I had little to go off of.  The appraiser told me that it sounded fine.  I got the appraisal back with a value of $180,000.  When I called the appraiser, he said there weren't ANY sales above $200,000, EVER.  He lived about 10 miles away.  You can't tell me that the appraiser didn't know that there was a huge problem if there haven't been any sales over $200,000 in that community.

I will grant you that appraisers have the most liability for the amount of pay they receive on a transaction and I understand that there were and still are originators that look for number hitters; but I doubt you will find them here.

So you gave that appraiser quite a bit of business thereafter?

I gave him "the business" alright!

Anyone

This goes back to using someones time for free to provide you with information that you can not acquire on your own. 

The next few question are simple. 

1. Do you find it of value when an appraiser tells you(verbally or written in short format) the applicants house is worth X dollars on a given date?

2.  If someone gave you this information in a simple format, how much are you willing to pay for the news, good or bad?

I am not looking for business. I think I am asking you questions you already know the answer too.

andrew

Simple... let's use a broker analogy:

1.  Some brokers/lenders charge an application fee.  The customer can pay upfront prior to finding out if they qualify for a mortgage or not.  You could certainly do the same for a comp check.

2.  Some brokers/lenders will offer a free application and analysis.  You could offer a free comp check as a value added service.

The question isn't whether or not a comp check is work.  It is work.

The question isn't whether or not you should be compensated for it.  You are compensated if you get an order. 

The question is am I willing to pay for it when I can get it from someone else for free.

Have you ever called a store to see whether or not they had an item in stock or how much it might be?  If they had to check, did you pay them for their time and effort?  If they told you it was a $1 charge for the information and the next store would offer it for free, would you pay?

apicarsic:

Anyone

 

This goes back to using someones time for free to provide you with information that you can not acquire on your own. 

The next few question are simple. 

1. Do you find it of value when an appraiser tells you(verbally or written in short format) the applicants house is worth X dollars on a given date?

2.  If someone gave you this information in a simple format, how much are you willing to pay for the news, good or bad?

I am not looking for business. I think I am asking you questions you already know the answer too.

andrew

Hi Andrew-

Welcome to the best Mortgage Blog available!

I'll answer your questions:

1. Yes

2. $25

I'm not being a smartass either.  I can tell within minutes wether a loan applicant will be approved based on their income, credit, assets (sans appraisal).I believe good appraisers can do the same.

Bob V-G:

I'm not being a smartass either.  I can tell within minutes wether a loan applicant will be approved based on their income, credit, assets (sans appraisal).I believe good appraisers can do the same.

I will agree with you that in many cases from a desktop look we have a good feeling for the value. We still can not garantee anything until we meet the minimum work requirements dictated by the Lender/Client.  What I mean is in most cases lenders require us to observe the exterior and to see the inside to be more accurate when we opine a value. 

Kudo's to you for the dollar suggestion of how much that is worth from the desk to you. I appreciate that extension of respect. Lets not forget that many  appraiser competitors will do it for free. So always avail youself of "free" first and then go to an appraiser who charges if you can not get it for free.

Stephen Ames:

I don't understand the name calling, don't those brokers pay your bills?...

No, not really.

I understand why you might have gotten steamed up about being lumped in with boiler-room boys. Obviously that's not your business model just like it's not really the business model of most of the brokers and agents who participate on this blog and "the other one."

Between you and me, there isn't really anything wrong with an appraiser discussing an assignment with the broker when they are both professionals, know the boundaries and respect each others limitations and obligations. If that's all that "the comp check" issue amounted to it wouldn't be an issue. The problem is that the professional relationship is no longer the common model. The proliferation of marginally trained newbie appraisers in the last 4 years and the shift from career mortgage professionals (like yourself) to boiler-room loan slingers with almost zero formal or even informal financial training and education and an even more acute paucity of ethics and sense of responsibility has turned what used to be a private and low key business matter into a grubby, foul and ultimately harmful activity. It's sickening to walk through a bank-owned house and having to look at the flotsam and jetsam left by a family that was once happy. One too many ARM pick-a-pay refis sold by a "mortgage professional" in a paper hat.

gb

Bob V-G:

I'm not being a smartass either.  I can tell within minutes wether a loan applicant will be approved based on their income, credit, assets (sans appraisal).I believe good appraisers can do the same.

Sometimes (most of the time) as soon as I see a property address an opinion will pop into my head within a few seconds. Just as often, after interviewing the property owner when setting the appointment, another opinion (way different) will pop into my head. Then when I get there and relize the borrower has been lying (probably because the broker told him how to lie and what to lie about. I'm now on opinion 3, there's probably not enough equity (MV) in this property and the broker's deal is not going to fly. Call? Why? I'm not giving the money back after driving 6 or 7 hours and spending an hour or so last night and a half hour this morning running legals, deeds, property histories, spreadsheets of all sales in 12 months, printing out MLS pages of the sales I'm going to inspect (if the property is really like what the homeowner described... and we know it's not. By the time I've drivien to the comparable sales available it's 2:30, I've been on the road about 5 hours and I'm still two hours from home. Next morning I get ready to start over and I program a different kind of search program for sales that are more like the subject. I start seeing a pattern in these types of sales (some weird characteristic for example - A grove of old growth redwood tress on the property; special zoning category on this lot due to someting a former owner did and now the lot can be split into 4 buildable lot; In any case I now have the latest opinion and it's twice as much as opinion 3 from the day before.

Like everyone else, appraisers can have an instant opinion, but unlike others in different lines of work, appraisers cannot communicate their opinions until they have completed the necessary steps involved in complying with the MINIMUM standards imposed by the authority which issues licenses to appraisers.

You can't tell me that the appraiser didn't know that there was a huge problem if there haven't been any sales over $200,000 in that community.

Yes. I can tell you exactly that. Even after sending you the apprasial report we don't KNOW if the value is right. We don't KNOW the value because the value is AN OPINION. And the opinion is based on a hypothetical sale that never occured and never will occur (because the appraisal is one day and anything after that day is a new day and a new appraisal. And if that isn't enough, the OPINION about the HYPOTHETICAL sales price of the subject on the EFFECTIVE DATE is not even defined as being precise, excact, accurate or knowable. It is THE MOST PROBABLE.

By the time I have enough data collected, organized, and figured out to be able to give you my opinion I've earned the full appraisal fee.

  Gidget,  Never fear,  the Bat Signal always shines bright.

FREE MARKET SALES DATA checks for all which place NO ONE'S license at risk

http://www.eppraisal.com/

http://www.realestateabc.com/

http://www.trulia.com/

Happy New Year.  Good Luck to all in '09.

Greg Boyd:

Sometimes (most of the time) as soon as I see a property address an opinion will pop into my head within a few seconds. Just as often, after interviewing the property owner when setting the appointment, another opinion (way different) will pop into my head. Then when I get there and relize the borrower has been lying (probably because the broker told him how to lie and what to lie about. I'm now on opinion 3, there's probably not enough equity (MV) in this property and the broker's deal is not going to fly. Call? Why? I'm not giving the money back after driving 6 or 7 hours and spending an hour or so last night and a half hour this morning running legals, deeds, property histories, spreadsheets of all sales in 12 months, printing out MLS pages of the sales I'm going to inspect (if the property is really like what the homeowner described... and we know it's not. By the time I've drivien to the comparable sales available it's 2:30, I've been on the road about 5 hours and I'm still two hours from home. Next morning I get ready to start over and I program a different kind of search program for sales that are more like the subject. I start seeing a pattern in these types of sales (some weird characteristic for example - A grove of old growth redwood tress on the property; special zoning category on this lot due to someting a former owner did and now the lot can be split into 4 buildable lot; In any case I now have the latest opinion and it's twice as much as opinion 3 from the day before.

Like everyone else, appraisers can have an instant opinion, but unlike others in different lines of work, appraisers cannot communicate their opinions until they have completed the necessary steps involved in complying with the MINIMUM standards imposed by the authority which issues licenses to appraisers.

Oh, what the hell.  I'd give you $50. 

Getting a bit extreme and still hellbent on calling Brokers liers.

Greg Boyd:

Yes. I can tell you exactly that. Even after sending you the apprasial report we don't KNOW if the value is right. We don't KNOW the value because the value is AN OPINION. And the opinion is based on a hypothetical sale that never occured and never will occur (because the appraisal is one day and anything after that day is a new day and a new appraisal. And if that isn't enough, the OPINION about the HYPOTHETICAL sales price of the subject on the EFFECTIVE DATE is not even defined as being precise, excact, accurate or knowable. It is THE MOST PROBABLE.

Oh, Greg.  So you are saying that you would not even blink if someone inquired about a value on a cookie cutter home, within 5 miles of your home, where the estimated value was 50% more than the highest sale of any property (not just potential comps) in the entire community?  I would think an appraiser would know his market a little better than that. 

I understand that the appraisal is a hypothetical value estimate based on recent sales with adjustments made to account for differences between the comps and the subject.  That the adjustments are merely an attempt to quantify the general market demand for each amenity.  But your argument would suggest that appraisals are not accurate within + or - 150% with any degree of certainty.  Statistically, how many properties would fall outside this range?

I fully agree that upon completing an appraisal, you have earned your fee. 

Kent,

And other mortgage professionals.

I will have to say, in California, comp checks are perfectly fine, and some, like myself, do offer them as an unpaid for service.  But there are specific steps and direction one must take to keep an appraiser out of trouble of violating USPAP. 

If you have a property, send over an Appraisal Order...with an estimate of value that you have looked over or the borrower has estimated or whatever number you think is appropriate.  From this point, it is not a violation of anything in USPAP to take a preliminary look at the market based on county information, however this is the step the mortgage professional would have to call and ask for prior to inspection.  Its not too hard to pick up the phone and ask the appraiser to take a preliminary look at anything.  The formal order is in place so the violation is not there.  In original conversation, inform the appraiser you have an estimate or idea, of value included on the appraisal order and would like to see if you are off prior to inspecting.  This language in itself does not violate 'predetermined' value.  Any terms like 'we need' or 'its your order if we can get the value'...or anything of that kind commits an appraiser into trouble.  I am not trying to teach everyone how to sidestep it, but there is a more professional way about it, and all appraisers still must focus some attention on caution and the broker/lenders intent.  SHopping for appraisers happens to us all, and i understand wanting to get it for free.  But you have to think about what kind of product you are trying to get.  Those appraisers who wont do it for free or who have higher ethical qualities, typicall have a better understanding of appraisals, and a more inclined to give you a value that is fully developed and supported.

Again, calling and asking any appraiser for a comp check first though, I'm going to have to agree with the other appraisers;  This is a violation of the Ethics Rule of USPAP, and punishable to us by law.   As many appraisers may tell you, why do you need to hear it from us.  Most brokers and lenders i know have AVM software or can look at closed sale comparables the same as us... why is there an insistance to hear a value from us?

Ralph,

Thank you for your response.  I think a lot of appraisers should actually move to MN, as it is against the law to get a comp check.  We are able to receive sales data from appraisers with the criteria we specify.  This is what I use and it works great.