AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. Click on Outside The Boxes for a collection of Patrick's articles on Appraisal Scoop!
Most appraisals are for home loans that involve some form of Federal underwriting (purchase or sponsorship by Fannie, Freddie, HUD, VA, regulated lenders, etc.) and therefore, the taxpayers underwrite the risks. As such, it would only seem logical that taxpayers should get something in return.
The argument is the GSEs and others provide the taxpayers with “loan availability” and that is true, however when those same taxpayers continuously have to foot the bill for bailouts, I am not sure that this is such a good deal. In this morning’s news, “Fannie & Freddie bailout expected to be $100-Billion”. I do not think “America” had that in mind.
No one expected housing to lose money, including Congress, when the GSEs were authorized. That was then and this is now, so we need to look at this more as a taxpayer’s investment. We want “return on” and “return of” of our money, so what else should we be getting if not our money back?
Since County Assessors are “government sponsored” as well, why not give them “some help” in the form of a copy of each appraisal completed? I have heard the arguments that appraising for assessment purposes is “way different than for loan purposes”, but we share basic value principles and techniques. Essentially, the elements of valuation are the same, the applications slightly different. Even if we stock county assessor offices with “reviewers”, it would be a step in the right direction.
Make it a federal law (with severe consequences) that appraisers must deliver a copy of each appraisal (or at the very least, a summary of salient facts) completed for a “mortgage transaction”, directly from the appraiser to the assessor’s office.
Doing so would provide the assessor with updated valuations on tens of 1,000’s of local properties (thereby providing “ad valorem” updates) while creating a “government sponsored” clearinghouse (think IVPI), especially for “multiple appraisals on the same property”.
If lenders ordered “multiple appraisals” because one “did not hit the number”, and the assessor received copies of each (with very different values), we would know about it. If values were “inflated”, we would know about that too.
Show me the money
First, most states have limited funds and giving the assessor some federal money to boost the payroll (just as Fannie and Freddie wanted to donate for an IVPI), is in the interest of the larger picture, “the health of the national housing market”. Staffed with “public employees” and the additional infrastructure funded, the assessor gets to see what most of us never do, a big picture in the form of tens of thousands of appraisals.
Think about it, the assessor not only has access to assessment appraisals, but also gets a copy of the most recent loan appraisal, with an update on improvements, condition, etc., for each home in the area. Over a short time, one of several events will occur. Since the assessed values for a neighborhood are generally uniform, valuations outside the range or those appearing excessive (when compared to the norms) will stand out like a sore thumb.
This can be automated (using a “parcel matching system” and AVM) to benchmark the value opinion to the norms for the area. Properties outside the range are “marked” and can be evaluated by an appraiser in the assessor’s office to see if anything is “amiss”, alerting to a possible problem. If a problem is noted, the full report goes to the state.
If taxpayers are footing the bill (for the bailout) then Fannie, Freddie and others should be picking up a tab for us keeping them safe, including additional funding for state agencies as well and those funds should be a fee associated with every loan made. I do not mind them making a profit, I just want them to share it with "their other investors", taxpayers.
Why should we do this? Such a system would accomplish several goals. First, all appraisers would know that someone (a local tax appraiser) would have access to their work and that it could be reviewed at any time. They would also know that the same appraiser would have access to reports completed by many other appraisers in the same area and on the same type of property.
County Assessors are independent, hence no conflicts. Assessors understand valuation principles and techniques; comprehend “protection and perception of the public’s trust”, have an “established organization” with the ability to network across the US with their peers to address and effect a “common solution” for implementing this process.
Why recreate the wheel when modifying the one we already have would better serve “the system”? The argument will be money and funding. How much will Fannie, Freddie, the rest of the secondary market along with investors, lenders, etc. have to lose before “this looks like a good alternative”?
Stop Bailing – Start Jailing
If the federal government wants to “bail out housing”, do it a way that will insure that future events are minimized, if not prevented. Providing Assessors with the ability to “match” and “mark” appraisals, to identify “outliers” or simply to update assessments, is the first step in identifying “mortgage fraud” while updating (GLA, etc.) public records, assuring better data and fairer tax assessments.
Since we can use AVMs to conclude a potential range of value”, it would seem that the same technology could identify “value opinions” that are way outside that range. It is not a matter of “new technology” but rather a new application of existing technology. At the very minimum, appraisers that are not producing “verifiable and auditable” value opinions, will have those same reports “verified and audited”. Such a process would not take long to implement and would provide a “first level of review” that is not motivated to “make the deal or pressure the appraiser”.
As taxpayers, we deserve accountability. We also deserve “equitable” tax assessments. Such a system would provide both.
AUTHOR: Patrick Egger is a Certified General Appraiser located in Las Vegas, NV. He teaches continuing education classes on the housing market, appraisal issues for real estate agents and appraisers. He can be reached at firstname.lastname@example.org Look for the new Outside The Boxes category for a collection of Patrick's articles on Appraisal Scoop!