When a seller of Palos Verdes real estate and the buyer who submits an offer on a Palos Verdes home are waiting for the appraisal to come in, they generally presume that an appraisal expert from the area will be doing that appraisal. That is not always true. I have written several articles regarding the frustration resulting from the appraisal process (the most recent can be accessed by clicking here) created by the Dodd-Frank financial reform law last year.
In order to separate the potentially biased lender from the appraiser, a new layer was created – Appraisal Management Companies. The LA Times printed a recent article by Kenneth R. Harney entitled, “Who’s getting appraisal fees?” which gets to the root of the issue. The issue is that the appraisal management companies (some of which are owned by or affiliated with the lenders themselves) are keeping as much as half the appraisal fee and offering the appraiser the other half. According to Harney, “Most experienced independent appraisers refuse to work for $200 to $250 because they can’t pay their overhead at these rates. Less-experienced appraisers, who sometimes have to travel long distances from their home markets, tend to be more willing to work for the lower amounts.”
This does not only affect buyers and sellers but current owners of Palos Verdes houses who are refinancing. What can be done? Some appraisal groups are lobbying to get this changed. Harney has a great suggestion, “But in the meantime, consumers should demand transparency: Of my $500 appraisal fee, who got what? And why?”