Author: Ted Faravelli, Jr., is a real estate case consultant and state-certified appraiser specializing in forensic valuation services, litigation support and expert witness testimony. With more than twenty-three years of experience, he has consulted in over 100 cases and has been designated as an expert witness to the California Superior Courts of Sacramento, Marin, San Francisco, San Mateo, Alameda, Contra Costa, Santa Clara, Orange and Los Angeles Counties.
The "Blacklisting" topic posted on Appraisal Scoop (click here) hits a raw nerve and makes most quite uncomfortable discussing the issue.
Why? We must examine the motivations of the participants in the equation. First, you have the borrower/consumer. Their motivation is to buy or refinance their dwelling. Second, you have the loan originator who stands to profit from the transaction; provided it gets closed. Last and least, you have the valuation process; which at the very best does nothing to impede this and is the weak link in the process.
Theoretically, an appraiser must be impartial, objective and independent; and cannot be an advocate for a clients cause. A neutral third party if you will. Reality is quite different however. All parties to the transaction, with the sole exception of the appraiser, are advocates for their cause and are willing to do what it takes to consummate the deal.
After all, it would appear no one gets hurt and all parties benefit; a venerable win-win-win situation. The borrower gets their home or money, the loan originator gets their commission and the appraiser get the promise of additional assignments; provided they are a "team player" and do not impinge upon the process.
A dark and disturbing consequence of this is that borrowers are being stretched to the limit financially as appraisers who continually push values are artificially establishing phantom values of the properties they appraise. The sales then became comparable sales that are used by other appraisers performing either purchase of refinance appraisals.
But wait, values are set by the market aren't they? Click below to continue reading . . . .
Consider the following that may not be entirely the case. Let us consider new home sales. We must draw from direct experience. Our firm had the largest home builder in the country as a client; but only for a short time period. As the builder continued to set home prices higher and higher the appraisers were placed under tremendous pressure to meet the sales price.
On several dozen occasions, the client, after funding the loan, realized that the appraised value was less than the contract price; some as a result of upgrades added after the appraisal report was submitted. Months later the client insisted that the appraisal reports needed to be "revised" to reflect the sales price and the effective dates and signature dates must not be altered; as the loans were already funded. 
In fact the situation became so desperate for the client that the president of the mortgage company called and demanded changes be made to dozens of appraisal reports so they would reflect the sales prices and that any insubordination and insolence would not be tolerated. Our refusing to violate the law resulted in our dismissal as a vendor.
I have spoken at length to many appraisers and all have unequivocally stated that they "dare not" appraise a new property for sale less than purchase price; as to do so would be career suicide. This deception and duplicity results in values being pushed ever higher due to the validation, confirmation and complicity of the appraiser. Two appraisers I interviewed, who strictly appraise new construction, have yet to not meet the sales price; this of thousands of homes they have appraised.
What is a solution? We are compelled to look at the changes in the accounting profession who have had similar problems of client pressure, control and abuse. We need an appraisal profession version of Sarbenes-Oxley to stop the vicious cycle of abuse. Only by taking away power and control from those who will not allow the appraiser to perform their primary obligation and duty; to render opinions in an impartial, objective and independent manner can we hope to break the stranglehold on this industry.
Only through advocacy in numbers can we as appraisers and custodians of the public trust hope to truly gain independence and freedom from the tyrannical and oppressive actions of those who have no duty or obligation to the public trust; rather are driven strictly by greed and avarice.
About The Author: Ted Faravelli, Jr is an adjunct professor at San Jose City College and national lecturer in topics ranging from real estate appraisal, construction defects to mortgage fraud and the appraisal process. As an AQB Certified USPAP instructor he is an expert in the ethical obligations, due diligence, standard of care and specific performance requirements of appraisers. Ted is a contributing appraiser member with the Northern California Real Estate Research Council, Cal-Poly, Pomona; an approved instructor with the Department of Real Estate and the Office of Real Estate Appraisers . He is also an associate member of the State Bar of California. He has been retained in several high-profile cases that have had national exposure. Ted also presides over and adjudicates disputes and conflicts concerning building code, construction, fire code and zoning issues as the Chair of the Board of Building Code Appeals for the City of Sunnyvale, CA.
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