The following article is by Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, The opinions expressed are the author's and do not necessarily represent those of the Appraisal Scoop blog.
For those who have not figured it out yet, we are in the second year of a Real Estate Recession that will last about 2-3 more years before we have hit and can measure the bottom. If you make a living doing loan production appraisals for loan brokers, life will be hard, unless you cave in and give up the goods, make the deals work.
Forget technology issues, forms vendors, the large picture has changed and it will be the worst, the first national Real Estate Recession since the 1930's impacting virtually every State, Canada and Mexico!
Looking back on the last 4-5 years, what percentage of residential appraisal values were pushed upward to accommodate the deal or help make it work? If values were pushed up 5% or 10%, then the artificial values amount to 20-50% of the present Sales Price levels, according to the math. Add the issue of the Housing Affordability Index and the situation becomes apparent.
In my Region, most cities are under 20%. Less than 20% of the Households can afford the average home. The Real Estate Speculators have left the market. The 1031 Tax Exchangers have left too. The Cash Back Buyers and Flippers are still here, trying to do one more deal. Some appraisers who tried to hang onto their integrity are already out of clients, others have already left the industry.
Every person who purchased with a 100% loan, refinanced with a negative AM loan, is holding more than an 80% loan, is subject to loosing all of their equity. What happens then? Millions of Households default. Then what? Who gets blamed? Who did Congress license for Consumer Protection reasons? Who is the Consumer in a sale or refinance transaction? The Buyer.
In 2007, Congress will act on behalf of the Consumer, or at least start down that path. In the end, they will act against the Licensee, which is US. We will all suffer the taint of what will be heaped at us, be painted with the same broad brush.
How does one separate themselves from those who pervert the appraisal process? Our work will stand on its own. Or, Not. The use of Good Appraisal Procedures, measuring Market Trends, Supply & Demand Conditions, Value Trends and Verifying our Market Data to dig out Motivations, Terms and Concessions is a good thing. Good especially during down markets.
"Appraisal is only hard if you try to do it right, or if the market is going down, or both."
AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training 909-798-8855, fax: 909-798-0139
Recent Comments