In the post last week about real estate crowdfunding, reader Jiji said we’re close to bubble territory, and I suggested this:
It will take a few ingredients to come together:
1. Alternative financing.
2. Desperate buyers who were previously shut out (self-employed, foreclosed, BK, etc.)
3. Appraisal shenanigans.
Crowdfunding could be the source of alternative financing, and we know plenty of folks have been forced to the sidelines in recent years by big money and insider trading.
This article talked about the pressure on appraisers:
http://www.housingwire.com/blogs/1-rewired/post/33410-did-little-known-arizona-law-start-the-appraiser-death-clock
One of their readers, an appraiser, offered this expanation:
One need only to go back to the beginning of the “appraiser death clock”. It all started with Andrew Cuomo and his suit against the GSE’s that resulted in the HVCC and was carried forward by Dodd-Frank (the one’s responsible for the “bubble”) that invented the AMC’s.
Many of the AMC’s are wholly owned subsidiaries of the big banks who seized the opportunity to turn the appraisal process into a profit center by paying “cram down” fees to appraisers who can’t make a living on the current fee structure.
Take for example Bank of America who charges the customer $550 for the appraisal and then assigns it to Landsafe AMC (their subsidiary) who pays the appraiser $305 for the appraisal and keeps the rest to cover operations and a big chunk towards profit. Or JP Morgan Chase who charges the customer $460 for the appraisal and then assigns it to Clear Capital AMC who pays the appraiser $250.
Because the appraiser has to do two appraisals just to keep up with their prior income status, they started “cutting corners” which produced poor quality appraisals, thus Fannie steps in and instigates Collateral Underwriter, a program that uses the appraisers own data against them to spot poor quality appraisals and “weed out” the poor quality appraisers.
This will create a shortage of appraisers which will either cause an increase in the appraisal fee or legislation to do away with the appraisal process altogether. After all, automated valuation models and “Google Earth” can do the same job as the appraiser. Appraisers we placed in the process to act as an independent third party to “PROTECT THE PUBLIC TRUST”.
Why are the ranks of the appraiser shrinking? Just ask yourself? Would you obtain a 4 year college degree, undergo over 350 hours of specialized appraisal courses and be directly supervised by a “certified appraiser” for 2,000 hours work experience, and subject yourself to the most constraining set of professional standards, just to make $25 to $40 per hour.
As an appraiser with 53 years of experience of real estate valuation, in my opinion, the answer is a resounding NO.
Let’s place the blame where is squarely belongs with the “big banks” who we bailed out and to Mssr’s Cuomo, Dodd and Frank, oh and let’s not forget Mr. Clinton under who’s administration this all started.
There are other good comments in the article too. Will appraisers get squeezed out of the equation? Will they go to work on realtors next?
Well I am not sure I meant to say we are close to a “Big” bubble.
Maybe a bubble forming but I don’t think you can get the kind of crash like we saw in 2007-9 without a large number of defaults caused by a large numbers of absolutely crazy loans (like the liar NINJA loans of 2004-6 era).
We will see I guess.
Honestly I think we can go on a while yet, maybe several years.
Wake me when 2/3rd’s of transactions are ninja borrowers double clutching piggy back loans and walking out of escrow with a check.
is Clairemont the last affordable area in SD? What’s the upside potentials?
Honestly I think we can go on a while yet, maybe several years.
It should continue because we won’t be hearing about ninja loans and cash-back at escrow. It will be better disguised this time around.
is Clairemont the last affordable area in SD? What’s the upside potentials?
I love Clairemont for the location but more full-house overhauls are needed. Plenty of long-time owners happy to live in their junker to the end.
When you only paid $30,000 for your house, the thought of spending $15,000 for a roof sounds obscene.
I used to live in Clairemont, it’s certainly got its rough edges. The schools aren’t that great either. It is relatively close to the beach, and gets a decent ocean breeze that keeps the temps nice. The houses are also more in the 1950s and 1960s era, so need a lot more rehabbing than houses built later. There’s also a bunch of poorly done re-models and additions which is a turn-off. When you look at houses there, it’s a bit overwhelming as a lot of the layouts aren’t that great either. Finally, the commute home from the Sorrento Valley area is brutal. It’s short, but a lot of time is used up trying to get on 805 and getting across 56.