New California Law Aims to Take the Heat Off of Appraisers While Protecting Consumers Too

Written by Posted On Sunday, 14 October 2007 17:00

Earlier this month, California Governor Arnold Schwarzenegger signed into law, SB 223 -- making it illegal to pressure appraisers to arrive at a predetermined property value that's been set by mortgage brokers or homeowners to ensure a sale goes through. The new law also states that it makes it illegal for a licensed appraiser to engage in "any appraisal activity in connection with the purchase, sale, transfer, financing, or development of real property if his or her compensation is dependent on or affected by the value conclusion generated by the appraisal."

"This law helps deter some of the individuals from putting pressure on appraisers," says Michael H. Evans, real estate appraiser, Evans Appraisal Service and a Fellow with the American Society of Appraisers.

But Evans is careful to add that it's only a start. "It'll help. It's not a cure all; I can guarantee you that."

The problem has been brewing for a long time and leaving appraisers and homeowners vulnerable.

"Almost every order that would come through our fax machine would have some type of order on it saying, 'If it doesn't come in at this price, call me.' Or, 'If this doesn't make value, we don't want the appraisal.' We just send it back to them saying, 'Hey, we don't work that way. We're going to have to give you the value that it is; we can't change that and if you want us to work under those circumstances, we can't do the job for you.' And some of them go away, they'll try to find some who will," explains Evans.

But Evans says some appraisers fall victim to the pressure.

"We have a lot of young appraisers … and they're hungry. You have some -- not all -- but just some unscrupulous lenders out there who are just hunting for a value. So the lenders go through the phone book looking for a young appraiser who maybe doesn't have the experience or the clientele and will do something that maybe he or she shouldn't do and lenders prey on them," says Evans.

The law now makes violators subject to punishment of license suspension or revocation with the potential of civil action.

Evans says the new law will make will people think twice before they pressure an appraiser for a predetermined value on a property. It will also make appraisers who are tempted to accept the illegal offer recognize there are severe consequences.

As for homeowners, they too will stand to gain from this new law. "Homebuyers need to protect themselves by checking the credentials of everyone involved in the transaction and requesting that their assigned appraiser be state licensed and accredited by a national professional organization," says Evans.

He says that by selecting an accredited appraiser, homeowners will risk less because "accredited appraisers have got more experience and more to lose if they're succumbing to that type of pressure. They've invested more in their profession."

Experts believe that inflated appraisals have significantly contributed to the mortgage-meltdown crisis. For that reason, numerous industry and consumer advocacy groups joined together to support the passage of the bill including: the Appraisal Institute, the American Society of Appraisers, the California Mortgage Bankers Association, the California Association of Mortgage Brokers, and the Fair Lending Alliance, and the Greenlining Institute.

For information about real estate appraisals, or to find an accredited appraiser near you, call 1-800-ASA-VALU or visit appraisers.org .

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Phoebe Chongchua

Phoebe Chongchua is an award-winning journalist, an author, customer service trainer/speaker, and founder of Setting the Service Standard, a customer service training and consulting program offered by Live Fit Enterprises (LFE) based in San Diego, California. She is the publisher of Live Fit Magazine, an online publication that features information on real estate/finance, physical fitness, travel, and philanthropy. Her company, LFE, specializes in media services including marketing, PR, writing, commercials, corporate videos, customer service training, and keynotes & seminars. Visit her magazine website: www.LiveFitMagazine.com.

Phoebe's articles, feature stories, and columns appear in various publications including The Coast News, Del Mar Village Voice, Rancho Santa Fe Review, and Today's Local News in San Diego, as well as numerous Internet sites. She holds a California real estate license. Phoebe worked for KGTV/10News in San Diego as a Newscaster, Reporter and Community Affairs Specialist for more than a decade. Phoebe's writing is also featured in Donald Trump's book: The Best Real Estate Advice I Ever Received and The Complete Idiot’s Guide to Buying Foreclosures. She is the author of If the Trash Stinks, TAKE IT OUT! 14 Worriless Principles for Your Success.

Contact Phoebe at (858) 259-3646 or phoebe@livefitmagazine.com. Visit PhoebeChongchua.com for more information.

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