Real estate appraisals have always included an element of judgment--or guesswork. Today's shaky property market is making it harder to come up with accurate appraisals as borrowers often square off with lenders about the "real" value of a property.
The biggest problem with appraisals today is the lack of comps, said Philip Lipp, president of Allwest Mortgage Co. in North Hollywood and president of the 3,000-member California Assn. of Mortgage Brokers. "Sometimes appraisers just scratch their heads and are unable to file comps," he said.
"Comps" are the sale prices for comparable homes in the neighborhood. "Appraisers today have slim pickings. . . . Many of those comps are also stale or are from foreclosure sales."
It's harder, however, to assess value when it comes to appraising a property for the purposes of refinancing. "There is a certain margin of leeway on most of these appraisals," Lipp said. "If the property is in better condition, the appraiser may be able to give it more value.
"We do everything in our power to best represent the borrower," he said. "I get my own data sources and also ask borrowers to provide their input about the amenities. . . . We are trying to get the best possible value that we can."
All this shouldn't be misinterpreted to suggest that loan brokers are improperly trying to influence the appraisers they usually hire, Lipp said.
"The appraiser can only legitimately raise the value according to the available comps," he said. "We wind up hurting ourselves in the long run with bad appraisals. It's not likely that an inflated appraisal will pass the lender's reviews."
"I'm doing a lot more homework up front before I take a loan application," said Ben Hunnicutt, president of Southland Financial Network Inc. in Woodland Hills. The first step is to call an appraiser and ask whether it's feasible to "bring in" an appraisal within a certain range. If the answer is yes, Hunnicutt said, then he'll go ahead and start looking for a loan to match with the borrower.
Hunnicutt said he makes it a point to inform the appraiser about anything that may help boost the value of a property.
"I may call the client and ask for an additional list of amenities that distinguish a property from other properties in the neighborhood that have been sold," he said. "It's not finagling, but there's pressure for appraisers to be aggressive."
