The New Army of Appraisal Inspectorsby Hamp Thomas on 10/24/18
Let loose an army of untrained real estate agents in the mortgage process? Who comes up with this stuff? Appraisal trainees aren’t good enough, but real estate agents are better? Hmmm…
The National Association of Realtors® has no mandated measurement standard and the over 800 MLS systems are a hodgepodge of measurements and methods, if the agents bother to measure at all. In getting a real estate license, measuring houses is a thirty minute exercise in calculating rectangle homes that haven’t been the style since the 60’s. For the real estate army that seems to calculate everything in price-per-square-foot numbers, they have no training on how to create a fair sqft total. It’s a subject they try to hold behind closed doors because they are afraid the public would be outraged if they knew all the sqft errors in MLS, and just how much money consumers get cheated out of by sqft errors. It’s simple math, but no one wants to talk about it.
Agents also have no training in why sqft is important in the first place. They don’t understand the very formula they use every single day to price real estate. That’s a problem!! All in all, for an industry that thinks learning how to calculate sqft is not very important to their education process, plus don’t see any need to have all agents across the country measure homes by the same method, it doesn’t seem like it’s a smart business practice to trust them to do home inspections for the appraisal industry. That’s just wrong on so many levels, it’s hard to keep my focus. It’s simply overwhelming to think an industry entrusted with people’s single, largest lifetime investment, cares only about making profits from the appraisal process, and couldn’t care less if the mortgage industry (sold off to Wall Street) has a problem or that the taxpayers will have to bail it out again. Appraisers are vital to homebuyers and mortgage investors. Big banks should NOT be in charge of how the appraisal industry operates. That’s like giving the fox the key to the henhouse.
I just can’t believe our government is going to allow these untrained agents loose on the mortgage industry. Have we learned nothing? And, don’t forget, it’s the bottom 10% of real estate agents that will be doing these inspections for Hyrbid Appraisals. No high paid real estate agent is going to spend their time doing thirty or forty dollar inspections. It’s not worth the gas. For MLS, lots of agents still use the information from tax records for sqft. Hopefully by now everyone has heard that tax records are inaccurate, in a bad way. Remember, this is not the tax department’s problem. They do a great job. The tax department doesn’t need precise square footage information, but the real estate industry does. A few lazy agents discovered tax records and were off to the races and it’s hard to get that runaway train back to the station. One of the main focuses of the NAR in the early 1900’s was to provide better property details, where square footage was vital to fair pricing. It seems we are moving backwards these days and bigger data does NOT mean better data, especially in the real estate business.
So, we are going to have the lowest end of real estate agents in charge of the information appraisers rely upon to calculate real estate values. That’s crazy and then some. If the info they provide is wrong, then so is the appraised value. The official government policy says “An evaluation should include sufficient information to identify the property and address the property’s actual physical condition.” How will agents do that? Perhaps with pictures as well. But, have you ever been able to make a house look much better than it really is by changing the view in the pictures? Just check out MLS, it happens every day. Trusting agents to measure and to fully describe the property condition is a nightmare waiting to happen. Can someone say “Trainee” again…
Who loses? The consumer. Stop trying to fix the appraisal industry. It’s all the same smoke and mirrors about big banks wanting to help consumers. That’s absolutely false. It’s all about them taking the profit away from appraisers and giving it to themselves. Nothing complicated, and the Golden Rule at work. I keep harping on this one point – order the appraisal at the same time the contracts are signed. No delays ever. Not that complicated. But, if banks do that, then they can’t complain about the appraisal industry and will lose their best chance at a new billion dollar increase to their profits. Remember, appraisals come in at or above the contract price apx 97% + of the time. That sounds like our system works pretty well to me. What am I missing? Please, stop the appraisal madness.