Did you pay too much for your home because it was appraised higher than the real value? A federal law passed last year was intended to make home appraisals accurate and fair. But some appraisers and realtors say the law isn't really protecting you.
If your home is overvalued by an appraiser, you paid too much. If it's undervalued, you may not get the loan. That's why last year's federal Dodd-Frank Consumer Protection Act is supposed to make sure appraisers are free of any influence from the lender or anyone else.
Pat Turner is an appraiser and former member of the Virginia Real Estate Appraisal Board. "In some cases I believe it probably worked. In other cases I believe it probably did not go far enough," he says.
Many appraisers are now hired through appraisal management companies, or AMC's, which Turner says are sometimes owned by banks. "Fox watching the henhouse," he says. "It's a profit center for the lenders."
But the Virginia Bankers Association President and CEO Bruce Whitehurst argues that the AMC's keep the lenders and appraisers separate. Says Whitehurst, "The regulatory agencies do an examination to make sure there is this complete separation, so these AMC's play a pretty vital role in that."
The new rules say appraisers must be paid "customary and reasonable" fees. But the professional association the Appraisal Institute says appraisers are getting sharply reduced fees, which it says has led to less qualified appraisers, sometimes from out of town.
Adds Turner, "If they're any good in Roanoke as an appraiser, how can they afford to come to Richmond for half price or less?"
To that question, Whitehurst counters, "If there's a good appraisal report that can be obtained for $200, that's a win for the consumer. There is so much information available on the internet today that wasn't available over the last 10 or 15 years that has really created the environment in which there's a lot more competition for the appraisal business."
And there are even cheaper methods, such as automated or drive-by appraisals. Turner says that's a problem too, pointing out that an appraiser can't see things on the inside of a home, such as kitchen improvements or an enclosed sunroom, that can add to the home's value.
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