The Story About “Hybrid” Who Does What
WHO actually fills in the subject info in ‘hybrid reports…
This is a long message… grab a cold one and settle in!
Last Wednesday, (yah, bad on me!), I sent out a message asking appraisers who have done, or are doing, the new ‘hybrid’, ‘alternative’, ‘bifurcated’ or “easy squeezie” desktop reports promoted by some AMC’s and others, what the actual process is concerning WHO actually fills in the subject info in ‘hybrid reports’.
A number of appraisers took time to answer via email that afternoon. Among the responses, I actually CALLED and talked to 4 appraisers who are from different areas in the US, and who had different experiences with these reports. I really appreciate the time they took to explain the process they have witnessed.
What I learned, and I think I’m the only one who has done this on a national scale and reported findings, is that there is massive confusion about the Scope of Work actually performed by two separate individuals (and perhaps other unknown contributors) in these reports. I have learned that.
To stress the point, as others have done, it’s the APPRAISER who must adhere to USPAP – no one else. None of the ‘forms’ we use are defacto compliant with USPAP. All ‘forms’ have to be supplemented with additional info the appraiser provides to allow the appraiser to be USPAP compliant when using a ‘form’ report.
By the way, when I say in compliance with, or adhere to, USPAP, I mean the CURRENT quoting a USPAP version that does not yet apply to our responsibility. Why that was done is baffling to me.. An appraiser I respect who has a national following via mindful groups, podcasts, forum posts, etc., recently spent countless keystrokes trying to justify these ‘hybrid reports’ by
Highly non-compliant issues for appraisers arise with alternative reports when thewho is not supervised or even really known to the appraiser. There is at least one known ‘hybrid’ product where this is done. This is considered to be APPRAISAL PRACTICE by someone acting as an appraiser. It is APPRAISAL PRACTICE because that , making decisions about what subject details to include, and perhaps exclude, and most often include photos taken by that ‘field inspector’ in conjunction with the filling in of subject info. I strongly encourage appraisers to steer clear of this pre-filled product.
A second non-compliant version has ‘suggested’ sales, assumed to be comparable properties, provided to the appraiser at the time of assignment offering to the appraiser. This is a veiled attempt to influence the appraiser into accepting someone else’s APPRAISAL PRACTICE decision, which can have a direct bearing on the opinion of value determined by the appraiser… if no research and analysis is done to evaluate those. That is a direct violation of USPAP.. With this kind of assignment, appraisers should inform the client that in no way should any ‘suggested’ sales be submitted by the client at the time of assignment, and they should be removed from assignment consideration. If they won’t do that, decline the assignment.
A third type of ‘hybrid’ product has a field inspector examining the subject, taking photos, and writing comments about the subject property and the surrounding neighborhood. This info is provided to the appraiser in a separate document, which the appraiser is allowed to review, with parts incorporated into the actual ‘hybrid’ report. I say this kind of process allows the appraiser to be marginally compliant with USPAP, in that the appraiser makes decisions about what data to use and incorporate. The appraiser can (and should) do their own subject research so that the provided data is corroborated with other sources. Some promoters of these ‘hybrid reports’ promote this activity as being little different than an appraiser incorporating MLS or ‘public’ info. Well, maybe – or not.
The Scope of Work in all ‘hybrid reports’ I have seen, and which are written about in the trade press, e-newsletters, blogs, etc., all incorporate vast statements about Extraordinary Assumptions the appraiser is allowed to incorporate. The point here is “why should we need to?” The real reason is because of the cost structure associated with ‘hybrid reports’, which at this writing, is far lower than any other type of ‘drive by’ assignment appraisers typically do, demands incorporating Assumptions about the subject property the appraiser has not personally examined. All these SOW’s say that info provided by someone else is considered “complete and accurate” – when in fact it may not be – even though it’s ‘relied on’ for the purposes of the report.
My contrarian commentators will point out that an appraiser does not have to make a physical inspection of the property as part of the appraisal report assignment. That’s true. But it’s the basic fall-back position ‘hybrid’ report promoters take when discussing these and attempting to ‘sell’ them to appraisers to complete. They don’t mention anything about APPRAISAL PRACTICE..
A fourth type of ‘hybrid reports’ has the ‘field inspector’ completing a Property Condition (or Inspection) Report. This is submitted back to the client, but is. The appraiser’s SOW in the desktop report is to find subject data from available sources, fill out a subject grid with that, and complete a sales comparison grid. Some report grids are ‘qualitative’ only (no adjustments), while others are ‘quantitative’ – meaning dollar adjustments are made. Both ask the appraiser to state a value conclusion. This kind of ‘hybrid’ report allows the appraiser to be USPAP compliant, because it’s only the appraiser who completes that report.
Something appraisers may not know is per current federal lending regulations,– for at least a few seconds. There is NO requirement that the eyeballs must be those of an appraiser. That’s the driving force behind the proliferation of these new low cost ‘hybrid reports’.
A fifth type of “alternative” report is an actual exterior-only, who . Millions of these used to be done on the 2055 form. But lenders DO NOT NEED ALL THE DETAILS on that outdated GSE form for the intended use they have when doing HELOC, second mortgage, asset monitoring, etc. The lenders don’t want to pay high dollar amounts just to have simple property info verified and provided. So lenders, and their agents – the AMC’s, have designed multiple different versions of ‘hybrid reports’ now floating around.
There… FIVE different versions of these new products. I strongly urge appraisers to get sample reports from clients who request your service. Examine the SOW in them, and ask tough questions about ‘who’ completes the subject info, and ‘when’ it’s filled in. Ask if you can ADD additional Assumptions and Limiting Conditions as necessary. If the clerks who call don’t have the answers,. If they won’t do that, tell the clerk you cannot help them.
You have to be extremely (USPAP) careful with these ‘hybrid’ products as currently constituted. Due to my research, and the kind assistance from the appraisers who talked with me last week, we now have a better understanding of what we appraisers need to be aware of before accepting or outright rejecting the potential ‘hybrid’ assignments.
But, there’s “more to the story.” We appraisers can do a better job meeting needs of clients. While writing this, I determined that further discussion about this kind of work is necessary. I’ll do that in a follow-up message. Stay tuned.