An Appeal Process for Appraisals?

One of the biggest complaints I hear from lenders these days – besides too much regulation – is the state of the appraisal market. Time and time again I hear of deals being blown up because the appraisal was just too low. But should (or can?) the appraisal be subject to an appeals process? This idea is raised by California mortgage banker Randy Johnson in a recent column. Johnson notes that in the good old days mortgage bankers ordered appraisals from “people whom we knew to be trustworthy and knowledgeable about an area.” He adds that, “I would not ask an appraiser from Fullerton to do an appraisal in San Clemente, for example. Today we order from a lender that orders from an appraisal management company that places the order with an appraiser they select. It's a fiddle-proof system, but we have seen appraisers do appraisals more than 100 miles from their office address. That's silly.” Johnson believes that originators should have an appeals process whereby they can “show that there are other, better comparable sales in your area that the appraiser didn't use. It's also possible that the appraiser didn't understand some particular aspect of your neighborhood.” Johnson's column first appeared in The Orange County Register.