Appraising the Appraisers

Photo:  Craig Bender

Appeared in Pioneer Press newspapers
August 5, 2010

Hallelujah, the house is a shambles!

            The kitchen is all torn out.  The old addition (from the ‘30s, when the house was only 80 years old) is ready to come down. The back door is gone, so are the windows.  The rest of the house has been sealed up.  And there’s a beautiful dumpster brimming in the back yard.

            So, the commencing has finally commenced.

            What brought about this happy change in our stalled building process?  Like Lincoln, who went through one commanding general after another until he finally found, in Grant, one willing to fight, we needed the right personnel.

            The problem was Appraiser A, the accursed.  It was he who ground things to a halt, just when we were about to start on time, when his appraisal of the property’s future, post-enhancement value came in meaningfully lower than the total of what we’d bought it for plus what we were ready to invest.  Even though the bank wanted to give us what we needed, their tightened, post-bubble rules locked them into a percentage of one guy’s opinion, and, as the banker ruefully told us, “The appraisers are the kings today.”

            As far as we can tell, this regal exercise of power consisted of counting bedrooms and bathrooms, and waiting for the computer to spit out the nearest comparable sales – nearest in mileage, that is, not in actual similarity of the properties.

            This led to a financing death spiral:  modify the plan to fit the now formulaically lowered budget -- e.g., drop a bathroom to get the cost to the right level -- only to have the appraisal then shrink in parallel, because now you have fewer bathrooms.  The lines converge somewhere around just bringing in Molly Maids, instead.

            The outlook wasn’t brilliant.  Until, that is, we were rescued by virtuous Appraiser B, blessings be upon him. Appraiser B who, looking at the same property as his colleague, envisioned a higher value for our scaled-down Plan B than Appraiser A came up with for the expanded Plan A.

            Appraiser B, of course, is a saint and a hero and will go down in our family lore.  We view his judgment as the correct one, of course.  We feel he took his job seriously and did it right, identifying actually comparable comparables – which, admittedly, isn’t easy with an unusual property like this one.  But he took the time to think about the assignment, to make the effort to find legitimate comparators, and used the imagination to envision what we’re aiming to build.

            And our lives changed overnight.

            That sounds like quite an exaggeration.  It ain’t.  Thanks to the difference of one guy’s opinion over another’s, we went from the prospect of leveraging every asset we own (and then some), to being merely way over our heads – a situation with which we’re well acquainted and have grown quite comfortable over the years. 

We lost more than two prime months of the building season to this farce.  We no longer have a hope of being in our new home for Christmas.  But we won’t have to scuttle the project and lick our wounds, either.

            So, thanks to Appraiser B, we’ll be executing Plan B, with Banker B.  Poor Banker A had to watch the business walk away and use our case to pitch for a reconsideration of his bank’s now strangulating rules.

            All because of one guy’s opinion. 

The appraisers were given all this power to correct the previous imbalance in the system – only to create another.  It raises the Socratic question, “Who will guard the guards themselves” (better known these days in its graphic-novel translation, “Who will watch the Watchmen?”) -- those given the role of protecting the city, if they, themselves, go astray?

In the system we’ve set up today, who will appraise the appraisers?