
Home Appraisals in More Stressful Times
by Bill Primavera
The Home Guru
“It didn’t ‘appraise’” is the dreaded phrase that can throw a monkey wrench into the works of a home sale and, in today’s market, we hear it more and more. A house appraisal is an essential component of every mortgage process in that it is an estimate of the value of the home being purchased. In virtually every type of mortgage, an appraisal must be done, or quite simply, the buyer cannot secure a loan.
As opposed to an inspection or “engineering” whose purpose is to determine the condition of a home and to protect the buyer against potential defects, the appraisal is an opinion of the value of the house by a state-licensed professional who visits the house and inspects the size, condition, quality and function of the home.
From that exercise, a very detailed report is issued to the lender that determines the home’s true value, which may or may not agree with the price offered by the buyer and accepted by the seller.
In today’s market, the process of the appraisal can be tricky. The landscape has changed in how appraisals are done and, with homes decreasing in value, there is more tension among sellers and buyers about the home being appraised.
“We just try to be objective observers,” says Peter Fluchere, an appraiser whose office is in Carmel. “We’re not here to write a permission slip so somebody can borrow some money. Today, appraisers are working in an ambiguous market in a time of stress that none of us has ever seen in our careers,” he continues. “It is at the appraisal process that people can be at their best or at their worse.
“When I visit homes to appraise and one or more of the owners are home, I can tell by their behaviors and attitudes that they’re anxious about what will transpire. They give me their opinions, but I can’t really listen to them. It’s my job to give my opinion to the lender and not to them.”
On top of market conditions for generating stress is the radical change the appraisal procedure has undergone recently, courtesy of former New York Attorney General and now Governor Andrew Cuomo who turned the process on its proverbial ear.
When the subprime mortgage crisis hit, Cuomo investigated the influence lenders were asserting on appraisers, looking for possible conflicts of interest, fraud and other misconduct in the residential mortgage lending industry that helped lead to artificially-inflated home values. He concentrated on the practices of the two government-sponsored enterprises, Fannie Mae and Freddie Mac that purchase residential mortgages.
The resulting “Cuomo Agreement” set forth a new code of conduct that prohibits any associate of a lender from influencing appraisals through any kind of coercion or intimidation to “make a number.” Further, the code prohibits the lender’s loan production staff from having any role in the selection of appraisers, or even communicating with appraisers. So today, the process is tightly observed and controlled to produce fair and honest appraisals.
“It used to be that the lender could pressure an appraiser to make the number needed,” says Fluchere. ‘If you didn’t give them the number they wanted, they would find somebody else. So you could either stand up to them and be honest, or there were others who would go along with it just to make a buck.
“The idea was there was too much collusion, so appraisals should be handed out ‘anonymously,’ without being cozy in the relationships,” he continues, “but you can still find people who are unethical.”
“When I go to appraise a house, I consider a host of variables and I look for features a buyer would be looking for: the view, the size of the property and of the house, the number of bedrooms, bathrooms, a finished basement, overall condition, and extraordinary features. Further, I consider the town, neighborhood and school district. Even though realtors can’t comment on the differences between communities and school districts, a buyer is going to know that there is a difference between a four-bedroom home in (one town) and the same house in (another town) and between one school district and another.
“It’s an art, not a science,” he observes.
But what happens when the appraisal comes in below the number initially accepted by the seller, buyer and lender? The negotiation process must be re-opened where either the seller lowers the price, or the buyer increases the amount of cash put down. “Sometimes another appraisal will be requested,” says Fulchere, “sometimes one opinion is not sufficient. I’ve seen as many as four appraisals done on one property. But a bank will check the quality of the report and the reputation of the appraiser hired to do them. We all have to include our resumes at the end of the report.”
Even though the appraisal is the requirement of the lender, it is the buyer who pays for it to the tune of $300 to $500. But that fee guarantees that the buyer is protected from paying too much for a property.
According to Fulchere, the bottom line is that the appraisal is “a form of consumer protection. It is a legal document and important decisions are based on it.”
Bill Primavera is a licensed Realtor® (PrimaveraHomes.com), affiliated with Coldwell Banker, and a marketing practitioner (PrimaveraPR.com). Anyone considering selling or buying a home can reach him directly at 914-522-2076.


