Feeling bad for appraisers

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You have to feel bad for appraisers these days. They are really caught between a rock and a hard place. They are paid primarily through brokers, lenders or through borrowers whom were referred to the appraiser via lenders requesting their services. It is the appraiser’s job to be an independent 3rd party who can make a disinterested assessment of property value. While this sounds good in theory it is far from actual practice.

Brokers and lenders alike rely on appraisers to continually "get value" for properties that they are lending on. Perhaps rely is a bit too polite. They expect appraisers to get value on properties. If an appraiser can’t get value on one or two properties brokers will quickly discard their information. If an appraiser wishes to maintain a semblance of a business pipeline they have to deliver to the broker. There are many stories about loan officers bullying appraisers in to
inflating appraised values. They use all sorts of techniques from the
elementary to the illegal. There is nothing that spreads around a broker office faster than news of a "bad" appraiser, where bad=conservative on value.

On the flip side they are held accountable by (most) lenders (nowadays) and more and more appraisals are being reviewed in great detail. Many are being sent for second (desk) reviews and a larger percentage are having other value products performed on them: drive-by appraisals, AVMs, etc. If an appraiser comes in with values that are too inflated on a repeated basis they will be censured by the lender or blacklisted. Being blacklisted by a lender (especially one like Countrywide) can easily put you out of the appraising industry.

So these folks have a tough job, deliver to both parties, whose aims are completely opposite of one another. There has to be some solutions that can take this tug of war out of the equation. Here are some reforms that could help make appraiser’s jobs much less conflicted:

Make all appraisal requests go through the designated lender. The lender would take a request for an appraisal from a broker and order it out themselves. They would either collect COD from the borrower or collect fees up front from the broker.
Keep the identity of the appraiser concealed. By making an appraiser clearinghouse orders could be sent in and then randomly assigned to a cadre of appraisers – whose identity is concealed from the broker.
Make it illegal for brokers to suggest value ranges or comparable sales to consider in appraisal requests. There is some of this already but it leaves a lot to be desired.
Develop a specific appraisal refutation/rebuttal disclosure that goes in each file where the rebuttal is requested. This could be used for brokers who disagree with value based on sound reasoning (e.g. an AVM or other appraiser’s opinion)

While none of these are groundbreaking, smart implementation could reduce the conflicts of interest surrounding the appraisal process.