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In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price w

In the late 90's I worked for an online mortgage broker, and 9 times out of 10 when we ordered an appraisal, the appraiser would ask us what the selling price was and return an identical figure for their estimate.

jaxytee 10y ago
I purchased a home couple years ago. The appraiser I used did exactly this.
leereeves 10y ago
Amazing that people still pay for that.
- URSpider94 10y ago
  "People" don't. It's a required part of the due diligence to get a mortgage. No appraisal, no loan. For the most part, the banks and brokers re-sell those loans immediately, so they don't stay on their books. All they need to protect them from lawsuits later is proof that they followed the process to the letter -- which involves getting a written appraisal. No mortgage broker or Realtor ever got rich by picking a fight with the appraiser to lower the appraised value ... there is literally nobody present at the table who has an incentive to push the value down.
  - DennisP 10y ago
    Aside from the buyer, who can pay for his own appraisal.
    - JamesBarney 10y ago
      Usually a buyer has already agreed to buy a house at a certain price. So if the appraisal comes back low, the seller doesn't lower the price. Instead the buyer just doesn't get a loan so they don't get to purchase the house they had their heart set on.
      - DennisP 10y ago
        A friend of mine saved $15K on a house because the appraisal came in low. If the bank won't write a loan for the agreed price, the original contract is void, since it's contingent on loan approval. If the seller's heart is set on moving, he might well lower the price.
        URSpider94 10y ago
        Really depends. In the Bay Area these days, sellers will usually only take offers with zero contingencies (because they can). Even if you do get a financing contingency in your offer and the deal falls through because of a low appraisal, there's almost always a back-up offer waiting in the wings that can cover the low appraisal with an additional downpayment (the bank doesn't really care about if the house appraises for the selling price, they just want to make sure that their Loan-to-value (LTV) ratio is OK.
        smsm42 10y ago
        That's really playing with fire. Good RE agent would tell their client so. Even if you're rich and buying in cash, at least inspection contingency is a must, but otherwise unless you have tons of money and don't really care for nasty surprises inspection could uncover - zero contingency is the riskiest bet one can make in one's life. My opinion, if you're on the market where sellers won't accept a contingent offer, it's better to get out of that market. I've bought house in BA recently, and there were plenty of sellers willing to take contingent offers (backed by some solid bank paperwork, maybe, but not just requiring to commit blindly). Of course, BA has many different places and in some market could be so hot sellers can get away with anything. But it's usually not good to get in such place as a buyer.
        deleted 10y ago
        [deleted]
        URSpider94 10y ago
        Usually, the seller provides an inspection report performed in advance. It's a big leap (I did this a year ago ...) and my Realtor is as old-school as they come, but if you want a single-family property in a hot area, it seems to be table stakes.
  - leereeves 10y ago
    I understand that it's required, and that organizations often follow processes long after they're revealed to be foolish. But it's been a decade now since the housing bubble revealed that appraisals are meaningless. Why has no one eliminated them?
    - mcherm 10y ago
      They are required by law or by long-standing policy in a government-run body (which is practically the same thing). Laws DO change to keep up with the times, but they do so rather slowly. In 50 to 100 years, if there is continuous clear evidence that home assessments are highly unreliable and not particularly profitable to anyone, then you should expect them to be eliminated.
    - dragonwriter 10y ago
      Because they reasons they were required were still valid, so instead efforts were directed at the factors that made them ineffective at addressing the need motivating them. Whether those efforts were successful or not is another discussion.
  - gozur88 10y ago
    This. As long as the appraisal is close enough for plausible deniability, it serves the purpose. The originator just needs a number that's close enough for reality that whoever they sell the loan to (probably the government) can't come back and accuse them of fraud.
- EpicEng 10y ago
  Apparently you've never actually taken out a mortgage.
jandrese 10y ago
When we were selling our home we didn't have a good idea of what it was worth so we called an appraiser and the first think he asked was "what are you selling it for?" Then we found out that even if we paid him a couple hundred bucks he wouldn't even come out and inspect the house before "appraising" it. We ended up just guessing high and lowering our price a couple of times until someone bit.
bronson 10y ago
That actually makes some sense. That number is supposed to indicate the maximum someone would pay for the property. If you're in contract, especially after competitive bidding, then we know that number: it's in your contract! The appraiser just needs to make sure that the number isn't fraudulent or crazy.

jaxytee 10y ago

I purchased a home couple years ago. The appraiser I used did exactly this.

leereeves 10y ago

Amazing that people still pay for that.

URSpider94 10y ago
"People" don't. It's a required part of the due diligence to get a mortgage. No appraisal, no loan. For the most part, the banks and brokers re-sell those loans immediately, so they don't stay on their books. All they need to protect them from lawsuits later is proof that they followed the process to the letter -- which involves getting a written appraisal. No mortgage broker or Realtor ever got rich by picking a fight with the appraiser to lower the appraised value ... there is literally nobody present at the table who has an incentive to push the value down.
- DennisP 10y ago
  Aside from the buyer, who can pay for his own appraisal.
  - JamesBarney 10y ago
    Usually a buyer has already agreed to buy a house at a certain price. So if the appraisal comes back low, the seller doesn't lower the price. Instead the buyer just doesn't get a loan so they don't get to purchase the house they had their heart set on.
    - DennisP 10y ago
      A friend of mine saved $15K on a house because the appraisal came in low. If the bank won't write a loan for the agreed price, the original contract is void, since it's contingent on loan approval. If the seller's heart is set on moving, he might well lower the price.
      - URSpider94 10y ago
        Really depends. In the Bay Area these days, sellers will usually only take offers with zero contingencies (because they can). Even if you do get a financing contingency in your offer and the deal falls through because of a low appraisal, there's almost always a back-up offer waiting in the wings that can cover the low appraisal with an additional downpayment (the bank doesn't really care about if the house appraises for the selling price, they just want to make sure that their Loan-to-value (LTV) ratio is OK.
        smsm42 10y ago
        That's really playing with fire. Good RE agent would tell their client so. Even if you're rich and buying in cash, at least inspection contingency is a must, but otherwise unless you have tons of money and don't really care for nasty surprises inspection could uncover - zero contingency is the riskiest bet one can make in one's life. My opinion, if you're on the market where sellers won't accept a contingent offer, it's better to get out of that market. I've bought house in BA recently, and there were plenty of sellers willing to take contingent offers (backed by some solid bank paperwork, maybe, but not just requiring to commit blindly). Of course, BA has many different places and in some market could be so hot sellers can get away with anything. But it's usually not good to get in such place as a buyer.
        deleted 10y ago
        [deleted]
        URSpider94 10y ago
        Usually, the seller provides an inspection report performed in advance. It's a big leap (I did this a year ago ...) and my Realtor is as old-school as they come, but if you want a single-family property in a hot area, it seems to be table stakes.
- leereeves 10y ago
  I understand that it's required, and that organizations often follow processes long after they're revealed to be foolish. But it's been a decade now since the housing bubble revealed that appraisals are meaningless. Why has no one eliminated them?
  - mcherm 10y ago
    They are required by law or by long-standing policy in a government-run body (which is practically the same thing). Laws DO change to keep up with the times, but they do so rather slowly. In 50 to 100 years, if there is continuous clear evidence that home assessments are highly unreliable and not particularly profitable to anyone, then you should expect them to be eliminated.
  - dragonwriter 10y ago
    Because they reasons they were required were still valid, so instead efforts were directed at the factors that made them ineffective at addressing the need motivating them. Whether those efforts were successful or not is another discussion.
- gozur88 10y ago
  This. As long as the appraisal is close enough for plausible deniability, it serves the purpose. The originator just needs a number that's close enough for reality that whoever they sell the loan to (probably the government) can't come back and accuse them of fraud.
EpicEng 10y ago
Apparently you've never actually taken out a mortgage.

jandrese 10y ago

When we were selling our home we didn't have a good idea of what it was worth so we called an appraiser and the first think he asked was "what are you selling it for?" Then we found out that even if we paid him a couple hundred bucks he wouldn't even come out and inspect the house before "appraising" it. We ended up just guessing high and lowering our price a couple of times until someone bit.

bronson 10y ago

That actually makes some sense. That number is supposed to indicate the maximum someone would pay for the property. If you're in contract, especially after competitive bidding, then we know that number: it's in your contract! The appraiser just needs to make sure that the number isn't fraudulent or crazy.