SUN., AUG 17, 2008 - 11:42 PM
Wisconsin appraisers felt pressure to inflate
Marv Balousek
608-252-6135
mbalousek@madison.com
Appraisers in Wisconsin say they've been pressured by mortgage brokers and lenders to inflate appraisals.
Gene DeYoung of DeYoung Appraisal Service of Madison said he frequently gets mortgage broker requests by mail or fax to provide "expected value" or a relative value for a property before he's hired or looks at the property.
"I totally refuse to do it," he said. "When you even talk about value in the capacity of an appraiser, whether you know it not, you have made an appraisal."
DeYoung, an appraiser for nearly 40 years, said inflated appraisals often aren't reported to the state Department of Regulation and Licensing because they're not going to be challenged by mortgage brokers or homeowners.
"It's like politics," he said. "You don't turn somebody in to cut your own throat."
Appraiser Ray Miller of Lyndon Station said he's also seen inflated appraisals.
"I think a lot of the properties here in Wisconsin were over-appraised," he said. "A lot of them were fudged or pushed to meet value."
Miller said the values of some resort condominiums, for example, rose rapidly partly due to in-house appraisals or using units in the same development as comparable properties.
Wisconsin has 2,373 licensed appraisers, about the same as the 2,357 appraisers in 2004, according to David Carlson of the state Department of Regulation and Licensing. Complaints against them rose from 41 in 2003 to 152 last year and 76 have been filed so far in 2008.
Educational requirements for all three appraiser license classifications in the state were upgraded at the beginning of the year. More hours of education and college-level degrees or the equivalent for the advanced classifications now are required.
Lender pressure to inflate appraisals shouldn't exist, said Marla Britton, chairwoman of the Wisconsin Real Estate Appraisers Board, which regulates the state's appraisal industry.
"An appraiser is hired to be the unbiased third party to come into a transaction," she said. "The appraiser's job is to do one very simple thing — reflect the market, not make the market."
The board, composed of four professional and three public members appointed by the governor, handles complaints against appraisers.
"I personally believe we're doing an excellent job of regulating our appraisers and educating them to our concerns," said Britton, a board member since 2004.
Over the past year, cases reviewed by the board have ranged from an alleged embezzlement to sloppy work. A few have involved inflated appraisals.
The license of appraiser James B. Brown of De Pere, for example, was suspended for six months last year after three of his appraisals on property owned by employees of the same mortgage company were challenged by the Green Bay Credit Union Center. Brown appraised a Brussels property at $603,000 that a second appraisal determined was worth $328,000.
Appraiser Nelida Valentin of Milwaukee received a 90-day license suspension last September after she was accused of using properties 12 years old and newer to appraise a 78-year-old South Milwaukee property at $287,000 when it had sold eight months earlier for $222,500.
Lenders have made efforts to reduce the pressure on appraisers, said Karen Scott, a member of the appraisers board and co-owner with her husband of Scott Appraisal of Madison.
She said loan officers don't have as much authority to select appraisers as they once did and U.S. Bank has implemented a plan to rotate appraisal firms.
"We're not seeing nearly the pressure that we were a few years ago," she said.
