Realtors and appraisers disagree on appraisals

There's a tug of war between appraisers and real estate agents over establishing the value of residential property.

In a forthcoming report, the Center for Public Integrity's Land Use Accountability Project said it obtained copies of "blacklists" containing names of thousands of appraisers, who refused to inflate home values.

The Washington, D.C.-based research center cited New York Attorney General Andrew Cuomo's investigation, pointing to Fannie Mae and Freddie Mac's purchases of mortgages without ensuring they were issued with accurate appraisals.

A new Federal law goes into effect May 1, designed to deter buyers and sellers — or their representatives — and lenders from lobbying appraisers.

"I think this is a bit overblown," said Steven Blanton, chief executive officer of the Rogue Valley Association of Realtors. "There is frequently a bit of forecasting involved in appraisals no matter the condition of the market. This is true in up markets and down. I don't think it's a systemic problem. In an up market, there's always a little bit of forecast involved and a tendency to factor that in."

He recalled a California transaction during the up market when the property value rose $10,000 while the house was in escrow for 30 days.

"Trying to be sure there is enough loan to value is important," Blanton said. "In a situation like that, there is a lot of finger-pointing after the fact. Conversely, in a downward market there is tension in the system. Do the appraisals lead to more of a downswing? No, I don't think so, but there is a concern to get an accurate appraisal."

No one knows exactly what role inflated appraisals played in the mortgage meltdown, the Center for Public Integrity said. But as an increasing number of homeowners face foreclosure, many remain unaware that the appraisal they paid for during the purchase process may not have reflected the true value of their investment, and may have caused them to borrow more money than their home was actually worth.

Now that values are sliding, the use of comparable sales data is causing waves here in Jackson County.

"Coast to coast, the biggest issue in the financing of real estate is the pressure put on appraisers to push numbers," says Medford real estate appraiser Roy Wright.

A recent memo from Rogue Valley Association of Realtors to local appraisers indicated current values would take a hit if recent historical data were carried forward, reducing a house's worth. The memo noted that if two identical homes, side by side, sold three months apart, and the first fetched $200,000, the second one would be appraised at $195,500, based on an assumed 1.5 percent monthly decline from recent data.

According to the memo, the potential exists for transactions having to be renegotiated, driving down market values even more.

"If your best comparable sales are six months old, then you've got to discount comps because they would have been worth less on the date," Wright said. "When prices are going up, real estate agents said we're pushing prices out of everyone's reach; so you get it both ways. The important issue is to maintain the independence of the appraiser."

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