Dennis Norman
By: Dennis Norman
One of the hot topics in our industry now is the Home Valuation Code of Conduct (HVCC) which, according to REALTORS(R) have cost them sales due to low appraisals, and according to appraisers has resulted in degradation of appraisal quality as a result of appraisals being done by appraisers that are not familiar with the local market.
A while back I came across Frank Gregoire, an appraiser in Florida who is very knowledgeable and passionate about his industry and in fact will be the 2010 Vice Chair of the NAR Appraisal Committee. Through is blog, Appraiser Active, Frank addresses issues he sees as an appraiser. I thought it would be interesting as well as informative to get Frank’s perspective on the market and HVCC and therefore did an E-View with him on the topic.
Francois (Frank) K. Gregoire, IFA RAA
Frank Gregoire has been licensed in real estate since 1976 and involved in real estate appraisal since 1977. He has experience as an instructor of Real Estate License Law, Real Estate Brokerage and Real Estate Appraisal for St. Petersburg College as well as several private Real Estate Schools.
Now for part 1 of the E-View :
Dennis- There has been a fair amount of talk about over-inflated real estate prices during the housing bubble as a result of sub-prime loans, 80/20′s, prices being increased to allow for the seller to take back a 20% second, etc. No doubt these things are at least part of the reason HVCC came about. What are your thoughts on this?
Frank-The bubble was driven by a number of factors, easy financing among them. A contributing factor that seems to be forgotten or rarely mentioned is the preponderance of shady deals, many of them fraudulent. The “Silent Second” you mention happens to be one of the schemes. Another that became popular in the boom time were cash back schemes that required a sales price above the listed price, a compliant appraiser and real estate broker. The lender was duped into approving and making a loan in excess of the value of the property. At closing, the seller credits the excess to the buyer, an entity controlled by the buyer, or a member of the fraud ring.
An appraiser is engaged to ferret out such transactions. If the appraiser is acting professionally, and doing their job properly, these fraudulent sales stand out like a sore thumb and should not be included as comparable sales. Unfortunately, it takes only a few appraiser involved in a number of appraisal assignments to allow the schemes to be successful. The wreckage resulting from their negligence is apparent all over the country, particularly here in the Sunshine State.
Dennis-As a result of the sub-prime implosion, the frequency of mortgage fraud as well as declining values, all aspects of the loan origination process seem to be under scrutiny. It is apparent regulators feel that appraisers were receiving a lot of pressure from sellers, agents and lenders with regard to values. Was this your experience? Did you feel others were trying to influence your opinion of value?
Frank-Pressure on appraisers is a reality; however it is nothing new. It existed long before the licensing and regulation of real estate appraisers that resulted from the last mortgage lending catastrophe in the 1980′s. The pressure is not limited to value issues. It includes encouragement to ignore detrimental property condition, detrimental market condition, encouragement to falsify occupancy and any factor that may affect the loan approval or acceptance in a particular loan program of product.
Pressure on appraisers is not limited to assignments related to mortgage lending. Appraisers involved in divorce, eminent domain, estate and tax appeal assignments are often subject to pressure to shade their opinions and conclusions in favor of the interests of a particular party. However, appraisers are licensed and certified, subject to state regulation and bound to adhere to the Uniform Standards of Professional Appraisal Practice to promote and maintain a high level of public trust in appraisal practice. Threats and intimidation do not justify an appraiser’s decision to succumb to pressure to falsify an appraisal or to act as an advocate for any party in a transaction.
Like I said in the beginning….Frank is knowledgeable and passionate about the appraisal professional. I’m going to stop here today but will pick up from here tomorrow. If you wish to reach Frank, his contact information is below:
Francois (Frank) K. Gregoire, IFA RAA
Gregoire & Gregoire, Inc.
727-344-3393
email: fgregoire1@yahoo.com
blog: http://appraiseractive.blogspot.com/
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