Posted by Jonathan J. Miller -Monday, January 30, 2012, 8:42 AM
One of the last pieces of the 2009 Fannie Mae/Cuomo agreement, called HVCC, that essentially (but unintentionally) destroyed the bank appraisal industry is being worked out. A consumer hotline was created to handle complaints about real estate appraisals. These calls are being be directed to the appropriate state licensing board for action.
I’m all for giving people a way to fix a wrong, but there are a few things wrong with the hotline concept (all bark and no bite):
- The states have no additional money to manage their compliance/license departments. Usually a handful of people oversee a profession of thousands of licensees with constant turnover.
- Many states have syphoned off much of the licensing fees to other departments relegating many licensing departments as merely revenue sources.
- How does a state deal with an appraisal complaint effectively? Do they say your adjustments for view wasn’t high or low enough? You can see how challenging it is for them.
- How are the frivolous complaints weeded out? I understand many states have advisory committees from the industry to help process the paperwork but it is a conceptual nightmare.
Our firm has had a handful of complaints directed to the state over the years by individuals who didn’t get what they wanted from our services. Here are a few representative examples:
- A mortgage broker tried to use the appraisal of a property that we had appraised for both parties in a divorce and demanded we make changes to the report including change the client name so he could use it for a refinance by one of the parties (we are prevented by the licensing law to do this) and filed a complaint against us. He threatened us with a dozen phone calls to make the change he wanted and that he “knew people” of influence. The matter was dropped by the state once they received our response.
- A doctor who was buying out a partner of their joint practice looked to us to appraise the real estate. We did so. We found out later from our client that we had appraised the value at a similar amount as the other partner’s appraiser did (we didn’t know the other side got an appraisal or who did it). Our client filed a complaint because he claimed the “real” value was triple (of course!) The only justification in his mind (he provided no supporting sales data) was using a square footage estimate by a real estate broker saying the space was about 75 square feet larger than we measured (it was a few thousand sq ft) so we “must” have been conservative because that 75 square feet would have tipped the scale and tripled the value [sarcasm]. The matter was dropped by the state once we explained.
There are more examples like this but you get the idea – it is the cost of doing business today for an appraiser.
I see hotlines or complaint lines as they are currently handled as a way for erroneous complaints to occur and burden the profession with excessive costs. Yet I believe this is an important function but needs to be handled much more vigorously and intelligently to protect the public but there is no money to do so. Until state governments recognize that effective oversight preserves the integrity of the profession and ultimately keeps overall financing costs lower, then nothing will change. In fact, with the onslaught of the appraisal management company phenomenon of recent years, I’d say the prospect of improvement is nearly impossible.
Case in point, the hotline concept hasn’t kept the massive appraisal management company competency fraud from entering day to day conversations i.e. the common “the appraiser came from 3 hours away and had never been in our market before”.
In America, the accused are innocent until proven guilty but in the private sector, the small business bears the unending burden of cost for frivolous actions because government generally does not have the resources or understanding of how destructive it can be.