William Maxwell is an expert in finance. He's a professor at Southern Methodist University's business school, has co-authored a book on high-yield debt and spent years calculating values of financial markets.
In August 2010, Mr. Maxwell's home was appraised at $790,000 as part of a mortgage refinancing. Yet this past spring, when he tried to sell the four-bedroom home for $756,500, the appraisal commissioned by the buyer's lender, Bank of America Corp., came up with a value of $730,000. Mr. Maxwell said the appraisal killed the sale.
Weak appraisals are "driving down the real-estate market," Mr. Maxwell says. Saying the appraisal process "borders on buffoonery," he's appealing his home's valuation to the Texas regulator.
One of the conclusions from the housing bust: The appraisal system was broken. One of the conclusions some have drawn from the struggling recovery since then: The appraisal system is still broken, but in a different way.
There is little doubt that home values have depreciated sharply in recent years for the most basic of economic reasons: excess supply of homes on the market and weak demand. But some realtors, home-sellers and economists believe low-ball appraisals also are undermining a housing recovery.
Appraisals are supposed to be unbiased assessments of a property's value. The housing bubble that burst a few years ago was inflated, in part, by overly generous appraisals. Now, lenders are pressuring appraisers to come in with lower estimates, some real-estate professionals say. Banks also are using less-experienced appraisers, who often don't appreciate factors that make a home worth more, they say. And valuations are being heavily influenced by distressed sales priced at a discount to the rest of the market.
5 comments:
Here we go again, let’s throw the appraiser(s) under the bus. Now appraisers are buffoons. The appraiser is located 25 miles from the property so he doesn’t know what he’s doing. Appraisers just use distressed properties for comparables, driving down the values, and the list goes on.
What short memories we all have, because just few short years ago it was appraisers that caused the housing problems due to faulty appraisals; they were too HIGH. I’ve completed over 5,000 appraisals in the past 14 years, and I have never had a lender ask me to come in low.
What most people don't realize is that appraisers have lender guidelines that they have to follow, not to mention Gov't GSE guidelines, and USPAP guidelines that dictate how the appraisals need to be completed. I’m certainly not a fan of banks, but it's their money, they make the rules, and if you don’t like the rules pay CASH.
Michael Bolton
www.proevalue.com
Welcome to Justice League, Michael!
No one wants to talk about how the banks put a lot of pressure to appraise a property at a certain value so that the banks to close escrow quickly or how many appraisals had inflated value during the housing bubble and how the banks profitted from the housing bubble and from the garbage mortgages.
I am stunned at the number of 'educated' people who still don't get the appraisal process. Appraisers report on what people have already paid - what consumers are WILLING to pay - not what one homeowner, real estate agent or loan officer needs to make a transaction work. If lenders & real estate agents had been regulated by federal or state guidelines in 2005, we wouldn't have this train wreck on our hands now. Believe me, 'Professor', not many appraisers are willing to do prison time for $300...
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The Wall Street Journal has as much credibility these days as the ripoff artists on Wall Street; the omniscient finance professor can't understand that his house may have declined in value -1% monthly for a 7-8 month period? If he seems so certain about his value, why was the property listed $35K +/- lower than the August 2010 appraisal? This is a non-story about someone whose credentials are supposed to impress; in reality, it's apparent who the real buffoon is.
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