Fort Thomas, KY Mortgage Specialist: January 2011

THE LISTING AGENT DID WHAT?  That was my immediate response when I learned from my borrower that they did their home inspection, spent as much time as they thought they needed with the inspector, then as they were leaving the appraiser was going in.

I spent a long five years as a Realtor before I transitioned over to the lending side several years ago. One thing that will always stick in my mind was a law class where I walked away with the mantra "Keep Yourself Out of the Line of Fire". I've used this many times in my career. It can be used as well to keep your buyer or seller out of the line of fire. I always told my sellers to NOT be home for showings or home inspections, although they may not be hiding anything, they may inadvertently say something that would screw up the transaction.

I have a purchase I'm working on where we have waited about three months for the short sale agreement from the bank. Finally! last week we got the short sale letter. We proceeded with the appraisal order and the borrower proceeded with his home inspection. Everything seemed it would finally come together, then I get the news that the appraiser and home inspector were present at the same time. The home is not nearly in "move in" condition as I'd been told, and a water pipe burst when they turned on the water because the renters moved out and no winterization was done. (brings up the question of why a listing agent or seller would not be more on top of things, but that is a whole different blog)

What leaps into my mind immediately is "what did the appraiser learn that he would not have known otherwise?" I'm not saying an inspector would spill his guts about the entire report, but when the appraiser asks him if the heat pump is working, then what does he say? Does he tell the truth? Is there a buyer/inspector privilege?

The point is "KEEP YOURSELF AND  YOUR CLIENT OUT OF THE LINE OF FIRE". The listing agent's office most likely made this appointment, not the listing agent herself, but it seems to me that it would be a given when appointments are being made NOT SCHEDULING THE APPRAISER AND THE HOME INSPECTOR AT THE SAME TIME WOULD BE FAIRLY IMPORTANT.

I'm not suggesting this because there is something to hide, or that any of the parties should behave in that way. As hard as it is to get usable appraisals these days then adding the extra burden of insuring the appraiser has even more reason to treat the value harshly is just sloppy work. My opinion is that appraisals are one of the biggest reason sales are not closing. Don't stack the deck against the home buyer or seller.

ARE WE FACING A SHORTAGE OF APPRAISERS IN THE FUTURE?  I was doing some online reading today and came across a short blog asking this question. Since this is something I've not experienced in my nearly 20 years in real estate and the lending business, it caused me to stop and think.

There has never been a shortage of appraisers, but now with the HVCC (Home Valuation Code of Conduct), appraising is a whole different process. I never stopped to think how many appraisers there were, in the past I just had a few I used for the market I was in. I did not need to know how many more were out there. All I needed to know was who were the ones who gave me excellent service and turned in a great appraisal for a reasonable fee.

As I sit here today going into the third week of waiting on an appraisal for a purchase, I can see some merit in the fact that indeed there may be a shortage of appraisers in the future. Reasons:

1) Appraising used to be a good career; if one decided to go into this field it was pretty straightforward how to do it. The appraiser would have to connect with Realtors or lenders to have a source of business, but the ones who performed had no problem doing this, they could build a nice clientele.

Contrast this now with the HVCC method of getting business. With few exceptions the seasoned appraiser can no longer go to the above sources for business and one wonders how much good advertising would even do. Appraisal orders (from mortgage broker originated loans) are handed out now by an AMC (appraisal management company) blindly in a round robin fashion. So, no matter how good an appraiser is, he/she cannot grow their business in a normal way. They can sign up with a lot of AMC's and hope their number comes up often.

2) Appraisers don't earn as much as they used to. In my market an appraisal used to cost $350 for a single family dwelling. That fee is now $360 and the appraiser who used to get all the money only gets a portion of that. Some tell me they get $150 to $225. Appraisers have taken quite a haircut when it comes to income. Logic would tell  you then that there is less incentive to go into appraising as a career. Appraisers have to work harder to make the same living.

So, the reduced income available to this group may actually reduce the number of people who would consider this a viable career choice. Additionally not having the ability to grow a business because of the dependency on a third party where any number of things could happen to terminate that relationship could make one a little wary of this career.

One thing I'm very sure of is that if a shortage of appraisers occurs in the future due to the HVCC ruling, then joining the sacrifice of many appraisers who have lost their businesses will be the consumer. As a result of fewer appraisers, fees will increase to the consumer and service would worsen. Another unintended consequence of the HVCC ruling.

And in ending, well, I'm not waiting on an appraisal for going on three weeks because of a shortage. At least not yet; I'm waiting because appraisers are blindly assigned jobs. Often they have no stake in doing a good job, or a timely job. Now, I'm not lumping them ALL in this category. Unfortunately it has been my experience more often than not in my market.

SUPPORT YOUR LOCAL MORTGAGE BROKER in 2011. In the interest of keeping the competition alive, I encourage you to talk with your local mortgage broker when you are shopping for a home loan. Or if you are a Realtor speak with local brokers to see what they may offer  your buyer when you start referring sources for funds.

I say this because (a) I'm a mortgage broker and (b) because so many mortgage brokers have left the business in the last couple of years. Ours is really a supply/demand business. If the lenders do not have competition, there is no reason to offer the best rates or best service.

I hear consistently these days that 2011 will be a better year for brokers who are left standing because so many have left the business. Unfortunately, the flip side of that is that with dwindling numbers it could make the few left more vulnerable to extinction.

Brokers have withstood so many changes in the last year or so. Just the fact that they are still standing is a testiment to their resiliency and determination. I was listening to a video on you tube today as it wound through the explanation of changes that have taken place. With licensing, background checks, testing and increased fees it has been a difficult time for mortgage brokers. In April the compensation rules will change. Will it be a final nail in the coffin? I hope not!

Generally a mortgage broker has the ability to deliver a product tailored to the borrower's needs and my experience is, at a competitive price and usually with superior service. So, I say, give your local broker a chance. You should find him/her anxious to answer your questions and you'll be keeping the competition alive!