Guest Post by Fred Rossiter - State Certified Residential Appraiser - Seahaven Appraisal Services This is the second of a two-part series presenting a case for, and benefits of, centralized appraisal ordering
Benefits of Centralized Ordering: Because the lender is no longer the appraiser’s client, the appraiser’s fiduciary is to a governmental agency. The appraiser no longer has any motivation to appease the lender. Because the appraiser remains anonymous until delivery, the lender has no opportunity to influence the appraiser. This insures a true and honest appraisal of the property.
Centralized Ordering, through a government run web site, with appraiser anonymity, would provide the perfect “firewall” needed between the appraiser and the lender.
Centralized Ordering provides the ordering, processing, delivery and payment functions of the appraisal process thus satisfying many of the functions currently provided by Appraisal Management Companies. This will reduce appraisal costs to the consumer and insure fair and customary fees to the appraiser.
Simplicity - All residential appraisals will be ordered through one government web site. The lender would fill out the home page (engagement letter) with property and ordering information and click on the Submit Information button. The lender would then select an anonymous appraiser on the 2nd page of the web site and click on: Order an Appraisal. Once completed, the appraiser would download the appraisal report, through the web site, to the lender and the Consumer Financial Protection Agency (CFPA) for archival. Downloading the appraisal report would automatically trigger the electronic payment of the report by debiting the lender’s reserve account and crediting the appraiser’s account.
Because the lender chooses the appraiser anonymously, the lender has no opportunity to coerce or influence the appraiser or manipulate fees. The lender is not allowed to make stipulations.
Because the appraiser is allowed to determine his own fees, free from influence by the lender, the fees become market based. Appraisers wishing to increase their volume, are free to reduce their fees and appraisers wishing to charge higher fees must compete with all other appraisers on the basis of experience, qualifications and industry affiliations. Because the appraisal fee is passed on to the borrower, the lender has no incentive to order from an appraiser offering the lowest fee.
Centralized ordering, appraiser anonymity, and fair and customary fees, determined by the market of appraisers, will halt the theft of the appraiser’s fees by lenders and AMC’s. Appraiser’s fees will no longer provide a profit center for lenders nor parasitic AMC’s.
A government run web site would offer only USPAP compliant appraisal products. AVM’s, BPO’s and non standard appraisal products would not be available, permitted or offered.
Centralized ordering will negate much of the need for Appraisal Management Companies. Centralized Ordering would break the existing oligopoly now enjoyed by the nation’s five largest lenders. Lender approved fee appraiser panels would no longer be permitted nor would they exist.
Appraisal Management Companies would still exist and provide quality control services only, to those lenders who chose to use them.
Centralized Ordering would allow the US Government and designated agencies to monitor the nation’s housing market and how well the nation’s housing stock is collateralized.
Centralized Ordering would negate the need for appraisers to establish business relationships with lenders to promote their business. These business relationships, in the past, frequently provided lenders an opportunity to coerce, intimidate and influence appraisers on their appraised values or extract low fees under the threat of reduced business.
With Centralized Ordering, every appraiser with geographic competence in a specified zip code would be exposed to every lender in the country ordering an appraisal in that specified zip code.
Every lender or mortgage company would be required to use the government run Centralized Ordering website on all new residential loans and refinances.
Centralized ordering with its built in firewall offering appraiser anonymity, and changing the appraiser’s client from the lender to a government entity would have prevented the S & L crisis in the mid 80’s, and the housing bubble and resultant crash of the housing industry and US economy in the last several years.
Part 1 - The Case for Centralized Appraisal Ordering
Download Appraisals - Centralized Ordering
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