Originally Posted by FSETH

I never said that all appraisers are honest. That is a completely different story. Even though I am an appraiser, I have to say that I don't think very highly of most appraisers out there. I was also a review appraiser for a while and saw first hand the crap that the occasional appraisers was trying to pull and how flat out incompetent others were.

All I can speak from is my personal experience. I do not inflate values and I am sure I have lost some work because of it. I never said it doesn't happen. I was just explaining how an appraisal is supposed to work and that is by simply reporting values, whether the lender likes what you have to say or not.

I will go back to what I said earlier about how I think loan officers should be salary and not commission and here is why. These loan officers are trying to close every loan possible. Whether it is good for the bank, where they work, or the borrower is irrelevant to some of them. Here is a simplified example;

I am appraising a house in a townhome subdivision where there have been 5 sales of the exact same floorplan as the home I am appraising. I mean same paint colors, size, view, lot size, condition, age, quality and everything. These sales have a tight range of $145,000 - $149,000. Lets say I appraise it at the upper end of the range and call it $149,000. Then the loan officer calls me up and says, look man we really need to get $152,000 out of this deal because the borrower has a bunch of debt they are trying to wrap into the loan. What do you do now? Do you tell him, not possible or do you grab 2 sales from the next door town house development where sales are still similar but ranging from $150,000 to $155,000, add in 2 sales over $152,000 and call the appraisal $152,000?

If you say you can't get him $152,000, then the loan officer will probably find one of the many appraisers starving for work that will do this and now you have just lost a client. This is what some appraisers are struggling with, but it is bacause of pressure put on them from the loan officers. As an appraiser, they are your client and you want to make them happy so they can close loans and get paid and so you can get paid as well. This is why I think they should be on salary. That way they wont be putting as much pressure on appriasers to stretch values.

Some lenders are also going with middle men or appraisal ordering companies in order to end direct contact with the loan oficer and appraiser, which may help the situation. However, I am not a fan of them because they cut into our fees bigtime.

There is some margin of error on an appraisers value estimate. For example If I were appraising a $500,000 house and I was off just 2% with my estimate, that translates into it appraising anywhere from $490,000 to $510,000. Therefore, if an appraiser feels that a house selling for $510,000 is really worth $500,000 they may just side with the open market contract price and call it $510,000 becuse of the margin of error. You see what I mean. There is a huge difference between intentionally inflating values and sliding the value scale a percentage or two on a deal. It is part science and part art.