Perhaps you saw the Sept. 29th report on 9News. It described how some appraisers are exploiting the hot market and the shortage of appraisers to charge “rush fees” for doing appraisals quickly. One of my own broker associates, Chuck Brown, brought that story to my attention because, coincidentally, the appraiser interviewed by 9News, Brian Boizot, was the same appraiser who charged Chuck’s buyer a $1,000 “rush fee” for doing his appraisal in 3 days instead of 10 days. This appraiser simply had enough work that he could give priority to those buyers who succumbed to his extortion-like demands.
Mortgage lenders pay the appraiser, passing that cost on to the buyer, but this rush fee was invoiced directly to the buyer through Chuck, and it was the only way this buyer could count on getting the appraisal done and avoid another month’s rent ($2,500) if the closing was delayed, so he paid it. It was a VA loan.
It doesn’t have to be this way. Many larger mortgage companies have appraisal desks which manage the process and can limit such abuse among their preferred appraisers. Speaking with Scott Lagge, a loan officer at Eagle Home Loans, I was told that it’s common for him to pay $100 to $300 for a bona fide rush, but, while he has heard of $1,000 rush fees, he has never paid one and considers that excessive.
Another mortgage broker, Jaxzann Riggs of The Mortgage Network, told me she once had to pay $1,600 for a rush appraisal. That was for a conventional loan.
The problem is worst for VA borrowers, like Chuck’s buyer. Contributing to that problem is VA’s requirement that appraisals be ordered only through the VA web portal, which delays the process considerably. In the case of Chuck’s buyer the VA didn’t assign the appraisal to Brian Boizot until 24 days after the order was entered on the VA portal, 5 days beyond the appraisal deadline in the contract. As I’ve written before, VA buyers are already disadvantaged in winning bidding wars, and this appraisal situation only further victimizes them.
Such delays, whether or not through the VA, can be attributed largely to the shortage of appraisers. It is not uncommon for one appraiser after another to decline an assignment because he/she is already overloaded.
The shortage of appraisers began several years ago when appraisal management companies (AMCs) were introduced to isolate lenders from appraisers and avoid the type of fraudulent appraisals that created to the “toxic loan” crisis. The AMCs take a percentage of the fees that previously went entirely to the appraisers. This pay cut was so extreme that many appraisers simply quit the industry. Combine that with today’s heavy workload, and you’ve created a situation that is ripe for price gouging.
My advice is to use a mortgage lender with a good appraisal desk. Credit unions are also good at avoiding this kind of exploitative pricing of appraisals. When choosing a lender, ask their experience with rush fees.
Published Oct. 6, 2016, in the YourHub section of the Denver Post.