Lindsey & Associates, Inc

07/16/2022

07/09/2022

WOKE APPRAISAL 101

The following article illustrates the slimey depth of how the Brookings Institute misrepresented racial bias in the appraisal industry which spilled over into Washington DC and the Appraisal Foundation. Our government gets it wrong again and again. Most of us are good appraisers just doing a job to the best of our abilities, let the chips fall where they fall. Read the article below...

APPRAISERS SHOULD CLOSELY WATCH PROBE OF DEPARTED BROOKINGS BOSS

VENTURA, Calif. (July 8, 2022) – The chief of the Brookings Institution, a retired four-star general, resigned last month under investigation of lobbying on behalf of a foreign government and then covering it up. If the allegations are true, it means the think tank, under the general’s watch, was secretly taking illicit cash from at least one outside interest group at a time it was engaged in research that irreparably damaged the reputation of the nation’s real estate appraisers.

Astute appraisers wondered whether Brookings might have also been influenced by any well-placed donations from other groups, such as the powerful lobbies of the Realtors, home builders, banks and nonbank lenders, when researchers at the think tank, seemingly out of the blue, attacked the gatekeepers of mortgage lending – the nation’s real property appraisers.

Brookings’ conclusions on institutionalized bias among appraisers, later discredited by Edward Pinto and Tobias Peter of the American Enterprise Institute, were relied upon by the Interagency Task Force on Property Appraisal and Valuation Equity, or PAVE, to buttress a recent government power grab into mortgage lending. The task force was led by Housing and Urban Development Secretary Marcia Fudge and the director of the president’s Domestic Policy Council, Susan Rice. The 116th and 117th Congress has also relied on the discredited Brookings findings to politicize mortgage lending by maligning its gatekeepers.

Pinto and Peter found that the Brookings report had reduced home values to 23 non-race variables that supposedly fully accounted for value and then made the specious assumption that the remaining value differences between white and black neighborhoods could only be due to racial bias.

“The November 2018 Brookings Institute report blames appraisers without proof or logic for lower property values in minority communities and then the June 2019 Congressional Hearing amplified the Brookings misrepresentation of the appraisal industry,” wrote Jonathan Miller, president and CEO of Miller Samuel, Inc., a New York real estate appraisal and consulting firm.

In June, the Brookings Institution announced retired Marine Gen. John R. Allen had resigned as the organization’s president in a controversy in which he is alleged to have been lobbying for the government of Qatar. The retired general and former commander of U.S. Forces in Afghanistan is currently under FBI investigation for allegedly trying to help Qatar navigate a diplomatic crisis and then covering up his involvement, according to a recent Federal Bureau of Investigation affidavit. It should be noted that Allen has not been charged with any crime.

The retired general began as a senior fellow with the Washington, D.C.-based think tank. In October 2017, it announced Allen’s appointment as its president. The U.S. Naval Academy graduate was on administrative leave four days before his resignation.

The FBI affidavit, inadvertently made public last week, lays out new details of a wide-scale U.S. inquiry into Qatar’s efforts to influence Washington. The docket was quickly sealed again, but the affidavit is publicly available through a nonprofit legal-research website.

A spokesman for Gen. Allen told the Wall Street Journal that the information contained in the affidavit was “factually inaccurate, incomplete, and misleading.” The spokesman said he had voluntarily cooperated with the government’s investigation and said his efforts with regard to Qatar were to protect the interests of the United States.

The Foreign Agents Registration Act requires Americans engaged in domestic political or advocacy work on behalf of foreign interests to register with the Department of Justice and disclose their relationship, activities, and related financial compensation.

Accepting cash from domestic lobbying groups would not have been in violation of the act and would not likely have been on the FBI’s radar.

“Brookings has strong policies in place to prohibit donors from directing research activities,” maintains the think tank.
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Jeremy Bagott, a licensed appraiser and former newspaperman, sends up a warning flare in his 2019 book “Dispatches from the Cosmic Cobra Breeding Farm.” He takes the reader deep inside a tiny Washington, D.C., foundation that has managed to have its copyrighted code of conduct enshrined in federal and state law. All 50 states, even the U.S. territories of Guam and the Northern Mariana Islands, now enforce it. The nonprofit, known as the Appraisal Foundation, has parlayed the arrangement into a lucrative publishing cartel. In his journey, the author uncovers a troubling trend deep in the plumbing of government.

06/06/2022

Wave the appraisal contingency clause in the contract doesn't jive with the actual language in the contract... read what Florida Realtors have to say.

Buyers Waiving Appraisals? Tread Carefully
By Meredith Caruso

What happens when “Buyers waive appraisal contingency” is added into the sales contract? For a lot of Legal Hotline callers, the provision doesn’t do what they think.

ORLANDO, Fla. – We’ve already done a three-part series of articles in previous Legal Newsletters on the risks of waiving certain contract contingencies, but I wanted to write about something we hear far too often on Florida Realtors’ Legal Hotline.

Let me share with you a discussion I had on the Legal Hotline recently: A buyers’ agent called in about a transaction and said that the parties had the following line in the additional terms: “Buyers waive appraisal contingency.” The parties were using the Florida Realtors/Florida Bar AS IS Residential Contract for Sale and Purchase (“AS IS” Contract”) so this article will refer to the language in the Florida Realtors/Florida Bar contracts (“FR/Bar Contracts”).

It’s a short sentence, isn’t it? “Buyers waive appraisal contingency.” But it’s not short of being anything other than problematic in most situations.

First, the above language presumes that the contract has an appraisal contingency that can be waived. Let’s be very clear on something: the FR/Bar Contracts do not contain a built-in appraisal-to-the-purchase-price contingency. As a result, adding language like the above to the additional terms sections effectively waives something that didn’t exist in the first place.

If a buyer wants to ensure that the appraisal of the property matches the purchase price – and if not, they can cancel – they need to add the appraisal rider to the contract. Only the appraisal rider that goes with the FR/Bar contracts gives buyers the right to terminate the contract if the appraisal is less than whatever value they’ve put in the blank on the form. If buyers want to waive their ability to cancel the contract if the property appraisal doesn’t equal the purchase price, they simply don’t add that rider to their offer.

Wait, what? “But there’s appraisal language in the financing paragraph,” you’re saying.

You are correct, there is. But based on calls to the Legal Hotline, many callers don’t understand what the financing paragraph actually says. But I will get to that in a minute.

Second, adding “Buyers waive appraisal contingency” also assumes that buyers have the authority to waive the appraisal. While it’s possible for buyers to obtain their own appraisal, a majority of the time the appraisal is really the lender’s appraisal (or other valuation) of the property. So when buyers add this language to the contract, they’re effectively saying that the buyers are waiving the lender’s appraisal and, seemingly, the lender’s ability to refuse a loan based on the results of the appraisal.

While I personally haven’t conducted polls on this, I have yet to hear of any mortgage company that will lend funds without some sort of property valuation. This is typically a part of their lending process. To me, adding something like the above verbiage is as if the buyers are saying, “We are waiving our lender’s loan approval process to the extent it involves any appraisal of the property.”

Yet, in reality, the lender will still be going out and obtaining whatever type of property valuation they need to process and evaluate the loan. And the results of that valuation process will be a factor in the lender’s willingness to lend the funds to the buyers. (Note: Each lender has its own processes.)

Let’s address the financing language. What we’re hearing on the Legal Hotline is that many callers believe that buyers can cancel if an appraisal doesn’t meet the purchase price. As I said earlier, this is just not the case.

In fact, if you read paragraph 8(b), you will see that the term “purchase price” appears nowhere in that paragraph. But let’s nail down what 8(b) does say about appraisals.

When the most recent FR/Bar contracts were revised, the definition of Loan Approval was amended to include an appraisal. Buyers with a financing contingency are attempting to get a Loan Approval, which is not only obtaining a mortgage loan covering the terms as laid out in the contract, but also – and here is the actual language – “Buyer’s mortgage broker or lender having received an appraisal or alternative valuation of the Property satisfactory to lender, if either is required by lender, which is sufficient to meet the terms required for lender to provide Financing for Buyer and proceed to Closing (“Appraisal”).

Let’s break that down a bit in hopefully some plain language.

If the lender requires an appraisal/valuation of the property as part of the lender’s process in order to provide buyer financing, then that appraisal/valuation has to be satisfactory to the lender. And note that it doesn’t say the appraisal/valuation has to be equal to the purchase price! The appraisal/valuation only has to be sufficient to meet the terms required for the lender.

I emphasized the word “lender” because I want you, the reader, to note that we are not talking about any sort of appraisal/valuation that is satisfactory to buyers. Again, if buyers want an option to get out of the deal when there’s a difference in the property purchase price vs. the property’s appraisal, they’ve got to use the rider I mentioned earlier.

In emphasizing the word “lender,” I also hope readers can see why writing “Buyers waive appraisal contingency” in the additional terms doesn’t really work or likely doesn’t have the intended effect.

Bottom line: Lenders aren’t parties in the sales contract. Buyers can waive whatever they want, but when it comes to the waiver of appraisals/property valuations, they can’t force a lender to comply with contract language, including any reference to the lender’s appraisal part of the loan process.

Meredith Caruso is Associate General Counsel for Florida Realtors
Note: Advice deemed accurate on date of publication

© 2022 Florida Realtors®

03/03/2022

Anyone remember a prior post pertaining to the coming foreclosures about a year ago from this blog? Residential foreclosure rates increased 7 fold over the past month and most of this activity is from borrowers who were already on the radar in 2021. These bloggers were spot on in their early reporting of this coming trend. Listen in for more info!

06/25/2021

A lot of people would never believe that there are still millions of underwater homes out there. But it’s true. The question is “where are they” and “why”? Location, location, location!

A lot of people would never believe that there are still millions of underwater homes out there. But it's true. The question is

06/05/2021

Comment below take from another appraiser who follows this blog... dittos from me.

It’s so odd and misguided to go after appraisers for the disparity in housing prices, Frank said it, “we are just bringing up what we are seeing, don’t shoot the messengers,” appraisers don’t create the markets, we just report what we see. Thanks to Kimber W for hinting the discrepancies in prices really lie in the location[s], not on the ethnicity of the owner[s]. If we are talking bias, the meaning of the word should be understood, ‘prejudice in favor of or against one thing, person, or group compared with another, usually in a way considered to be unfair.’ The only thing appraisers are measuring are what people pay, if there is a preference for a particular neighborhood or housing style, people will pay more, its that simple. The ghosts of redlining and all the other well known discriminatory practices are really to blame, go after those issues not the appraisers. And Frank, the skill/knowledge range of an appraiser is not from the “nubie to head of an AMC” – most AMCs are not run by appraisers, there are some highly skilled and knowledgeable appraisers in this country, many teach at the national level after long successful careers, maybe have someone like that on the show. There is actually a special category for an AMC that is owned and operated by actual appraisers, AMCs are a big issue with most appraisers, a lot of the appraiser shortage rumor is being driven by the fact that many skilled appraisers won’t work for most AMCs due to low pay and onerous and silly assignment conditions. Few people in the mortgage industry really know what appraisers actually do.

I know, I know, we're talking appraisals a bunch, but what can we say? It's what's in the news. The Biden Administration is looking at the appraisa

04/28/2021

The current new construction boom will hopefully not meet the same fate we experienced in the last 2009 bust. The current real estate market is certainly heated up the question is when and what will make it cool down?

New Construction is WAY up year over year. This is great for our inventory problem, but is it reminiscent of 2006? Let's hope not! At any rate we

03/08/2021

So much truth in this article... the quality of appraisal process is being gutted and continues to hit new lows.

Appraisal Independence is the single most important tenet of the appraisal process.

10/01/2019

The modernization of the appraisal industry and home valuations is entering a questionable era of accountability. This short blog explains a few of the concerns borrowers and lenders should have in this new age of property valuations which in many cases will not involve a professional licensed appraiser.

No Appraisals? Yes or No?

08/28/2019

So will the robot algorithms be subjected to a tribunal in front of an appraisal state board for totally screwing up on the valuation of a property due to the incompetence or poor judgement of the algorithm being employed to produce the valuation? Who gets sued or questioned when the borrower goes into foreclosure after they realize they are upside down in the property, can't sell it and have to move again shortly after they close? Would you invest your money in a Ginnie Mae bond fund which has the majority of the collateral assets in it's portfolio appraised by an algorithm? Talk about risky business... I can't wait to see how this all works out... Pretty soon we will start to see appraiser robots pan handeling for comparable sale data on your local street corner because the sale data is owned by one large robot controlled corporation that holds the data hostage unless the appraiser robot can pay a large sum of money in bit coin to obtain the data. You laugh but it's not that far fetched.

Homes valued below $400K (up from $250K) may no longer need a human to appraise them. About 2 out of 3 U.S. homes could be appraised by drones and algorithms.