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Technology Forced Upon Appraisers Is About Money in AMC Pockets

AMC technology is not about efficiency of the appraisal process…

I am very tired of reading all the articles from appraisal management companies stating appraisers need to embrace new technologies and tools. Please stop telling me how to do my job!

For the record, appraisers are professionally trained and licensed individuals. We use technology each and every day. We use analytical tools each and every day. Our most power tool, our brains, tells us most of these new technologies and analytical tools are pure garbage; not because the programs are flawed, but they do not have enough accurate data to produce credible results. Credible results are a requirement of the Uniform Standards of Professional Appraisal Practice (USPAP). There is simply no way around it.

In a recent article, “Reading the Tea Leaves” on Appraisal Buzz, Alan Hummel, the Chief Appraiser at First American, embraces the notion appraisers need to “get out from behind the keyboard and attend meetings such as Valuation Expo or attend a CE class with your peers.” The reality is everyone knows Valuation Expo is nothing more than Appraisal Management Company (AMC) propaganda. You are not fooling anyone into believing otherwise. Professional appraisers do not benefit from bias AMC propaganda. Our analytical nature sees right through it.

In the article, Mr. Hummel is under the delusion technology forced upon us by non valuation people and entities, the appraisal management companies, are good for appraisal professionals. This technology is not about efficiency of the appraisal process, it is about money in AMC pockets. It is really quite simple, the 20 year old gum chewing, burger flipping, pizza delivering want to be at the AMCs simply does not understand the appraisal process. It is impossible for these individuals to justify their existence against the skills and training of professional appraisers. These technologies were developed because the AMC employee, you know the gum chewing, burger flipping, pizza delivery want to be, does not have the ability to communicate or think in the real world. They simply hide behind technology. In other words, they lack the necessary skills to function in a real world environment.

In the article Mr. Hummel encourages hybrid appraisals where a property inspector will visit the property and provide “factual” data about the property. This will never work. I am not a pessimist, I am an appraiser and I understand and employ the appraisal process. Not only is the site inspection the most crucial part of my job, it is the most interesting. The interaction with homeowners, neighbors, and yes, even agents is by far the most important step in gathering the data needed to solve the problem; that is, “what is the property worth”. Gathering data is a crucial part in determining the scope of work necessary to comply with USPAP’s credible results requirement. Whatever group of attendees mentioned in the article that came up with this absurdity, clearly are not appraisers.

As someone who takes my license very seriously, I would never sign any appraisal report based on information provided by someone else. It just is not happening. Besides, doesn’t USPAP require verification of all data? If I am certifying I have complied with USPAP and have verified the information, I might as well gather it myself. I have to do it anyway. Let me provide a scenario that Lenders will go ballistic over. Suppose an appraiser was provided information about the property by a third party property inspector then completes and delivers the report based on that information. The client then asks for clarification on something that was provided by the third party property inspector. The appraiser never visited the property and has no first-hand knowledge of the situation. Is the client going to accept, “I don’t know”? Is the property inspector going to answer the client’s question? Who has the liability for incorrect information provided to the appraiser? Using the most advanced, most powerful tool I have at my disposal, my brain, it is the determination based on common sense, and sound human analysis this is nothing more than an attempt for higher profits of the AMC and does not protect the consumer, as my license dictates.

Now let’s talk about big data. I live in an area rich with diversity. From my front door, I can go two blocks north and be in a neighborhood with small ranch style, 1,000 square foot starter homes with price points in the mid $100,000 range. Two blocks east, a newer more affluent neighborhood with 3,000-4,000 square foot homes and price points in the $600,000-$700,000 range. Two blocks south, 5,000 to 6,000 square foot custom homes with price points in the $1,000,000 plus range and finally two blocks west, a small development of tutor style homes with gas street lights and a rod iron fencing. These price points are in the mid $500,000 range. My immediate section of the neighborhood, well, let’s just say I live in the poor man section with 2,000 square foot homes ranging from $250,000 to $300,000. Within this six block radius of my home, there are multiple price points, custom homes, diversity in age, style and construction materials. These homes are less than a mile from each other, in the same zip code, same neighborhood code, and all in the same elementary school district. Amenities within these sections of my neighborhood have different market values. I am sure there are areas throughout the country with similar scenarios. Big data simply does not work here as there is not enough data points of comparable properties for credible results. So please, stop trying to tell appraisers we must use the data and analytical tools to be more efficient. The local professional appraiser knows his or her market and will determine when, how and what “analytical tools” to use.

If new technologies are more efficient, then why are so many appraisers complaining about blasting orders via text message, AMC software, and automated reviews by computers? Why is there some much negativity around AVM’s? Why is there an active lawsuit against Zillow for their Zestimate?

These technologies may appear fast and efficient to the gum chewing, burger flipping, pizza delivery guy at the AMC, but from the appraiser’s perspective, this is dangerous territory and is counter-productive to determining a fair market value. First, blasting of orders is not professional. Second, not every property will fit into a nice little box. Each piece of real estate is unique and not suppose-to fit into little electronic boxes. That is not why people buy their homes and does not reflect market activity. Could you imagine how boring neighborhoods would be with each house exactly the same; the same color, same floor plan, etc.? No two people, not even twins, are exactly alike, real estate is no different. Third, communication is lacking. Sending messages through portals is not quick, nor efficient; therefore it simply is not effective communication. The tone of voice people use is far more powerful than any written words or emoji will ever be. Communication is more than words; the look your parents gave you when you were misbehaving, the rolling of the eyes, the hard stare, etc. These quick and effective forms of communication send the message loud and clear and yes the recipient receives that message loud and clear. Ownership of problems never happens with technology, because the gum chewing, burger flipping, pizza delivery want to be hides behind technology because they simply lack the thinking and communication skills necessary to function in the real world with real people.

While we are on the topic of real world, where is all this data supporting bathroom colors bring more value to your home? Real Estate Agents have always advised their clients to paint the walls neutral colors to attract more buyers. To my knowledge, this has not changed. As an appraiser, I simply cannot support a $5,000 +/- bump in value because of bathroom color. Rest assured some appraiser will get that argument in the form of a reconsideration of value when the opinion of market value does not meet the contract price.

Technology is not going away and it shouldn’t. There are many benefits and it can be excellent tools. However, not all technology is better than tried and true methods, and there is no technology better than good judgement, common sense and utilizing human analytical abilities.

Please stop telling me how to do my job. You are not the Appraiser!

By John J. Appraiser, Certified Real Estate Appraiser – author requested to remain anonymous

Image credit flickr - ioerror
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35 Responses

  1. Ralph says:

    What I find laughable is that AMC’s are pushing the idea of the appraiser shortage and want reports back in 48 hrs w/6 comps, since they want us to embrace TECHNOLOGY!  When they are the ones who add 1-2 weeks time from when the lender sends them an order, just PRICE SHOPPING to the lowest bidder in order to save $50-$200.  Every day I have missed phone calls from Dart Appraisal at 5:30 pm when I’m picking up my kids from daycare.  Great business model AMC’s! Keep up the great work!

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    • Baggins - appraiser ninja Baggins - appraiser ninja says:

      My nifty Sentry 10,000 number call blocker is perhaps the most beneficial piece of technology in my office. Works easy with older and newer phones, just branch the line prior to the Sentry and do not try to run through it. When any company or solicitor misuses the privilege of calling me, I simply press the block button after hang up. Then whenever they call, one ring then hang up. Every time that happens and I don’t actually have to answer the phone, I say I love my Sentry Call blocker. It was only 40 bucks online. During the rush in CO in the past several years I literally spent 4 hours a day answering the phone. Amc employees disclosed to me they often contact no less than 10, sometimes even 50 appraisers, to place a single order. Hence my new appraiser tag line; If you have to contact more than one appraiser for a regular order, you’re doing it wrong. Amc’s seem to me much like telemarketers, and some of these guys don’t even take my number off their lists despite the auto hang up. These guys truly are just dialing it in 9-5 and have no personal attachment to their jobs or this industry. Amc is out of the box telecom, that’s why they have to be tech reliant to track performance stats, that’s their only value added service available to them. I’m going to start an appraisal management company whom manages appraisal management companies. Why not, the concept is sound because regular amc’s can prove they can establish businesses without any meaningful contribution to the process, I’ll just follow their business model.

      Don’t get me started about how Mercury network followed this same model, because they certainly did.

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  2. BigAl says:

    Agree 1000%

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  3. Dave says:

    I used to do many appraisals for First American for a local lender. First American then purchased Alan Hummel firm then sent all the business to them. (wonder why)

    I thought AMC’s were supposed to be middle men, but they simply couldn’t make enough money off of me by taking half the appraisal fee. They then needed to actually buy the appraisal firm so they could extort even more money. What frauds….

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  4. Excellent article! A few observations:

    1. Mr. Hummel works for First American

    2. First American aka First American Home Warranty; First American Realty, First American Real Estate Solutions, First American Title, First American APPRAISAL MANAGEMENT SERVICES, First American Escrow Services, First American Mortgage Loan Servicing, First American Asset Management, FIRST AMERICAN THAT BOUGHT OUT ACI  appraisal software and created the INFAMOUS PACE PRO Product. First American Monopoly. Lets make no mistake, that particular product (pace pro) was the absolute worst appraisal “hybrid” ever dreamed up  by self serving folks that have zero integrity and principles (Go ahead SUE me – UI absolutely DARE you – the proof is in the PACE PRO form itself!); or alternately are so incompetent they should not even be permitted to say or write the word “appraisal”. Even our federal regulators ‘had concerns’ about Pace Pro and they pretty much rarely have publicly expressed ‘concerns’ about anything.

    3. Again, great article, but WHY would anyone give a tinkers damn what Mr. Hummel has to say? He’s bought and paid for with his compensation from First American

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  5. Raymond says:

    very good article and totally true. I find it troubling, that every “non-appraisal entity” is telling the lending appraisers how to do their job. Lenders, lender-interest groups, realtor groups, appraisal software companies, etc, etc.

    Pretty amazing how much depreciation has gone on within the lending appraisal process. As some have stated, there seems to be little remaining economic life left for the appraiser doing appraisals for mortgage lending purposes.

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  6. Raymond says:

    hummell is a SRA, not a MAI, per AI web site. regardless of the appraisal designation, as an appraiser, he does not appear to be acting for the benefit of the appraiser. His actions are more self serving than serving any appraisal group.

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  7. Wake up and smell the roses.

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  8. ace appraiser says:

    Mr. Hummel should focus on improving the technology he is associated with instead of preaching to the boots on the ground appraiser. We do this every day. Most appraisers incorporate good technology into their business model but throw out the bad. Let’s talk about several examples of bad technology for a moment. How long has ACI been around now and the still can’t get it right ? Since Mr Hummels company First American purchased it it’s reliability has diminished. It constantly crashes. You have to manually add the listing comp addresses for the VA liquidation addendum into Delorme because the software won’t do it for you, the project name populates as the comps city location in Delorme maps which has to be corrected manually, I get weird space between the headers and text below in the addendum page, yada, yada, yada. Let’s talk about the Phoenix mobile app. That was a real winner wasn’t it !

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    • Baggins - appraiser ninja Baggins - appraiser ninja says:

      Never heard of the software and such you speak of bro. That’s because I’ve long since removed myself from presentation to objectionable companies. I’m fine giving an amc a try out now and then and picking up a straggler every so often. Staying in business and doubling my effective income did however require some new thinking, some better marketing, and concerted long game efforts to cut out the middle man. This is an interesting time in appraisal; Half of our income has been redirected to middle men. This can work to the appraisers advantage well, all you need to do is cut out the middle man. Tracking appraisers performance stats seems like a racket, much like credit management. By providing unrealistic expectations there is always a ready excuse to deny the credibility of the appraisers being worked with. Round robin distribution is the only effective assignment criteria in the larger picture for majority of suburban and urban orders out there. Don’t get me started on how Mercury does not offer that, they’re focused on mirroring amc management protocols at the moment.

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  9. Lets run a little test using CoreLogic’s own real world data.

    I’m doing a retrospective appraisal for tax compliance purposes. I wont discuss the subject but we can talk about the three most appropriate comparables (all things, including IRS/Treasury Regs considered).

    Sale 1 actually sold 5/15/2017 for $2,525,000 after 9 total days on market. Multiple offers. With the benefit of 20/20 hindsight CoreLogic’s “RealAVM(tm)” says this comparable is worth $2,434, 945 effective 7/13/2017 [not too bad for an avm!] in a range of from $2,167,101 to $2,702,789 [HORRIBLE!!!]. They claim a confidence score of 82 and a ‘forecast’ standard deviation of 11 but we don’t know if that’s for the point value or the range.

    Sale 2 sold 2/28/2017 for $1,410,000 as a fixer to a developer after 101 days while he arranged his 173% LTV purchase and construction financing. All cash to seller. Habitable house but it really sold for its ability to be expanded by 1,000 sf & “renovated as new” for future resale a over 3.5 million).

    20/20; CoreLogic hindsight says its worth $1,342,090 on 7/13/2017 in a range from $1,060,251 to $1,623,929. Confidence score 68 and ‘forecast’ standard deviation of 21. [tight , isn’t it? Anyone think ANY of these numbers are helpful or fair to a seller/buyer/client?].

    Sale 3 actual sale price $2,220,000 on 2/19/2017 (8 days on market -multiple offers) and with 20/20 hindsight CoreLogic says its worth $2,242,390 on 7/13/2017 [“reasonable, EXCEPT the market has already bumped up 5% to10% in that sub area from original sale date to CoreLogic date]. Range? $1,906,032 to $2,578,749 Confidence rating is 74 and forecast standard deviation is 15.

    Subject and 2 of 3 sales are high demand Spanish; 2 is a pseudo Tudor. HIGH adjustments for condition (subject also a fixer); and lot sizes. This area is the Westwood area of Los Angeles (90024) near UCLA; Miracle Mile, Wadsworth VA, Getty Museum, Beverly Hills adjacent etc, etc.. The comparables AFTER my effective date show market is strongly appreciating in a very short period of time.

    From the information shown WHICH numbers is the lender that uses an AVM going to use for the actual sales (or even subsequent refinances)? The AVM accidently obtained a ‘reasonable’ point value 2 out of 3 times BUT in 2 of the 3 cases the borrowers still would have needed $90k and $67k more cash to complete their deals IF Cores “logic” had been used. While Im actually appraising another property, there is SO much support for the sale prices of each comp at or above sales prices that it would be inexcusable to appraise any lower than they sold for.

    By the way, there is also much current support for numbers between the actual prices and higher end of range prices as of July 2017 for these comparables. So where did the lower end of range numbers come from?

    Lets assume I have good reason for including the one lower (fixer) sale and pretend we are the lender using the AVM for financing each comps transaction as if they were the subject. What’s the impact to the consumer and taxpayer? Heck, what is the number to be used for a loan in the first place?

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  10. Jason Graham says:

    The author is such a sissy he wouldn’t even put his name on his own article.

    Technology will leave you all jobless and I CAN’T WAIT.

    Have fun becoming fossils, and even so… pretty soon people won’t even pump you as gas.

    Get over your ego, and get to work.

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Enough Already, Nobody is Listening

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