Are Realtors bypassing appraisal independence requirements by coaching the buyer & seller to require a "local appraiser" in the P/A (same town as subject)?
Here’s what AIMSdashboard President Chris Williams had to say.
The premise that a realtor or "non-collateralizing" party influences the selection of an appraiser seems out of whack with the current trends and the cultural norm of the day. It isn’t inconsistent with the cultural views of 18 months ago; but even then the view was a misinterpretation of the function served by an appraisal (and a misinterpretation of the client relationship).
The appraisal is for the lending institution (an assigns).
It is like a lawsuit, anyone can sue anyone else. The question is if they can win. Similarly, anyone can contract anything agreed upon between two parties; but in the case of a mortgage, that doesn’t mean it will influence the lender. In fact, it shouldn’t.
But to use another “parable”, just because you’re paranoid, doesn’t mean they’re not after you. The efforts of the cited realtors should serve as a red herring, calling attention to a real problem that seems more persistent that I would have ever anticipated. It is an easy problem to solve, and the realtors are on to the right idea … they just can’t really influence any collateral valuation processes in a sales contract.
The good news is that the notion is redundant -- if the current appraisal standards are enforced. So the focus should probably be on enforcing the existing [enforceable] requirement for a competent appraiser (geographic competency), and one with access to appropriate local market data.
Generally speaking, we all know some of the indicators associated with this competency. The key is to act on the indicators; monitor the outcomes; and adjust as refinements are needed.
Unfortunately, the anecdotal cases demonstrate underlying motives shaping appraiser selection. These motives are other than those leading to competent appraiser assignment.
State regulations are working to address this issue. Lenders can do the same…and many of them are doing so. There is a significant number of lenders who manage their own appraisal operations, or they work very closely with good AMCs, to ensure that competent appraisers are performing the work.
The spirit of the Realtor efforts is in the right direction. Yet, from a Realtor perspective, it simply seems to create another “out” for a borrower or seller. The Realtor’s e
