Brokers call for appraisal changes

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Brokers who are frustrated by outdated and inaccurate appraisals are calling for a reform that will take into account other valuations when deciding the value of a home.

“Appraisals aren’t coming in at the proper value; they’re not coming in at purchase price,” Anthony Ambrosio of CSI Mortgages told MortgageBrokerNews.ca. “The appraisers look at market data that is old – they’re always looking backward and not forward.”

According to Ambrosio, homes he is having appraised now are being valued at winter prices, when the market was slower and prices were lower.

“Look at prices in February compared to now; we’re getting valued at February and March prices even though the market has gone up,” He said. “When August rolls around they will be looking at Spring prices.”

It’s a problem a number of brokers across Canada have had to deal with and one particular player is noticing certain appraisals are especially under-valued.

“The appraisers don’t care, they often undervalue by 20-30 thousand dollars; they are quoting down from the market, especially when it’s an insured-referred appraiser,” Avijit Ghatak of Centum Home Loan Inc. told MortgageBrokerNews.ca. “I have chatted with the insurers and they don’t discuss it with us. They say they only go by the appraisers and not the market or the Realtors (but they should) go by the market and listing as well as what the appraiser says and do an average.”

Ghatak believes benchmarking against similar homes – currently listed – as well as recently sold homes is a good way to get a better glimpse of a home’s true worth.
 
 
  • Anonymous on 2014-06-18 11:38:45 AM

    Listing data is not an indicator of market; there is no evidence of sale activity attached to pricing set (i.e. it can anything the seller wants). A good appraiser will not only consider recent / relevant sale activity, but also review any current listings that may have received offers or may be under contract. As well, a survey of active market participants (i.e. brokers / buyers) should also supplement the appraiser's decision.

    Please review the Canadian Uniform Standards of Professional Appraisal Practice ("CUSPAP") for the steps and analysis required for an appropriate appraisal - ensure that your client's appraisal is compliant. The standards are continually being updated, and the brokerage community themselves should be familiar with them in order to fully service their clientele.



    Active AACI Appraiser

  • Barbara Buote on 2014-06-18 11:39:50 AM

    Anthony has brought to light what I have been saying over the past months. Certain lenders and insurers specifically use an extremely narrow list of appraisers that time after time appraise a property WELL below current market value. I have proof of this with my appraisal of the same property using an appraiser from their "lists" that has an evaluation way higher (but in line with comparables). However, these certain appraisers that are ordered for a second appraisal I believe are getting the business due
    to their nature of "conservatism" and knowing that they may become the sole supplier for that lender or insurer.

    I am not looking for a highballed nor lowballed
    appraisal - just an honest one, which I believe
    97% of appraisers do. It is that very small
    percentage that may want business so badly that they will go down that road of I'll give 'em
    what they want.

  • Anon on 2014-06-18 11:46:08 AM

    Most appraisers don't do a thorough job ad they decide what is comparable, often stating that a comparable had superior finishes than the subject property even though they never saw that property and have no reasonable evidence other than comments on a listing to establish that. Most appraiser spend very little time in the property and do very little research. Too often they will exclude supporting comparable becuase its one or two streets further than where they decided to include despite the comparable property being closer in specs to the subject.

  • Mike Maguire on 2014-06-18 12:55:42 PM

    Maybe your clients are over paying. Most appraisers I know will do there best to support a purchase price but there are cases when buyers emotions take over and they fall in love with the house so much that they will pay whatever. A good realtor should rein them in and make them see that they are making a financial mistake but it does not always happen. The common example I get are with stainless steel appliances. They get so excited that they get them and think they are worth alot of money. How does and an appraiser deal with that. $2500 worth of appliances that they paid up $10000 in value for that are not even included in as security. I think a buyer may be wise to use a low appraisal as a warning sign. Of course the true test is when they try to re sell it and can't get their money back. Seen that one way to often.

  • Mike Maguire on 2014-06-18 12:59:31 PM

    "Ghatak believes benchmarking against similar homes – currently listed – as well as recently sold homes is a good way to get a better glimpse of a home’s true worth"

    Great idea, there is a house on my street listed $40,000 over what it should be, been sitting there for months. Than means mine should appraise $40,000 higher, perfect. I guess on the other side when they under list to drive multiple offers you would not mind those low listing values too.

  • Cory on 2014-06-18 1:10:02 PM

    The introduction of the 3rd party appraisal ordering systems was to, in part, eliminate the opportunity for persuasion from those ordering the appraisal to the appraiser, however the system has created the exact opposite effect, which is persuasion from the lender/insurers to that same appraiser. If a home appraises for 10-20% less than the purchase/estimated price then maybe there needs to be an adjustment by the purchaser, however I have seen numerous appraisals coming in at 2-3% lower, which still causes significant issues on the file. You can throw all sorts of policy at me, but there is no one that can convince me an appraiser can value a home exactly to the penny (telling a purchaser it is not worth what they are willing to pay). Every home value is subjective and that is why people pay what they are willing to pay. 2-3% could be the difference between liking the paint colour, the flooring choice, the stainless fireplace instead of the brick fireplace. These appraisal companies need to understand these things. Back to ordering appraisals directly so we can have this conversation up front!

  • Sheldon Rajesky, AACI, P.App on 2014-06-18 1:11:49 PM

    When a purchaser wins a bidding war and pays substantially over ask price, they are buying with emotion rather than brains and rarely does it equate to value. This is actually the Realtors fault for not guiding their client so please don't try and lay the blame on the appraiser when the purchase does not appraise out.

  • Mike Rice on 2014-06-18 1:47:57 PM

    Appraisers are always getting bashed if the perceived value is too low. From a Lender perspective I'm happy with conservative appraised values becuase the value in a foreclosure is always going to come in lower than the appraised value due to poor maintenance etc. The writer mentions lower values in the summer based on winter comparables, but what about higher values in the winter due to summer comparables, funny he doesn't mention that side of the coin. The other issue that is not mentioned is the loss of control certain brokers have as to who they get to choose to do their appraisers is growing reality. Centralized appraisers are becoming the norm because regulators like the anonimity of the process. This also could be a factor in the lower values because certain brokers can't use their "regular guy" to fill in the amount they need. Im just saying......

  • Mike Maguire on 2014-06-18 2:15:27 PM

    Mike Rice....where do I find a "regular guy" to fill in the amount I need. The appraiser I send a hundred or so appraisals to a year won't fill in the amount I need. We sometimes have some discussions over his choice of comps and he keeps an open mind but hardly just giving me any value. I think knowing the real estate market in your area thoroughly helps as you recognize issues right away. The problem we have with the appraisal services is the skill level of the appraisers who end up picking up the jobs. There are a number of appraisers undercutting prices and hiring under qualified guys to go out. Have even seen out of town appraisers doing properties which is bizarre. So really not sure why lenders like this system as the most qualified appraisers are too busy to cut their price so they don't get the jobs. Guess you pay for what you get.

  • Keith Lancastle - Appraisal Institute of Canada on 2014-06-18 2:55:28 PM

    On behalf of the nearly 5,000 members of the Appraisal Institute of Canada (AIC), I would like to clarify the appraisal methodologies that AIC-designated members must employ to arrive at an opinion of value. To say that “the appraisers look at market data that are old – they’re always looking backward and not forward” is, quite simply, inaccurate.

    The reality is that individual real estate markets can be volatile. In a “sellers’ market”, or when there are multiple offers on a home, an inflated selling price above the true market value can result.

    A multiple-offer scenario is just one example of when a professional appraiser’s independent and unbiased opinion of value is critical to protecting the consumer and to the long-term stability of the lending system and real estate market.

    To provide a reliable market value, AIC-designated appraisers consider a number of factors, including past sales. Current market conditions are also taken into account in the analysis of the information and in the preparation of the appraisal. Adjustments are made to the sale price of the comparable properties based on market-derived elements of comparison. An opinion of value, either a single value or a range of values, is arrived at by reconciling the adjusted sales prices of the comparable properties. For more detailed information about the various methodologies used in real estate appraisals, please view our "Industry Guide to Understanding the Fundamentals of Real Estate Appraisal" available at www.aicanada.ca/industry-resources/consumer-guides/industry-guide.

    An AIC-designated appraiser has a professional and ethical responsibility to provide an independent and unbiased opinion of the value of a property. All of our members must comply with the Canadian Uniform Standards of Professional Practice (CUSPAP), a Code of Conduct and Regulations. As professionals, AIC members are obligated to prepare their work in compliance with these standards.

    The Appraisal Institute of Canada believes that a reliable market value – prepared by a qualified professional - is critical to consumer protection, the lending system and overall Canadian economy. Consumers and lenders should be wary of selling prices that are inflated – either through multiple offers or other local market factors.

    Keith Lancastle, CEO
    Appraisal Institute of Canada

  • MP on 2014-06-18 3:37:27 PM

    Well said Keith!! I wouldn't want the job of the appraiser. It is a very subjective job and it is difficult to compare homes as there are no too alike.

  • Keith on 2014-06-18 4:12:46 PM

    Keep in mind, lenders also have their own 'policies' of sorts that appraisers need to follow. Home Trust for example want appraisals to come in low...BNS wants a fair appraisal. Appraisers do not know how we submit a file, they can just go by area comps and what the lenders want such as 90 days sales, 120 or 180 day sales, etc. Their arms are tied and they are caught in the middle. Maybe we should look at the lenders more so for controlling this so much and pushing for lower values to protect themselves. Everyone keeps talking purchases but its in refi's that we get hit the most by low appraisals.

  • Just sayin on 2014-06-18 4:42:19 PM

    An article in "Broker News" about brokers complaining that appraisals do not support the sale price and thus the broker is out of a commission! On what planet is this new?

  • Mike Rice on 2014-06-18 7:58:45 PM

    Re Mike Mguire...i'm always miffed at comments regarding appraisers doing appraisals out of town. In all instances I've seen, out of town is actually a bordering community like Vancouver and West Vancouver. To say an appraiser from Vancouver doesn't know the West Van market or lowermainland market is a stretch. In addition if an appraisal company is based in Vancouver they have appraisers who live in most areas of the lowermainland and would assign it to the applicable appraiser. I would agree its not a good thing if the appraiser is doing an appraisal in a community in another part of the province but that would never happen in a centralized appraisal system anyways.

  • Matt Cook, SRA on 2014-06-18 9:10:04 PM

    Anthony Ambrosio: “Appraisals aren’t coming in at the proper value; they’re not coming in at purchase price.”

    Mike Maguire: “Where do I find a ‘regular guy’ to fill in the amount I need. The appraiser I send a hundred or so appraisals to a year won't fill in the amount I need.”

    That’s the problem right there. It is not the appraiser’s job to “come in at the purchase price” or “fill in the amount you need.” It is their job to provide an unbiased opinion of value supported by the market data available. They are usually the ONLY unbiased party in the transaction. If you want to know what happens when appraisers whore themselves to give you the value you want, look at the mortgage meltdown that happened below the border.

  • Steve on 2014-06-19 9:36:05 AM

    @ Keith Lancastle... not all appraisers follow the proper methodology... they hide behind the fact that an appraisal is a "statement of opinion". End of the day market value is set by what a seller is will to accept and a buyer is willing to pay. Appraisals are not a science in its current form but you should look at standardize some common parts such as starting with base value determined by the size (suare footage), type (detached, semi & 2 storey or bungalow etc) then use pre-determined adjustment factors to adjust for promixity to schools, shopping, transit, highways, golf courses, parks etc and pre-set adjustments for upgrades done to the house. Currently your appraisers seems to adjust up or down by numbers that seem arbitrary (I see consistently $10,000 or $15000 up or down). They rely on the comments from mls listing from previous sales to determine is the subject property is superior or inferior to those sales, how can they determine that without seeing those properties. A sold property that stated hardwood floor throughout doesn't mean that is is good condition, nor the quality of the hardwood used versus the subject property. I've had appraisals come back in lower by $20,000 - $30,000 on the same property we appraised a year earlier. Considering property values have only gone up... I would have to say that there is a great level of incompentance on the part of the appraiser. Also tohought it would be worth noting that I get about 40% of clients complaining about the appraiser before we even get the results (this if from a centralized system). Perhaps they need to have continuing education to keep them up to date on the realities of the market.

  • Steve on 2014-06-19 9:36:25 AM

    @ Keith Lancastle... not all appraisers follow the proper methodology... they hide behind the fact that an appraisal is a "statement of opinion". End of the day market value is set by what a seller is will to accept and a buyer is willing to pay. Appraisals are not a science in its current form but you should look at standardize some common parts such as starting with base value determined by the size (suare footage), type (detached, semi & 2 storey or bungalow etc) then use pre-determined adjustment factors to adjust for promixity to schools, shopping, transit, highways, golf courses, parks etc and pre-set adjustments for upgrades done to the house. Currently your appraisers seems to adjust up or down by numbers that seem arbitrary (I see consistently $10,000 or $15000 up or down). They rely on the comments from mls listing from previous sales to determine is the subject property is superior or inferior to those sales, how can they determine that without seeing those properties. A sold property that stated hardwood floor throughout doesn't mean that is is good condition, nor the quality of the hardwood used versus the subject property. I've had appraisals come back in lower by $20,000 - $30,000 on the same property we appraised a year earlier. Considering property values have only gone up... I would have to say that there is a great level of incompentance on the part of the appraiser. Also tohought it would be worth noting that I get about 40% of clients complaining about the appraiser before we even get the results (this if from a centralized system). Perhaps they need to have continuing education to keep them up to date on the realities of the market.

  • Steve on 2014-06-19 9:44:38 AM

    @Matt Cook - "If you want to know what happens when appraisers whore themselves to give you the value you want, look at the mortgage meltdown that happened below the border"

    You might want to check your fact... the mortgage issues had nothing to do with appraisal values, and eveything to do with investment banks re-positioning mortgage back securities with insurance on it to make it attractive without disclosing the quality of the mortgages within the security. It was the lending banks trying to feed the need of the investments banks for more mortgages to bundle that started lending greater than 100% of the purchase price coupled with the fact that in the US banks foreclose (take title) to the property, it was easy for the homeowners to walk away without any financial obligation from the property. This is not the case in Canada, banks can't foreclose , so any loss on the debts is still the responsibility of the homeowner. This would only happen if markets decline of the equity in the property is not sufficient to cover the cost of selling (ie real estate fees, property management fees, and penalties on the mortgage), none of which is related to the appraiser's role.

  • Deryl Fitzgerald; CRA on 2014-06-19 12:21:24 PM

    Most of the problem here is that the lenders and the realtors don't understand what the banks have requested from the appraiser to extract from the property for the purpose of meeting that specific lenders lending requirements. No second garage, No outbuildings, Sometimes no pools, five acres only for rural property etc., etc. So have the realtors address the lending institutions and have them bone up on what it is that lenders are asking appraisers to include and to ignore in the final value of the appraisal. I have seen property sell for substantially more dollars than I have appraised them for only because I had to abide by the LENDERS lending guidelines. They are the client! Not the buyer! Not the broker! Not the realtor! That's where my E&0 insurance is directed! In 46 years of being in the industry I have never seen an realtor sued for over pricing or over selling in the market. Can't say that about the appraiser.

  • phil williams on 2014-06-19 12:47:22 PM

    Thank you Keith for your writings on this. My favourite is the Mortgage Broker who called me upset that my value did not meet his needs. Then proceeded to tell me that he knows how to value a house, "just take the assessed value, multiply by 1.3 and that is the value of the house" Wow, to think I studied all those years to be a professional and that is all I really needed to know. Or the broker who asked the client to ask me to just change the date on a nine month old appraisal and bring the value up $70,000. Don't bother to go to the property and all will be well. Or the broker who wanted to know why I was $20,000 less then requested value, when I asked where the requested value came from she said and I quote "oh, the client was at your value but I added $20,000, they need furniture" There is a reason the lenders send an appraisal people.

  • Greg on 2014-06-19 2:35:02 PM

    When a house deal closes, realtor(s) makes 5% commission on sale price. Higher sale price, higher commission. Therefore higher mortgage equals more commission for brokers. But guess who everyone sues when Joe Blow couldn't make his mortgage payment? The appraiser who made $200.00 but carries 100% of the risk if they are wrong. Our job to insure that if Joe Blow fails to pay, the bank can recover their money in an open market transaction within a open market time frame. I would love to see brokers E&O insurance premiums. Oh wait, they don't need it cause they have no risk.

  • Cory on 2014-06-19 2:55:40 PM

    Can the people that post on here at least provide some fact behind their rant. Yes Brokers need E and O insurance , yes Brokers can be sued, yes Brokers get paid more on larger mortgages. A $5000 larger mortgage pays me $50 more, are you really suggesting that is why a Broker would push for a higher value. The reality is deals go sideways at the 12th hour due to appraisal valuations that fall within 1%,2%,3% of what is required. IN many instances you appraisers have referred to "crooked" dealings that Brokers suggest (change dates, increase value without viewing a home, etc.) It is difficult to think these types of Brokers still exist in the industry today, but I am sure they do. But to think that is the norm is not accurate and is insulting. And to think that your opinion of value is the sole reason why a deal can fall apart is also difficult to comprehend. If a home sells for $290 000 and the deal falls apart because you appraised it at $286 000 or $288 000 that is also wrong. There is no way to convince anyone that the home is not worth $2000, $4000 more in the eyes of the purchaser. Where is their protection? In the case of a 1.2 million dollar home, if you appraised it at 1.18, again there is no way to convince anyone that $20 000 (1.7% variance) is justifiable to determine exact value. Get off the thought that all requests for appraisal values are determined by the Brokers zest for an extra $50 commission.

  • Steve on 2014-06-19 3:03:21 PM

    Generally in a sale situation the appraiser will try to meet the sale price. We are there to confirm to the lender or other client, that this price is reasonable. It is not our intention to be a stumbling block. As said in earlier posts however, the lender may instruct that certain components or features not be included, or land size is restricted. These restrictions will impact the value.

    In a mortgage application often parties want a high value. Higher value will provide for a higher mortgage which lenders and owners often want. Estimated market value is based on sales of comparable properties which occur between a willing buyer and seller under normal market circumstances. Pressure to drive a value in particular direction depending on the intended use, should not be considered. Otherwise our credibility as unbiased interpreters of the market will suffer.

  • Cory on 2014-06-19 3:10:59 PM

    @Steve, thanks for your insight. I think you would be very surprised at how some appraisers take a very hard line approach to their position of value, leading to the stumbling block you reference. Of coarse we are aware that lender policy is a driving factor in what can and can't be used in valuation, that is part of the job. The part that causes significantly more issues on our end is the quest for "reasonable", which is exactly my point above. No way anyone can tell me that reasonably a home can't be worth 1, 2, 3% more. Pressure to drive a value by that little amount, in my eyes, is not pressure at all, but rather trying to come to an understanding of what reasonable is.

  • Steven on 2014-06-19 3:46:22 PM

    Brokers work on commission, appraisers do not. Of course the brokers want a "higher value" their bank account depends on it.

  • Gordon Cavanaugh on 2014-06-19 4:57:15 PM

    It's the refinancing and not the purchase where most of the difficulties happen between broker and appraiser. I find the broker is pushing the deal to meet the the amount of financing the client desires and not the value of the property. In otherwords, the property must be worth $300,000 because the client needs that amount to get their financing.

    For a purchase, the appraiser is fully aware of the amount of the offer. The only reason why the appraiser would be lower than the offer is that the offer to purchase is not supportable. That it's 1, 2 or 3 percent is of no importance. The only mistake the appraiser may have done is to have stretched their opinion to the extreme high end of the value range already which has mislead the broker to believe that it's only a couple of percent. The broker is left with two options, have the client put more skin into the game or get another appraisal. If a broker proceeds to coerce an appraiser to a higher value then that broker has crossed the line and should be reprimanded and fined by the brokers association. If this continues then the broker should be expelled. There must be accountability and responsibility at the mortgage origination source.

  • Nolan on 2014-06-19 5:26:11 PM

    My concern is some do not understand that we may spend 30 minutes in a property but can spend hours on sales, verifying information, justifying adjustments, etc. Yes too many appraisers, i believe, just slap a number. My mentor has really focused on justifying sales and adjustments. When i hear "it isnt coming in at a number" i hear "i want to do some mortgage fraud will you help?" The value is what it is. These are not scientific numbers, that is why it is called the Final Estimate Of Value. Most lenders allow for a 2-3% variance. We need to remind ourselves (appraisers) if we go in front of a judge and a tiger of a lawyer can we support our adjustments?

  • Jay on 2014-06-19 6:51:46 PM

    Does Anthony Ambrosio of CSI Mortgages even have an inkling of how appraisals / appraisers work? It appears not. Who decided to interview this guy? Seriously. Use listings? Well if that isn't a recipe for disaster, nothing is. Looking forward, tell the future? Sorry I
    I misplace my crystal ball? Wow! Stop whining! Appraisal theory is a time tested intricate process not to be questioned by the likes of a disgruntled broker who lost out on some money because an appraiser was actually doing his job! Get informed and do your job. Rant complete.

  • Gordon Cavanaugh on 2014-06-19 6:55:13 PM

    There has to be market evidence to support prices rising. Falling months of inventory, Days on Market and a rising Sales to New Listings Ratio. House prices do not rise in isolation from these factors. For a broker to say house prices are higher simply because one client has over paid disregards 250 years of economic theory. And that's why an appraisers opinion is a supportable opinion of value and not anecdotal evidence.

  • Steve on 2014-06-19 11:41:32 PM

    @ Jay "Appraisal theory is a time tested intricate process not to be questioned by the likes of a disgruntled broker who lost out on some money because an appraiser was actually doing his job! " Your arrogance amazed me... appraisal theory ... time tested intricate process... if that is so when why (1) do you need E&O insurance (2) why is an appraisal a "statement of opinion" and (3) why would a different appraiser provide a different value on the same property if the appraisal is appealed? Your believe that appraisals are some sort of science is misguide and only provides evidence that appraisers believe that they are always right.

  • Steve on 2014-06-19 11:48:45 PM

    @Steven "Brokers work on commission, appraisers do not. Of course the brokers want a "higher value" their bank account depends on it." If you want to make more money then be a broker... no one force you to be an appraiser. You spend 10 minutes in the property, half hour pulling up data and half hour preparing the report. Brokers spend 5-6 hours on one deal and to get results by deadlines to meet for condition of financing and closing resulting in us working way beyond normal hours to get deals done... when was the last time an appraiser did that, much less get a report in one time.

  • Nolan on 2014-06-20 12:12:17 AM

    Steve: I guess you dont use a good appraiser. I will bend over backwards to get a file for a client. i make sure i know their deadlines. To say we spend a max of 1-2 hours on a file is false. There are some (very few these days) where 2 hours its out the door. I have had some where it took a week. Why a week? The inspection may have taken an hour, i may have had to go back to double check items. Then drive by comps. Call realtors to verify information or to obtain more information. Maybe there is limited sales and a wider search has to be made. Or there are sales but there is one adjustment that doesnt make sense so you need to figure that adjustment. I had one where the front faced a freeway, i had no sales similar so i had to search and go through sales seeing which ones had similar locations and then pare them for an adjustment. That took time. I had one last weekend, broker called at noon on a friday, "client JUST got back to me to give the go ahead. conditions are monday, lender wants to review before noon. Can you do it?" Yup worked ANOTHER saturday, talked to the reviewer and bought him a beer to get it done over the weekend, bang 9am monday morning on the lenders desk. I work long hours some months. we dont have just 1 or 2 files. Sometimes i have 4,5,6 inspections in a day then i have to write the things. They cant be slapped together. I really think we appraisers need to let the plublic know how much work we actually put in. Think, i may work every day a month and get a check that is decent but a broker can do 1 or 2 deals and be a the same what i did. A realtor can do one deal and make what i make in 6 months.

  • Jay on 2014-06-20 8:12:08 PM

    @ Steve: You seriously do not know what you are talking about when it comes to the steps & time put in to do an proper appraisal. If an appraisal is done correctly then the value should be very close from one appraiser to the next. I can't speak for every appraiser on the planet, but as far as my colleagues and myself go, there is a methodology to that is practiced that has worked and proven to be accurate many many thousands of times. Are we human, yes. Are mistakes made on rare occasions, yes. Are there rotten apples in every basket, of course. And THAT is why there is E&O insurance, & why some appraisals vary more so. Solving an appraisal problem is an art as well as a science. People are fickle and diverse, how would you quantify that? It sounds to me that what with your all knowing tone, that perhaps you have a better method. Please share.

  • appraiser on 2014-06-22 11:35:57 AM

    maybe the broker needs to be more proactive in determining the appraisers experience in valuing the property prior to accepting them to complete the assignment. Although the lender, generally through an AMC orders the report, the broker should has some say in the quality of the appraiser being sent.

  • Omer Quenneville on 2014-07-01 11:56:37 AM

    A big difference between market value, listing price and probable selling price. Market value in my opinion is the value today. Not yesterday and not tomorrow., listing price is the strategy price used by an agent given their strategy, which such strategy can change from property to property. Probable selling price is the price one gets if the moon and stars are properly aliened and nothing more than a qualified guess. If I am concerned about the value of a property, I will ask for the appraisal to be done before the condition on financing is waived.

  • Omer Quenneville on 2014-07-01 11:57:24 AM

    A big difference between market value, listing price and probable selling price. Market value in my opinion is the value today. Not yesterday and not tomorrow., listing price is the strategy price used by an agent given their strategy, which such strategy can change from property to property. Probable selling price is the price one gets if the moon and stars are properly aliened and nothing more than a qualified guess. If I am concerned about the value of a property, I will ask for the appraisal to be done before the condition on financing is waived.

  • Gordon Cavanaugh on 2014-07-07 9:10:00 PM

    Mortgage appraising is not perceived as adding value to a deal. The broker, lender, agents and purchaser want a loan - they don't want an appraisal. That's why mortgage appraisals will always be cheap and quick. And you will never be adequately compensated for your work as a mortgage appraiser. Never.

    Unfortunately, mortgage appraisals are what most lenders, brokers and sales people experience. And that's why some of these groups have little respect for what an appraiser does.

    And that's something that the AIC has to change. In this world of instant communications, the unregulated AMCs and AVMs are taking the place of a human appraiser.

    Appraisers can compete with the AVM, but the AIC has to change its reporting standards to meet the needs of today. A 2 or 3 paragraph report, signed and dated stating the value is all that should be provided for a residential mortgage. The time has to be spent better on the analysis and not writing a report that can be data mined and open to criticism for not using the "right" comparable sales.

    Since lender's are willing to lend on AVM's and provincial assessments without anyone seeing the property why should an appraiser have to complete a full form report?

    Since, the AIC doesn't regulate the AMC's or AVM developers these groups can do what ever they please. Their analysis doesn't even have to follow accepted appraisal standards in developing an estimate of value.

  • M. Robertson on 2014-07-08 3:25:12 PM

    Is this story for real? Do brokers actually believe that purchase price is a true indication of value? Really?

    This just goes to show how little understanding of the market too many broker have. People that are supposed to be advising consumers.

    Appraisals traditionally have a much better track record of assessing value than realtors and other "valuation" services. Just because the market is "hot" right now does not mean that the value of a home will continue to skyrocket, and just because there are multiple bids on a home does not mean it is worth the final selling price.

    Appraisers value based on market trends, not the pent up desire of an individual to go crazy and buy a house because they simply "MUST HAVE IT"

  • A Purchaser on 2014-09-11 9:21:53 PM

    A question for the many pros here: If my mortgage broker asked me to pay for an appraisal for mortgage approval purposes, am I entitled to get a copy of it?

    Thanks in advance!

  • Omer Quenneville on 2014-09-11 10:00:13 PM

    The appraisal is only for the person named on the report and is usually the same name as the person that paid for it and is only valid for the day that it is dated and has no real value beyond that. Banks have now been passing this cost onto the borrower and without providing a copy.

  • Gordon Cavanaugh on 2014-09-11 10:35:50 PM

    You should ask the lender for a copy of the report. It's their property to do with whatever they want.

    You are the lenders' client and the lender is the appraisers' client. While you pay the lender for the cost of the report, you never become the appraiser's client. That's why an appraiser can not give you a copy without obtaining the lender's (the appraiser's client) permission.

  • Gordon Cavanaugh on 2014-09-11 10:36:40 PM

    You should ask the lender for a copy of the report. It's their property to do with whatever they want.

    You are the lenders' client and the lender is the appraisers' client. While you pay the lender for the cost of the report, you never become the appraiser's client. That's why an appraiser can not give you a copy without obtaining the lender's (the appraiser's client) permission.

  • Gordon Cavanaugh on 2014-09-11 10:42:37 PM

    How long an appraisal is valid is more to do with the lenders internal policy. Some lenders say three months, some say six months. It can depend on what's going on in the marketplace. If a hurricane sweeps through your town on Tuesday, chances are the appraisal done on Monday is no longer valid.

  • Gordon Cavanaugh on 2014-09-11 10:53:49 PM

    I understand the frustration of brokers dealing with appraisals and I think our Appraisal Institute should work with the brokers to solve this tension. The best solution is to get rid of the form report for residential mortgage lending. All you need is letter with the appraisers findings, signed, dated and with their designation. The report is backed by the education and experience of the appraiser and insured for errors and omissions. If a broker needs more detail then they would order a higher level of service and get a more in depth report. That would make for a faster turn around in the industry.

  • Nolan on 2014-09-12 12:42:47 PM

    Read this article. it will free up any questions. We are only allowed to send to the one who ordered or the end use, no matter who paid. I make it a practice if the borrower wants a copy, i have no problem. I inform the lender/broker and sometimes then send the borrower a copy with a watermark on it saying "CLIENT COPY". I also let them know if they have questions to please contact the broker/lender. Sometimes they have questions that are small and can be answered by their broker. If we gave copies to every borrower we'd spend all day fielding questions.

    http://staging.aicanada.ca/images/content/file/who_is_my_client(v49bk1p36).pdf

  • Gordon Cavanaugh on 2014-09-12 12:56:02 PM

    Personally, I won't send the applicant the report. I'll have the end user do that. It gives me one more degree of separation. If the lender insists on me sending the report, then I will include a front page identifying the applicant as the third party and any use other that what is stated in the report is unauthorized use. I really don't want the applicant using the report for a mortgage and their divorce.

    I'm not in the business of sending free copies to anyone asking for one.

  • Omer Quenneville on 2014-09-12 1:30:16 PM

    Good point Nolan, after all, profit margins are slim with lenders and fielding questions would cut into those margins. And maybe borrowers might learn a thing or two if they ask question and that would just make matters worse. My opinion, he who pays has a right to see. But that is not the way it is.

  • Gordon Cavanaugh on 2014-09-12 3:55:52 PM

    Omer, you have a right to your opinion.

    Unfortunately numerous court cases have shown things differently. If you discuss the report or send the report to a third party without the permission of your client you've violated client confidentiality. It's not a matter of opinion - it's a matter of the law. It's a costly error in judgement to make.

    The solution is simple - get the lender to send them the report.

  • Omer Quenneville on 2014-09-12 6:23:31 PM

    If you read my first comment you would have seen that basically that is what I said. Only thing is now the payment has been shifted to the borrower. It is the same thing with status certificates. The only person that can rely on the information contained within is the person named on it.

  • A Purchaser on 2014-09-13 12:23:24 PM

    If I paid $800 (tax incl) to the appraiser directly to get an appraisal, and I am refused a copy, that is simply not right. As a consumer, why should I care who's the client and who should send it to me? As a group, you should make it standard practice to provide if not the full report, an "applicant-sanitized" copy, if the applicant is made to pay. I paid for the appraisal. I should get a copy! The relevant regulatory body/bodies should really pay attention to this growing unfair practice.

  • Gordon Cavanaugh on 2014-09-13 1:08:03 PM

    If you have been refused a copy, That means the lender has refused permission to release the copy, there is something more serious going on.

    I never get your check. You paid the bank or the Appraisal Management Company and they write me their own check back to me. I don't know what the lender or AMC is charging you for the appraisal. The AMC could be charging you $325 but they only write a check to the appraiser for $125.

    If you want a copy of the appraisal then contact the appraiser directly to appraise the property, then you are the client. And you can send it on to whatever lender you want. Then the lender has to get a letter of release - not you. All you have to pay a buck for an E-Transfer rather than a hundred or two hundred dollar management fee.

  • Matt Cook, SRA on 2014-09-13 1:25:33 PM

    Your CUSPAP reads very similar to ours in the USA regarding the appraiser-client relationship. To @A Purchaser (and others), the analogy I usually give is that in a divorce case (or other civil suit), the judge may order you to pay your wife's attorney fees. That does not mean that the attorney now works for you, nor that he can give you any information that is confidential between him and your wife.

    We have long had legislation governing real estate financing that required lenders to provide a copy of the appraisal to the borrower, but it could be well after the loan closed (or did not close). We now have legislation requiring the lender provide a copy of the appraisal to the borrower at least 3 days before closing. Lenders I have spoken to say that they routinely send a notice along with the appraisal explaining the appraiser-client relationship and directing the borrower to address any questions to the lender and not the appraiser.

Broker news forum is the place for positive industry interaction and welcomes your professional and informed opinion.

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