Federal Reserve chief Ben Bernanke and Treasury Secretary Tim Geithner are making headlines, but people like John Squier and Dan Fries are in the trenches of America’s economic crisis.

Appraisers like Squier and Fries are engaged in a seemingly impossible job — estimating property values when prices are plunging and relatively few people are buying homes.

Enlarge this image

Elissa Eubanks / eeubanks@ajc.com

Appraiser John Squier, inspecting a home last week in Chamblee, takes photographs inside the house to give to the lender — something he says was not required before when lenders were less nervous.

Even though sales have tanked, Squier and Fries are still working long hours. They’re appraising homes for would-be borrowers who want to refinance and for financial institutions and government agencies selling foreclosed properties.

But the job is getting much harder, appraisers say. They say nervous lenders are getting much stricter about how appraisers estimate property values, even as the slow pace of real estate sales shrinks the amount of available data.

“I’ve never seen anything like this,” said Squier, an appraiser for 32 years. “If the lenders keep enforcing these tight rules, we’re not going to meet their guidelines. … At some point, everything is going to bog down.”

To be sure, much of the blame for the nation’s economic crisis can be traced back to overly optimistic appraisals of property values and poor decisions regarding the abilities of borrowers to repay their loans.

But the once-routine task of appraising properties continues to have important repercussions in today’s economy, lenders said. Homeowners who hoped to cash in on low interest rates are discovering they can’t refinance their mortgages because their home values are too low. And banks are having to book millions of dollars in paper losses that they argue may never materialize, partly based on appraisers’ steeply discounted valuations of failed real estate developments ringing the city.

“The same bank that gets a $24 million loan written down to $4 million was able to do the loan because they had an appraisal for $30 million [before the real estate collapse],” said Walt Moeling, an attorney who represents the Georgia Bankers Association. “On the way up, appraisers were enablers. … On the way down, they’re executioners.”

Some appraisers concede their industry helped drive the real estate bubble by producing inflated value estimates. Still, they say lenders also were at fault for ordering abbreviated “desktop appraisals” and for perpetuating lax underwriting standards that allowed homeowners and developers to get loans they wouldn’t be able to repay if anything went wrong.

After most things went wrong, appraisers said, fear began to overtake the process.

“I think lenders are just scared to death, as they should be after what they’ve done,” Squier said as he splashed through the yard of a Chamblee home to measure the exterior on a recent rain-soaked day.

Squier, who runs a solo business appraising homes on the north side of metro Atlanta, said he’s “very busy” because of a boom in refinance applications. Many homeowners are trying to take advantage of interest rates that plunged below

5 percent for a 30-year mortgage — a historic low.

But falling home values and tighter underwriting standards — including tougher appraisal requirements — are making it much harder for homeowners to qualify for those loans.

It’s also making his job harder, although Squier said he welcomes the move away from so-called “desktop appraisals” in which appraisers simply looked at the exterior of the house and relied on online home sales records to estimate property values.

In contrast to those lax days, Squier said lenders are now very picky about appraisal reports. Because home prices are falling, he said, lenders want appraisers to use only the most recent sales comparisons — ideally less than 3 months old. The comparison sales — “comps” — should be similar houses less than a mile away in similar neighborhoods.

“We’re even giving them interior photos, which was never required before,” he said.

After drawing the outline of the house and measurements on graph paper on a clipboard, Squier went inside the two-story, three-bedroom house to repeat the measuring process. He said the house was built about a year ago; the lender foreclosed on the builder.

“This guy’s profit’s gone,” he said as he inspected each room, noting higher-end features here and there. Hardwood floor in the living room. Granite counters in the kitchen. Whirlpool bathtub in the master bathroom.

Despite such amenities, the lender may not be thrilled with Squier’s appraisal report because of the lack of comps.

“This is a hard appraisal because this is a neighborhood of 50-year-old houses and this is a new house,” he said. He found one comp about a mile away, but the sale was five years ago. A 1960s-era house is for sale just down the street for $229,000 — well above the deeply discounted price for the house he’s appraising.

“How does that make sense?” he asked. “This is distress. The problem is we don’t have enough buyers.”

His best hope is the nearly identical house next door, built by the same builder. The sale of that house was supposed to have closed the previous week. But Squier noticed that a thief has apparently raided the neighboring house. The air-conditioner unit is missing and a front window is covered with plywood. That sale probably didn’t go through, he concluded, but added that he will check when he gets back to his office.

“This is not going to fit their standard guidelines,” Squier said. “At some point it becomes their decision, not mine.”

Often these days, the lender’s decision is a thumbs-down for even seemingly minor issues, according to people in the industry.

“I feel bad for the appraisers because there are no comps because the market has ground to a halt,” said Richard Martin, a real estate professor at the University of Georgia. With home prices down as much as 20 percent in some parts of metro Atlanta, Martin said he’s hearing that failed appraisals are scuttling many mortgage applications, which in turn is also hurting home sales.

Martin likewise had to shelve plans to refinance his Athens home to get a cheaper interest rate. He said his loan broker turned him away, citing the fact that Martin had listed his home for sale in the past six months. The broker said that would make the loan hard to sell to investors, such as Freddie Mac or Fannie Mae.

“Some of the rules are so rigid,” Martin said.

Vickie Randall, owner of Sunshine Appraisals of Atlanta, said many homeowners seeking to refinance mortgages either can’t meet lenders’ demands for higher credit scores or their home values have dropped to near or below their current loan balances.

“From what I’m hearing, a lot of loans are not going through,” she said.

Brooks Campbell, senior vice president of Vanguard Mortgage in Atlanta, said he’s still seeing about triple the volume of clients that he did several months ago, mostly people who want to refinance. He turns away about 10 percent who aren’t likely to make it through the vetting process of tougher credit checks and appraisals demanded by loan investors.

“We do our homework first,” he said. “No one wants to have the end user say you weren’t careful enough. … You verify everything.”

www.ajc.com/metro/content/business/stories/2009/04/05/home_appraise_atlanta.html