Appraisers, represented by the Appraisal Institute, say sellers, buyers, agents, and others haven't been able to grasp that values have dropped in the last five years. They do agree, however, that the post-meltdown system is a disaster not of their making. As evidence, they name third-party appraisal-management companies, which regulators determined were an appropriate barrier to lender-appraisal "collusion." Lenders contact these companies for appraisers, and the firms find appraisers to assign to the work.
The Government Accountability Office says the Federal Financial Institutions Examination Council's Appraisal Subcommittee, which oversees the regulatory programs established by the states, needs to improve its monitoring procedures. That may not happen, however, since the subcommittee has a $2.8 million annual budget and 10 staffers, and the Dodd-Frank Act is expanding its regulatory work.
As I sat pondering the various arguments, I decided that I needed to find an insider, a fresh voice to articulate what appraisers are up against.
That's Gregg Gipp of Keller Williams Oceanside in Ocean City, a real estate broker and certified appraiser. He has been selling real estate since 1979. His appraisal firm, GTG Associates, does 600-plus each year in Philadelphia and South Jersey.
Appraisal-management companies, Gipp said, are in business to make money, "so the most they can make, the better for them."
The market rate for a residential appraisal is about $350, he said. The typical management company offers $200, although some come in as low as $175.
"The price of an appraisal has not increased since the mid-1980s," Gipp said, adding that the "true cost" to complete one, including insurance, software, transportation (car, gasoline), licensing-board and Multiple Listing Service fees, and Internet and office expenses, is about $190 in today's dollars.
The post-meltdown rule changes state that the management company is to pay market fee for an appraisal, he said.
"None do," Gipp noted. They say that "since they have appraisers accepting their fees, that must be the market fee." It's a "tough argument for the appraisal industry to win."
Most experienced appraisers are not willing to work for management companies, and have diversified into other areas.
"Appraisers coming to areas they don't know well is now commonplace," he said. "When markets begin to change, it is the responsibility of the appraiser to write such data into a report and have the confidence to do so."
Recognizing such changes is not easy and usually takes extra work, he said, since the appraiser "has to be able to convey such data in the appropriate manner." Some management companies have software that would reject such a conclusion to an appraisal report, according to Gipp.
"The appraiser would not be able to upload the report and get paid," he said.
Gipp doesn't work for appraisal-management firms, and the institutions he works for don't use them.
"I assure you that my position is not just sour grapes," he said.
Inquirer real estate writer Alan J. Heavens' home improvement column appears Fridays in Home & Design. See instructional videos at Al's Place. Go to philly.com/yourplace. Contact Alan J. Heavens at 215-854-2472, email@example.com or @alheavens at Twitter.