Mortgage Mistrust Hits Appraisers

Many lenders have come to mistrust appraisers after an epidemic of inflated home values.

By: Henry Berkowitz

Knowing how much your house is worth is only a phone call away. Or, at least, it was before the housing bubble burst. Home values are becoming increasingly difficult to assess, say many appraisal companies. Because of instabilities in the hosuing market, it has become very difficult to determine housing values. “It’s miserable,” according to Karen Mann, who runs a small appraisal firm in California called Mann & Associates. “I’ve been in the business 28 years, and this is the worst downturn I’ve seen.”

Appraisers both in the San Francisco area, and in other parts of the country suffering from the mortgage crisis, agree that mortgage companies, “…are shooting down the value of appraisals like I’ve never seen before,” says Rick Gordillo, a real estate appraiser. The reason for the difficulty in getting an appraisal accepted is that one of the most direct causes of the mortgage crisis is inflated home values. Appraisers placed far too high a value on the properties that mortgage lenders were financing, and it caused a great deal of trouble.

Over the last decade or so, since the housing market skyrocketed, lenders would generally accept an appraisal as valid simply by running comparisons, or “comps” from their desks. Representatives from the lenders seldom actually visited the property to check the values themselves. With the mortgage crisis entering its second year, banks are far more likely now to send their own appraiser to visit the property and make a secondary valuation.