Low-Cost E&O Insurance from OREP Library/Previous Editions
Comp Checks: Shifting Liability
to Appraisers -
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> I found your article
interesting but let me answer one of your questions for you. You asked: "Why do
lenders even bother with a comp check or other appraiser input if they don't
need it to close the loan?" I think you missed the point on why comp checks are
ordered in the first place. The broker KNOWS the lender WILL REQUIRE an
appraisal. They send out a comp check call/fax/email to appraisers to see which
appraiser will 'get them what they need to make the deal work'. Then they order
the appraisal from that appraiser. And 95 percent of brokers asking for comp
checks are for maximum financing, poor credit, no equity borrowers. And, even if
a lender (not a broker) is requesting a comp check, it's because their desktop
underwriting told them they needed an appraisal from an appraiser. - Thomas J.
Kirchmeyer, SRA
> Your article offers good
advice, however, lumping all appraisers as being "easily hood-winked into
inflating values" is extraordinarily misleading. I have been reviewing
appraisals for the past 15 years and it is not ignorance or naiveté that
inflates values. It is a defined intent in order to meet a certain point. The
system offers almost no penalty as USPAP cannot be significantly enforced and
making the "point" brings in more business. Inexperienced appraisers may not be
as thorough as one would like but the majority of the problems resulting in
inflated values are pressure from mortgage brokers and the appraiser's lack of
ethics, in addition to their desire for the business. It's a bad
combination. Although I see so many unacceptable appraisals, I believe that many
very good appraisers are true to their ethics and not unaware of flips and
highly inflated prices imposed by a mortgage broker. - Carol Wolfe, SRA
> Makes your blood run cold,
doesn't it? It's been obvious for about 50 years that the problem is regulating
the lenders, not the appraisers. If brokers have no one to answer to and they're
just salesmen, who can blame them? What's the difference between a loan broker
and a car salesman? Selling is selling. – Nancy Quillen
> Good article on
comp checks. Just had an email from a lender
looking for appraisers in the area (for single family). As a commercial guy I
did not respond for the work but I did respond to the ad; hoodwinked is a good
term. They were looking for general fee quotes and asking if the appraiser did
pre-comps before went to the property or taking
the assignment. Smart guys. You are right; they are shifting the liability to
the appraisers. Unfortunately, as I wrote this lender, the word pre-comp
should not even be used and the appraisers that fall for this deserve to get
into hot water. In the old days you took the assignment, looked at the property
and analyzed what it’s worth, like a professional. We have
succumbed to being virtually a low-end service
provider, not professionals, always hungry and competing for fees that seem to
be continually falling. After 22 years I am ready to get out, go to something
more lucrative, probably commercial brokerage. There cannot be anymore
litigation worries, paperwork or headaches than what I am currently doing. -
PW Dils, MAI
> Yep, folks are dumb and
dumber. Simply quote a fee that is two or three times the appraisal and the
callers disappear. - Dave Hamel
> My experience with comp checks is that the client
wants you to commit to a specific value. I have always refused to do any kind of
comp check and was instructed to never do comp checks in my classroom training.
Of course, I don't do appraisals any more because I couldn't attract any clients
without doing comp checks.
> Comp checks demean the appraisal profession. Appraisers who complete comp
checks encourage loan officers (LOs) to continue demanding guarantees of target
values prior to assigning an appraisal. Comp checks are the primary tool of LOs
who shop for appraisers who will report target values. Based on the
increased frequency of comp check requests, there are many appraisers who comply
with such requests. Appraisal orders should omit values, unless there is a
pending contract price. Otherwise there should be no value provided to the
appraiser completing the assignment. Telephone calls asking for comp checks
typically start, "Hello Ricardo. I am with Anyval Mortgage out here in
Faxes titled "Comp Check/Appraisal Order" usually instruct me to verify value
before proceeding with the assignment. Discussions with other appraisers in
> Handling the “Comp Check”
dilemma has turned into a real PR challenge. Having headed up several mortgage
operations in the past I can understand the loan officer’s situation and know
for a fact that they regard the whole appraisal process as a major pain. In an
attempt to balance their needs, my needs (income) and USPAP, I’ve begun to
respond as follows:
Here is what I can do
for you. I will give you all of the information I can find out
about the subject (Auditor’s data, MLS, etc.) and let you know what I know about
the general market factors impacting its location. Hopefully that will give you
enough information to decide if you wish to place an order.
If not, then I can perform a
“Desk-Top” appraisal for you. This will take a few days but should be done by
the time your check arrives. Should you wish to proceed at that time with a more
in-depth report, since I will already have the research done, I will credit you
50 percent of the Desk-Top fee towards the final report. It’s important to
understand, however, that the Desk-Top is only considering raw data and that an
inspection of the property could have a significant impact on the value
conclusion.”
I’ve had several respond with,
“Well at least you didn’t yell at me and hang up.” And they seem to appreciate
that I’m trying to do what I can for them. I’ve just started this and so far
haven’t gotten a Desk-Top order yet but have turned a number of the requests
into full orders by keeping the lines of communications open. To the best of my
knowledge this approach keeps me compliant with USPAP but I would appreciate any
other opinions or findings. - Dan Feasel