Real estate appraisers are in a tough spot. Of course, they almost always are. The Kansas City Star today has an article that basically says that real estate appraisers are the problem, or at least part of the problem, that led to the housing crisis we find ourselves in today. (Want to have some fun, read through the comments sections. Oy.) Also part of the problem were “unscrupulous real estate agents and mortgage brokers, whose commissions are determined by the size of the deals.”
Whew. Glad I got that off my chest. For all of you I’m telling you right now it’s in my best interest to sell you an investment property over-inflated in price. <sarcasm> After all, by over-selling you by 10% on that $150,000 duplex I make an extra $288!!!!…before taxes/expenses. <cue photo of me boarding a flight to Europe for the month>
Getting back to appraisers, they really are in a tough spot. When the market was turning hotter a short 5 years ago they got pressure to respond. When a realtor would put a sign in the yard of a house that sat in a neighborhood with no inventory and it goes under contract for 5% more than the previous high seller and gets under contract in less than one week then everyone can plainly see that there is an upward pressure on housing. Yet, appraisers had their rules they had to follow and they were slow to respond and I do remember talking to more than a few who had to look beyond the subdivision to find “comps.”
Now, appraisers are under pressure from banks and end users to be sure there is no downward pressure on housing because they don’t want to be stuck holding a note that is worth what the property is worth. (I don’t blame the lenders for feeling this way.) Appraisers are running scared and a bit dazed and confused.
All of this assumes the real estate appraiser is honest. If he’s in cahoots with a mortgage broker or realtor or whomever then they all deserve to go to jail. I think I’ve made my position clear on the subject of mortgage fraud.
Getting back to the subject at hand I’m a little confused myself. I remember Congressional hearings on why the housing boom wasn’t reaching down to the working class. Why were lower income whites and urban blacks being kept out of the ongoing riches of real estate? Remember those? I do. Go back and check, it is a historical fact.
Now, after the mortgage industry responds there are Congressional hearings on who is to blame! Appraisers! Mortgage securities sellers! Greedy real estate investors! Realtors! Mortgage brokers! And anyone else to help spread the blame.
Well, how about Congress? They were the ones who were exerting an undo amount of pressure on a subject you knew little about. Yes, greed and ignorance and fraud were very much players in all of this throughout the industry and throughout the public. Think every buyer was an innocent bystander?
Home ownership has been a steadily rising statistic in this country for the last 60 years. (You really should visit that link.) I read somewhere (sorry can’t find the reference) that this statistic grew disproportionately from ’98 till about ’05. Now this statistic is correcting itself.
This real estate correction, whether minor in Kansas City or devastating in Sacremento, has caused heartache for thousands of Americans. Whether losing their homes to foreclosure or their rented house because their landlord is losing it to the bank or the investor who bought securities in mortgage products people have lost. Blaming entire sections of the industry is as preposterous as it is dangerous.
Enforcement agencies have for years failed to do their jobs because they are either underfunded or out-dated. Put people in position to investigate and put the bad guys in jail. Go after them with full force. But until you are ready to do that quit just writing article on article about who is to blame.