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I worked in the mortgage industry for a while and appraisals are 100% made up metrics. We consistently utilized specific appraisers who would "always" make sure

I worked in the mortgage industry for a while and appraisals are 100% made up metrics. We consistently utilized specific appraisers who would "always" make sure the purchased house came in at the maximum value of our loan amount (80% of the purchase price). The taxes said it wasn't even worth the amount these people bought it for. Half the time lenders and us would joke saying we could be an appraiser. It's so easy, just look at your database of "comparable" properties and just say "heres a ballpark figure." We're headed for another 2008 like a goddamn train with no brakes. Whatever the federal government did to curb that, they didn't police the mortgage industry enough. Appraisers, realtors, and lenders are all complicit with only the banks getting oversight. Lenders can go through banks, but they don't have to be immediately affiliated with them. So they can literally be ignoring rights "guaranteed" by the government since 2008. On top of this, they charge single digit percentage fees for the loans. It is such a giant joke that honestly the government shouldn't bail out at all. Owning a house should be a legitimate risk. Not this farcical system of laundering money.

freedomben 5y ago
I worked in real estate and left because the whole industry is built on adverse incentives, rent-seeking, and sticking as many hands in the homeowners equity cookie jar as possible. I found it grotesque.
- jimmygrapes 5y ago
  It's also pretty exploitative in the way "becoming a realtor" is marketed to women in particular as a way to "make money fast"
  - WalterBright 5y ago
    The women realtors I know make lots of money at it.
    - lostcolony 5y ago
      Survivorship bias. Likely also non-representative sample, but that's, of course, debatable.
      - WalterBright 5y ago
        Being a realtor is definitely a way to leapfrog ahead in income far quicker than attempting to climb the corporate ladder. Of course, the ones that do have to be willing to put out the effort to learn salesmanship. Most people are too lazy to, and drop out. Yes, it is survivorship bias, but survival is up to the person, it isn't automatic or random.
    - MerelyMortal 5y ago
      there are more real estate agents than there are houses for sale [0]. The average house price is $374,900 [1]. The most common real estate agent commission is 6%. 6% of $374,900 is $22,494. That is how much income a real estate agent can make on average if they buy and sell one home. Of course they have expenses, so it's not all profit. Real estate agents have to network and advertise to get the higher value houses, and those are going to skew the average, so most real estate agents make less income than that on average. [0] https://www.npr.org/2021/04/21/989588150/too-many-real-estate-agents https://www.npr.org/2021/04/21/989588150/too-many-real-estat... [1] https://www.fool.com/the-ascent/research/average-house-price-state/ https://www.fool.com/the-ascent/research/average-house-price...
      - WalterBright 5y ago
        > there are more real estate agents than there are houses for sale I'm not surprised. I'm sure there is a long tail of realtors with licenses but who aren't very active. I know who the get-up-and-go agents are in my area. There's no way to not know, as they make sure you know :-) Becoming a realtor is not a good choice for someone lacking get-up-and-go, or someone who needs to be managed. I talked to one a year ago, wondering how on earth he thought he could get $3m for the house he was showing. He said the other realtors all thought he was crazy. He got it, and the 6% commission. Ka-ching!
ethbr0 5y ago
2008 was caused by leverage on top of poor quality mortgages. Afaik, that's substantially reined in now. A lot of people would still be underwater on their mortgages, but a smaller number would default (if central bank rates spiked, it would only impact adjustable rates), and the the spillover onto banks would be substantially less. Which is how it should be: housing corrections should suck for homeowners, but not topple well-capitalized banks.
- hellbannedguy 5y ago
  It's gone too far though. It's to hard to get a loan. Of course the wealthy, including foreign aliens, have no problem collecting homes. The only thing Bush ever said I liked was "Everone should have a shot at buying a house.", or something like that.
- MeinBlutIstBlau 5y ago
  > 2008 was caused by leverage on top of poor quality mortgages. Afaik, that's substantially reined in now. So instead of having mortgages over 100% loan-to-value, the appraised value is just inflated beyond the actual value so that you keep the loan-to-value ration below 100%. It's the exact same concept, they just shift the numbers around so the government is happy.
root_axis 5y ago
This doesn't make sense to me. If the appraisal is just a formality then why wouldn't the bank just waive the appraisal entirely? This would save the cost of the appraisal and delight the buyer that they don't have to wiggle around funds or negotiate with the seller to meet an appraisal gap.
- toomuchtodo 5y ago
  Sometimes they can depending on automated appraisals based on comparable sales history (which is public record). Depends on the underwriting guideline of the loan product (which is being packaged into a mortgage backed security). It’s common with conventional loan refinances when there’s already substantial equity in the property, but FHA loans mandate a human performed appraisal to protect the buyer (FHA appraisals are more stringent than conventional appraisals as well) as well as the US government (who is insuring the loan).
  - _hyn3 5y ago
    > public record This is certainly not the case in all states. In Texas, the actual sale price is considered the private details of a private transaction (unless, of course, a public entity is party to the transaction). Companies like Zillow and Black Knight make a big part of their business by making educated guesses. For example, here's an article explaining that "Texas REALTORS® opposes all legislative efforts to require the disclosure of sales-price information": https://www.texasrealestate.com/members/government-affairs/legislative-affairs/sales-price-disclosure/ https://www.texasrealestate.com/members/government-affairs/l... Still, there's a substantial amount of data out there (such as the last publicly offered price and how long it took to close, so you can get a pretty good idea for how low the seller had to drop the price to close the deal). In Texas, appraisals (both tax and financing) are based, in part, on the estimates that companies like Zillow, Black Knight, Core Data, etc all provide. Since it is germaine to the article, it's interesting to note that none of these automated appraisal companies record the race or skin color of the current home owners.
- dboreham 5y ago
  It's not a formality. Failing to appraise for purchase price is possible and happens. The formality aspect is the apprised value number itself. Really it only represents 'greater than or equal to whatever the bank needs'. There's no reason for an appraiser to come up with a higher value but they may find a lower value. This is why appraisals for refinancing can lower- the financed amount is usually less than market value.
passivate 5y ago
I recently bought a home and I was told lenders can't pick the appraisers, they're assigned at random. This is due to regulation changes after 2008. Is that not the case?
- MeinBlutIstBlau 5y ago
  It is, but its not at all difficult for shady lenders to game it. So if everyone is doing it, eventually it becomes the norm.
toast0 5y ago
> The taxes said it wasn't even worth the amount these people bought it for. In some areas, tax assessment values are supposed to be the market value and in some areas the tax assessment has no clear connection to market value. Looking at tax assessments to say someone paid too much doesn't make much sense. The market is a market, and that a seller and a buyer got together on a price is prima facia evidence of the market price. Assuming it was a arms length transaction. Especially if there were several similar bids, that's strong evidence of the market value. For a purchase mortgage, an apprasial is kind of confirming the price is somewhat reasonable, and should only come in low in case the buyer, the buyer's agent, and the inspector (if any) missed something big. For a refinance or similar, there's no direct evidence of the market value, so an apprasial needs to more closely gauge condition of the house in question as well as that of comps and it's more subjective.

freedomben 5y ago

I worked in real estate and left because the whole industry is built on adverse incentives, rent-seeking, and sticking as many hands in the homeowners equity cookie jar as possible. I found it grotesque.

jimmygrapes 5y ago
It's also pretty exploitative in the way "becoming a realtor" is marketed to women in particular as a way to "make money fast"
- WalterBright 5y ago
  The women realtors I know make lots of money at it.
  - lostcolony 5y ago
    Survivorship bias. Likely also non-representative sample, but that's, of course, debatable.
    - WalterBright 5y ago
      Being a realtor is definitely a way to leapfrog ahead in income far quicker than attempting to climb the corporate ladder. Of course, the ones that do have to be willing to put out the effort to learn salesmanship. Most people are too lazy to, and drop out. Yes, it is survivorship bias, but survival is up to the person, it isn't automatic or random.
  - MerelyMortal 5y ago
    there are more real estate agents than there are houses for sale [0]. The average house price is $374,900 [1]. The most common real estate agent commission is 6%. 6% of $374,900 is $22,494. That is how much income a real estate agent can make on average if they buy and sell one home. Of course they have expenses, so it's not all profit. Real estate agents have to network and advertise to get the higher value houses, and those are going to skew the average, so most real estate agents make less income than that on average. [0] https://www.npr.org/2021/04/21/989588150/too-many-real-estate-agents https://www.npr.org/2021/04/21/989588150/too-many-real-estat... [1] https://www.fool.com/the-ascent/research/average-house-price-state/ https://www.fool.com/the-ascent/research/average-house-price...
    - WalterBright 5y ago
      > there are more real estate agents than there are houses for sale I'm not surprised. I'm sure there is a long tail of realtors with licenses but who aren't very active. I know who the get-up-and-go agents are in my area. There's no way to not know, as they make sure you know :-) Becoming a realtor is not a good choice for someone lacking get-up-and-go, or someone who needs to be managed. I talked to one a year ago, wondering how on earth he thought he could get $3m for the house he was showing. He said the other realtors all thought he was crazy. He got it, and the 6% commission. Ka-ching!

ethbr0 5y ago

2008 was caused by leverage on top of poor quality mortgages. Afaik, that's substantially reined in now. A lot of people would still be underwater on their mortgages, but a smaller number would default (if central bank rates spiked, it would only impact adjustable rates), and the the spillover onto banks would be substantially less. Which is how it should be: housing corrections should suck for homeowners, but not topple well-capitalized banks.

hellbannedguy 5y ago
It's gone too far though. It's to hard to get a loan. Of course the wealthy, including foreign aliens, have no problem collecting homes. The only thing Bush ever said I liked was "Everone should have a shot at buying a house.", or something like that.
MeinBlutIstBlau 5y ago
> 2008 was caused by leverage on top of poor quality mortgages. Afaik, that's substantially reined in now. So instead of having mortgages over 100% loan-to-value, the appraised value is just inflated beyond the actual value so that you keep the loan-to-value ration below 100%. It's the exact same concept, they just shift the numbers around so the government is happy.

root_axis 5y ago

This doesn't make sense to me. If the appraisal is just a formality then why wouldn't the bank just waive the appraisal entirely? This would save the cost of the appraisal and delight the buyer that they don't have to wiggle around funds or negotiate with the seller to meet an appraisal gap.

toomuchtodo 5y ago
Sometimes they can depending on automated appraisals based on comparable sales history (which is public record). Depends on the underwriting guideline of the loan product (which is being packaged into a mortgage backed security). It’s common with conventional loan refinances when there’s already substantial equity in the property, but FHA loans mandate a human performed appraisal to protect the buyer (FHA appraisals are more stringent than conventional appraisals as well) as well as the US government (who is insuring the loan).
- _hyn3 5y ago
  > public record This is certainly not the case in all states. In Texas, the actual sale price is considered the private details of a private transaction (unless, of course, a public entity is party to the transaction). Companies like Zillow and Black Knight make a big part of their business by making educated guesses. For example, here's an article explaining that "Texas REALTORS® opposes all legislative efforts to require the disclosure of sales-price information": https://www.texasrealestate.com/members/government-affairs/legislative-affairs/sales-price-disclosure/ https://www.texasrealestate.com/members/government-affairs/l... Still, there's a substantial amount of data out there (such as the last publicly offered price and how long it took to close, so you can get a pretty good idea for how low the seller had to drop the price to close the deal). In Texas, appraisals (both tax and financing) are based, in part, on the estimates that companies like Zillow, Black Knight, Core Data, etc all provide. Since it is germaine to the article, it's interesting to note that none of these automated appraisal companies record the race or skin color of the current home owners.
dboreham 5y ago
It's not a formality. Failing to appraise for purchase price is possible and happens. The formality aspect is the apprised value number itself. Really it only represents 'greater than or equal to whatever the bank needs'. There's no reason for an appraiser to come up with a higher value but they may find a lower value. This is why appraisals for refinancing can lower- the financed amount is usually less than market value.

passivate 5y ago

I recently bought a home and I was told lenders can't pick the appraisers, they're assigned at random. This is due to regulation changes after 2008. Is that not the case?

MeinBlutIstBlau 5y ago
It is, but its not at all difficult for shady lenders to game it. So if everyone is doing it, eventually it becomes the norm.

toast0 5y ago

> The taxes said it wasn't even worth the amount these people bought it for. In some areas, tax assessment values are supposed to be the market value and in some areas the tax assessment has no clear connection to market value. Looking at tax assessments to say someone paid too much doesn't make much sense. The market is a market, and that a seller and a buyer got together on a price is prima facia evidence of the market price. Assuming it was a arms length transaction. Especially if there were several similar bids, that's strong evidence of the market value. For a purchase mortgage, an apprasial is kind of confirming the price is somewhat reasonable, and should only come in low in case the buyer, the buyer's agent, and the inspector (if any) missed something big. For a refinance or similar, there's no direct evidence of the market value, so an apprasial needs to more closely gauge condition of the house in question as well as that of comps and it's more subjective.