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Comp Checks: Shifting Liability to Appraisers - read story

> 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 California . I am not familiar with the Tucson  market. The borrower tells me the house is worth $500,000 but the AVM doesn't show any comps near that. Can you pull some comps for that value?" 

Faxes titled "Comp Check/Appraisal Order" usually instruct me to verify value before proceeding with the assignment. Discussions with other appraisers in Tucson show that many of the faxed comp checks are broadcast to as many appraisers as possible. - Ricardo Small

> 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: “Well (Jim, Jane, whomever) as I’m sure you’ve heard by now, we can no longer to do “Comp Checks” as we knew them in the past (and of course neither one of us wants to do anything that puts our license in jeopardy, do we?).

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  

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