: Where are the Appraised Values Going?

Dec 26 |07:42

Will my home value go down?The problem is that an appraisal is an opinion based the subjective research done by one person.The value can vary from appraisal to appraisal and therefore is somewhat arbitrary.For this reason, there has been much manipulation and less quality in the output in recent years.With the increase in home purchases and refinancing, the mortgage industry was a booming industry.To keep up with volume, every aspect of the industry needed to bulk up staff.They were literally pulling bodies of the street, qualified or not (not).The appraisal industry was booming and many people started new careers thinking they could earn big on sheer volume alone.Appraisers hired people just to do the inspections and would never visit the house themselves.Then would hire people to do the research and might review it as carefully as they should.This was done to keep up with the volume and turn around time.Mortgage companies and realtors would drop the appraiser in a minute if you could not turn the work around in a matter of days.A rush was considered same day turn around. It was crazy and everybody wanted a piece.
Lenders, also taking people off the street, could not properly train the staff to read and review appraisals.Therefore, the underwriters were rubberstamping them, just to get through the files.This led to the manipulation.If the appraiser did not come in at the value requested, he would be ostracized.If the appraiser could not turn it around quickly enough, he would not get the next deal.So,what happened?Appraisers were cranking out the work and always coming in at requested value to get more work.More work led to less quality.Lenders were not carefully reviewing the work, so they were simply sliding by.This spiraled into an exacerbation of false inflation of values.You cannot tell me that something that was worth $250,000 in 2004 was worth $400,000 in 2006.It is impossible and unreasonable.The market began to lose steam and inventory began to build.As more houses stayed on the market, buyers had more to choose from and could question asking prices.Values were easily inflated during the real estate boom, which in turn increased loan amounts much higher than they should be.As values decrease, appraisals are coming in lower and loans are becoming upside down.When a loan is upside down, the borrower owes more than the house is worth.These will impede refinancing as well as selling.Unless the buyer must sell and can make up the difference out of pocket, they are staying put!

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