VESTED INTERESTS

October 30, 2011 at 12:00a.m.

By Paul Owers

Sun Sentinel

FORT LAUDERDALE, Fla.

Low appraisals contin- ue to block people from selling homes or refinancing mortgages, leaving many sellers and real-estate agents unhappy.

“We really feel we’re at the mercy of appraisers,” said Randy Lane, a Broward County, Fla., homeowner whose sale fell through recently when two value estimates came in well below the negotiated price.

When a sale collapses because of a low appraisal, the buyer is angry for having agreed to pay more than the home is thought to be worth. Meanwhile, the seller puts the home back on the market and considers adjusting the price — all the while not knowing whether another potential sale will suffer the same fate.

A May 2009 law required that appraisers work independently and without undue influence from mortgage brokers, lenders and real- estate agents. Mortgage-fraud prosecutors say the overhaul was necessary to curtail conflicts of interest and bloated estimates that contributed to the housing debacle.

More than two years later, real-estate professionals say the change inadvertently has led to inaccurate appraisals, which is delaying a housing recovery.

“This requirement is costing everybody, including the consumer, because we’re not getting quality appraisals,” said Tim Singer of Coldwell Banker in Fort Lauderdale.

Appraisers bristle at the criticism. Though some concede that concerns about the law are valid, they also say real-estate agents and sellers have vested interests that blind them to the reality of falling home values.

“Don’t shoot the messenger,” said Ken Chitester, spokesman for the Appraisal Institute, a Chicago-based association with 24,000 members nationwide. “It’s very easy to point fingers, especially in a depressed market.”

The abundance of foreclosures in recent years has dramatically reduced values, and appraisers say they can’t help but factor in those comparable homes when they’re preparing estimates.

But many of those homes are in disrepair, and real-estate agents point out that appraisers often don’t consider the condition of the properties, leading to unnecessarily low appraisals.

In home sales, buyers who need mortgages pay for the appraisals, which on average cost about $350. Banks require them to make sure they don’t lend more money than the homes are worth.

Cash buyers typically don’t request appraisals, real-estate agents say.

For years, an appraisal was considered a formality. A mortgage broker would commonly suggest a business acquaintance to do the work, virtually assuring the appraisal, an opinion of value, matched the sale price.

The 2009 law put a stop to that by insisting on appraiser independence.

It also discouraged prolonged communication between an appraiser and the real-estate agent, who used to work more in tandem.

Many lenders now hire appraisal- management companies, which randomly select appraisers. Real- estate agents and others complain that the companies assign appraisers from out of the area who aren’t familiar with specific neighborhoods.

Another complaint is that the management companies don’t pay a fair wage, which deters experienced appraisers from accepting assignments.

The result: low valuations, real- estate professionals say.

Nine percent of real-estate agents reported delayed sales contracts in recent months because of low appraisals, according to the National Association of Realtors.

In addition, 13 percent said a contract was renegotiated to a lower price because an appraisal came in below the agreed-upon price.

Appraisals are especially troublesome on short sales, when a lender agrees to let the homeowner unload the property for less than the mortgage amount, said Judy Trudel, an agent for Balistreri Realty in Lighthouse Point, Fla.

The seller’s lender wants the home to appraise as high as possible to reduce the financial hit, but the buyer’s lender hopes the appraisal comes in low, Trudel said.

Scott Dooley, a Fort Lauderdale appraiser, shrugs off the criticism, saying appraisal complaints come with the job and tend to increase in a down market.

“But once it stabilizes,” he said, “things will improve and our jobs will be a little easier.”