I’m a 43-year-old guy and I grew up in the 80’s when music was odd and fun. I had some favorite bands like Def Leppard, Guns N Roses, Bon Jovi (hello I’m from NJ) and Ratt. Yes, Ratt and one of my all-time favorite songs is Round and Round. Here’s the throwback: https://youtu.be0u8teXR8VE4
Funny, it’s relevant to me today in the valuation, regulatory and real estate appraisal sectors. One specific lyric offers so much insight into the Lender/ Real Estate Appraisal world…
“Round and Round
What comes around goes around
I’ll tell you why”
Here is where I tell you why
The real estate crash 10 years ago was due to lender pressure on consumers to buy property they could not afford and appraisers to inflate values. If appraisers didn’t fall in line and file to meet those inflated values, they were blacklisted or told you would get no more work. Lenders all over the US were pressuring appraisers to “make value” so that they could lend money; it was never about your biggest family investment as a consumer. Appraisers were giving their unbiased professional opinions of value only to have the lenders strike back with unreasonable demands and some going as far as blacklisting them. Many appraisers did not give into these pressures and eventually wouldn’t see any work. The appraiser was doing his or her job correctly and protecting the public trust only to have the lenders ultimately have the final say.
Round and Round, what comes around goes around and 10 years later it’s happening again.
Appraisers are once again vocalizing about the pressures of lenders and AMCS to make values, do what they say or suffer the consequences. Those consequences are once again blacklisting, removal from appraisal panels, limited work or nonpayment for their services. Isn’t the whole idea to have an appraisal to assist the lender to lend money or not? Assist in the risk? Seems like we are back to 2008 again when the warning shots were being fired but the regulators and public ignored those warnings. The question is, will they ignore them once again?
You don’t believe me, do you? Well here is a recent example from an appraiser this past year and the messages from the lender (shown in 1st pic below). The appraiser did a report, but the lender wasn’t happy with the results. So, they hired another appraiser who appraised it for a higher amount to make the deal work. As you can see the first appraiser was pressured and then removed from getting work. But it doesn’t stop there. In the second picture the lender basically told the appraiser that he knew this wasn’t going to go well and that he (the appraiser) should have said something if it wasn’t going to come in close to the Sales Price (SP) to stay in the GOOD GRACES of the lender. What??? So, I guess that means they would find someone out there to make the deal happen?
Round and round as we are now back to pre-crash pressures and taxpayers may get taken for another ride. To me it sounds like the lenders only care about making a deal work for them while the honest, unbiased appraisers are once again being forced to the side, being strong armed and the consumers are paying the price.
as the song says ” you put an arrow through my heart”.
2 thoughts on “ROUND AND ROUND”
Great article Mark! This is a very serious situation. It is a sobering thought to think that we are repeating the past. My hope is that this is not reflective of most lending institutions today. Bit clearly there are some bad actors on the scene again. It is important to make this know to the public for their own protection. Thanks for shedding light on what is going on!
Same old, same old. Been in the business 40 years, and it’s always the same, and it will not change, no matter what. Human nature. Learn it, live it, love it.