Are appraisers pressured by lenders, brokers and others to hit the purchase price number in real estate? A survey scheduled for this spring means to find out.
October Research, publisher of Valuation Review, has announced its intention to measure pressure on appraisers to overstate property values. In 2003, the company conducted a National Appraisal Survey to surprising results -- over 55 percent of professional appraisers felt they had been pressured to inflate property values and over 25 percent of the appraisers surveyed said they felt such pressure on almost half of their orders.
"The 2003 survey verified a reality that people in the industry widely suspected, but had never seen quantified," said Lee Kaplan, October Research's Vice President of Studies and Seminars and project manager for the follow-up survey. "The sheer number, however, really shook the industry, and called into question some very basic assumptions about the mortgage and valuation process. Now, three years later, a dialogue has been opened on the issue and the industry is more self aware. We would like to measure how much has really changed since then."
Kaplan said that the 2006 survey will revisit several of the questions asked in the earlier survey. A national sample of real estate appraisers will again be surveyed on key issues in the real estate services industry, including whether or not they have ever felt uncomfortably pressured to restate the value of a home. The results are expected to be published late this spring in the 2006 National Appraisal Survey.
The 2006 follow-up will also widen the scope of inquiry, asking appraisers who claim to have felt pressure to spell out the types of pressure applied and the perceived consequences for their refusal to overstate. The 2006 National Appraisal Survey will also question appraisers on technology usage and perceptions, business practices and more.
The survey is part of a national trend toward more transparency in the real estate transaction, including investigations in the real estate and title industries.
According to Lee Kaplan, October Research's project manager for the 2006 National Appraisal Survey, until October Research conducted the 2003 National Appraisal Survey, which was the industry's first comprehensive survey to measure appraiser preferences and tendencies, there had been no scientific quantification of the breadth of pressure felt by appraisers in the industry.
"Because of the company's independence and its deep rooted experience in the professional appraisal process, the company is uniquely qualified to administer and analyze research related to the American residential real estate appraiser," he says. "October Research has a deep and broad working knowledge of real estate settlement services and its customer markets. Company principals have over 25 years of experience managing national appraisal and valuation networks and have, in previous positions, overseen over 75 local appraisal offices across the U.S. As an independent third party, the company is not beholden to any trade organizations or professional interests. We are in a distinctive position to monitor and evaluate how regulation, technology and various business initiatives interact and impact competitive strategies."
October Research is doing the survey to keep the issue of appraisal pressure on the front burner. "It has been three years since the initial October Research study," says Kaplan. "To our knowledge, no other organization has conducted any type of follow up or published information relating to the specific issues uncovered in our findings. The industry's response to the 2003 survey and the continuing dialogue make it clear that appraisal pressure is one of the most important issues facing participants in the valuation field right now. October Research would like to measure the impact of the original findings and the resulting discussion, and perhaps encourage further dialogue within the industry.
He says, "Most meaningful research protocol dictates that gap analysis and result evaluation be conducted at different points in time. This will be the first of several measures of gap analysis that October Research will conduct."
The company does not have any preconceived expectations that more appraisers will say they are being pressured to hit the "right" number.
"October Research still believes that the residential appraisal industry is underserved with respect to having impartial research on its business practices, effects of the recent economic environment, pricing, client relationships, industry-specific technologies and state regulation," says Kaplan. "In light of increased pressure by consumer advocacy groups to add regulation or legislation to the valuation process, October Research is interested only in reporting on the pulse of the professional appraisal industry. October Research is also looking to spur industry dialogue. Of course the publication is a sold product, but the function and purpose of October Research is to bring market data and analysis to the real estate services industry. This is an important subject for any business that is touched by the valuation process."
