Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California

Mary Cummins, Real Estate Appraiser, Animal Advocates, Los Angeles, California
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Monday, April 10, 2023

HUD only cares about appraisals UNDER contract price which is dangerous by Mary Cummins

appraisal value over under contract sales price, mary cummins, real estate appraiser, real estate appraisal, fannie mae, percent sales price, contract price, appraisal, value
appraisal value over under contract sales price, mary cummins, real estate appraiser, real estate appraisal, fannie mae, percent sales price, contract price, appraisal, value

Dave Towne sent out this linked article about bias and appraisal gap.

"The article below was in the Inside Mortgage Finance Publications e-newsletter on 4/06/23:

"FHFA Data Fueling Looks into Appraisal Bias

dhollier@imfpubs.com

The Federal Housing Finance Agency is a is a critical provider of the data necessary for oversight, enforcement and research, FHFA Director Sandra Thompson noted during a discussion in late March.

According to aggregate statistics from the Uniform Appraisal Dataset released by the FHFA, roughly 57% of appraisals were above the contract price in 2021. Just 15.2% were below the eventual sale price, but these are the under-valuations that could possibly reflect bias.

And the important datum here is that this percentage is growing. In 2013, only 8.4% of appraisals came in under the contract price.

In addition to providing data, Thompson noted that FHFA has coordinated with the Department of Housing and Urban Development, the Consumer Financial Protection Bureau and the Department of Justice “to provide additional information for fair lending enforcement and oversight.”

If this actually reflects the true thinking of Ms. Thompson, she has aligned with so many others who believe SALE PRICE is immutable, and is the ultimate indicator of Value, and apparently, of bias, when not accepted as gospel by the appraiser.  My gosh, what a misguided opinion!

Apparently Ms. Thompson didn’t see, experience or understand what happened during the ‘pandemic era’ in mid-2020-early ‘22, when overly emotional, and irrationally exuberant buyers paid astronomical prices for homes way above what their actual value was.  The same thing happened in 2006-2008.....but it wasn’t considered ‘bias’ then due to the different political climate and attitude at that time.

Conversely, how can it be said that valuing a property lower than its eventual sale price based on current market evidence is tantamount to BIAS?  And, if 57% of the appraised values were ABOVE the sales price, couldn’t that also reflect BIAS?  Seems to me that if one comparison in one direction is considered bias, the other in the opposite direction can be equally judged the same.

To better understand this concept, look up the definition of bias.

The political drumbeat of appraisal bias just because an appraisal Value doesn’t reflect Sales Price is blatantly wrong-headed.  In fact, it reflects internal personal bias at worst, and exhibits a definite lack of understanding of the appraisal process, by the person promoting such falsehoods.

More appraisers should stand up and challenge Ms. Thompson’s assertions."

I agree that we should be looking at the over valuations. That is probably where most of any alleged "bias" would be. In the major media cases of alleged bias the first lower appraisal is considered the wrong one when it was actually the higher second appraisal that was wrong and above market value. 

The second higher appraisals were influenced, biased by the AMC, Lender and borrowers who stated the first appraisal was too low. The second appraiser knew there'd be a complaint or lawsuit if they didn't come in high. Clearly the second appraiser was influenced to come in over market value. In the appraiser's eyes he has much to lose coming in at market and much to gain by coming in above market. That's all fine until the borrower goes under and the gov reviews the appraisal in default which they stated they will do. This is a concern because the current economy and real estate market is going down. People are losing jobs as interest rates rise. More homeowners could end up under water and in default. 

Things are a little similar to the beginning of the Great Recession. We all know what happened after the Great Recession. The gov pushed appraisers to come in high to meet higher values. After values dropped the government blamed appraisers! We report values. We don't set them. The gov caused the huge run up with reduced financial regulations and programs which helped lower income people take on loans they couldn't easily afford. The gov caused great financial damage to the people they said they were helping.

Image above came from this article
https://www.fanniemae.com/research-and-insights/perspectives/opportunities-improve-value-appraisals

Nice quote from the above linked article, "Reforms following the 2008 housing crisis attempted to improve the independence and accuracy of appraisals, and some early research indicated these reforms were marginally successful, with the percent of transactions confirmed falling from a high of 98 percent in 2007 to 94 percent in 2009. Confirmation rates, however, have since drifted back up as we have moved further away from the financial crisis."

So was it the financial crisis or reforms which caused change in % of appraisals meeting contract price?

What's interesting is there were appraisals done pre and post contract. When the appraiser knew the contract price, the value was more likely to meet or exceed that contract price. Maybe appraisers shouldn't know the contract price because it clearly influences them. Fannie Mae even makes that suggestion in their article.

Fannie Mae knows the industry and what's really happening. They can't speak freely because they are dependent upon HUD and the government no matter how "independent" they claim to be. For this reason they kiss HUD's ass and support all this false alleged appraisal bias. AEI's research has shown there is no appraisal bias based on race in the government's own data. HUD still falsely insists there is for political reasons. 2024 elections are coming. I bet Dem candidates will still be hawking racial appraisal bias in their campaigns to get the black, brown vote. They will claim they already solved most of the alleged bias but will continue to do more.


Mary Cummins of Cummins Real Estate is a certified residential licensed appraiser in Los Angeles, California. Mary Cummins is licensed by the California Bureau of Real Estate appraisers and has over 35 years of experience.


Mary Cummins, Mary K. Cummins, Mary Katherine Cummins, Mary, Cummins, #marycummins #animaladvocates #losangeles #california #wildlife #wildliferehabilitation #wildliferehabilitator #realestate #realestateappraiser #realestateappraisal #lawsuit real estate, appraiser, appraisal, instructor, teacher, Los Angeles, Santa Monica, Beverly Hills, Pasadena, Brentwood, Bel Air, California, licensed, permitted, certified, single family, condo, condominium, pud, hud, fannie mae, freddie mac, fha, uspap, certified, residential, certified resident, apartment building, multi-family, commercial, industrial, expert witness, civil, criminal, orea, dre, brea insurance, bonded, experienced, bilingual, spanish, english, form, 1004, 2055, 1073, land, raw, acreage, vacant, insurance, cost, income approach, market analysis, comparative, theory, appraisal theory, cost approach, sales, matched pairs, plot, plat, map, diagram, photo, photographs, photography, rear, front, street, subject, comparable, sold, listed, active, pending, expired, cancelled, listing, mls, multiple listing service, claw, themls, historical appraisal, facebook, linkedin DISCLAIMER: https://mary--cummins.blogspot.com/p/disclaimer-privacy-policy-for-blogs-by.html

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