From California Real Estate Commissioner:
An appraiser must not accept an assignment that includes
the reporting of predetermined opinions and conclusions.
dre.ca.gov
Comment by Appraiser
Alas, some exposure on a serious problem facing the local real estate market. Yes, to remain USPAP compliant, an appraiser must be impartial and NOT accept assignments or compensation based on pre-determined results. The problem is, if you dont guarantee a broker in this town a particular value, you will not get the assignment. This is a fact. As a result, I no longer have any brokers as clients. I've been looking, but they all want guaranteed values. Since 80% of loan originations are now flowing through brokers, you can imagine how many NON-compliant appraisers are making a pretty good living in this town. I get many calls per week from brokers looking for pre-determined value results. The calls are all the same: "Hi I'm Mr Broker, I have an assignment for you in Lake Forest. But before I send you the order, I need to make sure you can get me $600k." Mind you, I havent even seen the property or driven the neighborhood. These are called "comp checks", and they are a violation of USPAP, unless the appraiser develops a "scope of work", opens a file, that he has to keep (by law) for 5 years, and attaches a signed certification. Well, needless to say, 99.99% of appraisers do not go through all that trouble, rather they punch in an address into a public data service, set the parameters to a mile and hit enter. If the value that the broker wants pops up, the appraiser says, "sure, no problem". If it doesnt, the appraiser widens the search (fishing for value). Ever wonder why everytime you refinance your house, and you give your broker "your" estimate, the appraisal "magically" turns up that estimate?? Folks, there is a huge flaw in the system, and its called FRAUD. Next time an appraiser comes to your house, ask him for his DL to verify ID. There is a really good chance that when you get a copy of your appraisal (which you are entitled to from the lender/broker) the signed certification will indicate someone else came to your house and inspected your property. This also is FRAUD. The fact is, there are roughly 2550 licensed appraisers in OC, of which about 1500 have been appraising for less than 2 years. Many of these "newbies" are running "chop shop" operations, were they themselves have 3-5 trainees under them (the blind leading the blind). They gladly service all the local brokers in town, rubber stamping reports left and right. When a trainee working at a local chop shop finally accumulates the necessary hours for his license upgrade, he goes out an hires himself a couple of trainees, and the process repeats itself, over and over. The problem is, these so-called appraisers do not have appraisal skills, and are not in anyway familiar with USPAP, they could care less. These are folks that are in this for a quick buck, who rubber stamp reports, send hordes of trainees out to take pictures, and repeat the process over, and over again. The mortgage brokers are happy and the honest, ethical, competent appraiser gets starved out, because he/she refuses to violate USPAP. In my opinion, it is not a coincidence that the number of appraisers has doubled in the past 5 years in this area, and it is also widely known to be the capital of mortgage fraud. Why so many brokers and "direct lenders" in Orange County? Why so many new appraisers in this same county? Why is it than when OFHEO looks at refi appraisals, they always show appreciation in values??
Look around folks. Now that the market is really starting to turn under its own weight, be vigilant. You cant say nobody warned you. And for goodness sake, if you are buying a house in this environment, go out and spend a couple hundred bucks and hire your own independent appraiser. Make sure you find him yourself. Sadly, even many agents in this town cant be trusted, for they too have their "favorite" appraisers that they use. And if the appraiser asks you "what do you think its worth", find a new appraiser. Because any REAL appraiser doesnt need someone to guide them on the value. Dont take my word for it, select an appraiser out of the phone book at random, and tell them a value that you "need". If it is reasonable, he will say "sure, no problem". Now, does that sound like the appraiser is acting in an independent, unbiased manner? I think not. The only clients I have left are the banks that actually loan out their own money. These big players dont usually fool around with "skippy" appraisers, unless of course they are gonna sell the loan off in a month. In this case, the call goes out the local "number hitter". These guys fight over themselves for these assignments, bidding down prices as low as $150. What kind of person commits fraud for $150 bucks? Society's bottom of the barrel. And this County is full of them. The word is out though, I see changes coming down the pipe. There are some Bills pending in Congress, and hearings have begun. Appraisers across the county are being convicted, and its only a matter of time before the FBI makes it to Orange County. This should scare many out of the business. During the last real estate bust, the number of appraisers shrunk by half. There is hope this could happen again.
After all, you guys didnt really believe the market could go up at 20-30% per year for 3-5 years, on fundamentals alone did you?
Everything was found here:
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