Hands On The Heartland
Checking The Pulse Of The Kansas City Real Estate Market 

It’s Fannie Mae’s expressed goal to prevent fraudulent property appraisals with it’s guidelines for how an appraiser is chosen on a Fannie Mae backed loan. It should be pointed out these guidelines only apply to loans underwritten by Fannie Mae. But keep in mind that the vast majority of loans ARE run through Fannie Mae underwriting and, as such, this rule plays a significant role in the Kansas City mortgage loan process. With the goal of ensuring an arms length appraisal process (without outside influences affecting the appraiser’s report), the rule calls for an appraiser to be chosen by an Appraisal Management Company. In the past the lender had sole discretion of the appraiser being chosen.  

Kansas City Mortgage Loan Appraisals

At first glance the change seems like a solid plan. But upon further review I see some potential problems. How are a buyer and seller going to feel about a deal falling through when an unsatisfactory appraisal is provided by an appraiser who’s office is 200 miles away? I don’t see anything in the rules that keeps this from happening and I believe appraisers must have first hand knowledge of the markets in which they work. I‘m licensed to sell real estate in the entire state of Missouri but I’m not the right agent to help anyone buy or sell a home in St. Louis. I certainly don’t want to see an appraiser from St. Louis doing an appraisal on a property I’m involved with here in Kansas City.

I’ve spoke with a local appraiser and he told me  the third party appraisal management companies simply ASK the appraisers in their group to define the geographical sphere they cover. So if a New York appraiser says he’s now a California appraiser, that makes it so? Furthermore, the appraiser told me the Appraisal Management Companies hand out appraisal orders on a rotating basis and not based on an appraiser’s qualifications. It seems to me all that does is take business from the best appraisal professionals and spreads the wealth among the bottom feeders in the industry.

Having an Appraisal Management Company as a middle man surely means the middle man is getting a cut of the deal. So either (A) the appraiser is making less for the work they do or (b) those additional third party fees are passed on to the buyer in the form of higher appraisal fees. Both options present problems if you ask me. If A applies then this could lead to the best appraisers simply getting out of the business – and of course lead to less qualified appraisers doing our future appraisals. If B applies then buyers are being hit with more closing fees. 

I have to wonder if the change will ultimately mean we’ll be seeing a much slower appraisal turn around, less accurate appraisals overall and a lack of communication regarding appraisal status updates. Since all of the above are critical to orchestrating a real estate transaction through to closing, I’m more than a little concerned. It should be noted that the American Society of Appraisers, the Appraisal Institute and the National Association of Mortgage Brokers all oppose the rule and plan to lobby the new congress to either repeal or amend it.  Want to read the Fannie Mae guidelines on appraisals? Here you go… Fannie Mae Home Valuation Code of Conduct.

Posted by Jason A. Brown

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