First, I would like to state that the video assigned had no information about the impact appraisers had on the Real estate industry during the market collapse. However, fortunately, I am very aware as I was actively working for a Mortgage brokerage at that time.
I saw how appraisers were manipulated into providing values that clearly were not there. Most appraisal, I would see where conservative when submitted to lenders. However, often, Real Estate agents and brokers would tell the appraiser what value they were looking for. Often this was due to the promises made by the agent to the customer to get the listing contract. So if the appraiser did not agree with the value, the agent would shop the asking value until they found an appraiser willing to give them that value. Moreover, a for the appraisers that didn’t they would either never hear from the agents again, or they would be the last option.
This, of course, would put the appraiser in an awkward position. Do they deny the agent who can be a revenue stream, or accept and develop a reputation for overstating values with lenders and cause them to be flagged as a required review whenever they submit an appraisal to that lender. An appraisal of real estate carries much weight. If it is good, it can validate and elevate the value of homes in any given neighborhood. But if it’s bad it can also do the opposite. For example, I purchased my first home in 2001 for $420,000. The home needed some improvements, and I planned on doing the improvements when work slowed down. In California, the price of existing homes increased by 5.4% annually from 1968 to 2005, on average.
| 2001 | $ 420,000.00 | 5.40% | $ 22,680.00 | |
|---|---|---|---|---|
| 2002 | $ 442,680.00 | 5.40% | $ 23,904.72 | |
| 2003 | $ 466,584.72 | 5.40% | $ 25,195.57 | |
| 2004 | $ 491,780.29 | 5.40% | $ 26,556.14 | |
| 2005 | $ 518,336.43 | 5.40% | $ 27,990.17 | |
| 2006 | $ 546,326.60 | 5.40% | $ 29,501.64 | |
| 2007 | $ 575,828.23 | 5.40% | $ 31,094.72 | $ 606,922.96 |
By 2007 all I had manage to complete was a fresh coat of paint, new carpet in the living and bedrooms, laminate floors in the halls and peel and stick tiles for the bathroom floors. When appraised that year that home was given a value of $875,000 (approx. 11.05%)
| 2001 | $ 420,000.00 | 11.05% | $46,410.00 | |
|---|---|---|---|---|
| 2002 | $ 466,410.00 | 11.05% | $51,538.31 | |
| 2003 | $ 517,948.31 | 11.05% | $57,233.29 | |
| 2004 | $ 575,181.59 | 11.05% | $63,557.57 | |
| 2005 | $ 638,739.16 | 11.05% | $70,580.68 | |
| 2006 | $ 709,319.84 | 11.05% | $78,379.84 | |
| 2007 | $ 787,699.68 | 11.05% | $87,040.81 | $ 874,740.49 |
Now multiply this by the number of appraisals for the infinite number of houses and then add on lenders who are lending to people that cannot qualify for the home at the current interest rate, so you qualify them of 1% and boom you have a real estate bubble that has nowhere to go but down.
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