Can You Believe That? Hybrid Appraisal Part 4

George Dell

George Dell

Owner of Valuemetrics at Valuemetrics
George Dell is the owner of Valuemetrics and author of the Analogue Blog. He is a graduate of San Diego State University with extensive post-graduate work in Economics, Statistics, Mathematics, Finance, and Information Systems, Certificate level work in Environmental Management and Geographic Information Systems (GIS). George has earned the MAI, SRA, and ASA designations.
George Dell

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Is the Non-appraiser Inspector Worthy of Belief? Can You Believe That?

…non-appraiser inspector must not provide any significant appraisal assistance…

This is Part Four in a series on Hybrid Appraisal. Be sure to read Part OnePart Two and Part Three.

The term “hybrid appraisal” (as it’s currently used), means that the appraiser sits at a desk, while someone else (not an appraiser) looks at the property. It appears that the non-appraiser may or may not inspect the interior, measure the improvements – but always takes a front photo, similar to what can be found in MLS listings, or Google Earth street pictures.

The basic claim is that the overall process is cheaper and faster, and just as good.

  • Non-appraisers are cheaper, and work faster; and,
  • The appraiser uses his/her analytical expertise more efficiently.

The desk appraiser relies on whatever information is provided from the non-appraiser. Usually the non-appraiser fills in a separate form provided by the lender, lender’s agent, or AMC (Appraisal Management Company). Presumably the form provided, and the individual have no reason to be biased to help “make the loan.” The non-appraiser inspectors have a range of property analysis experience, ranging from being a successful Realtor® to someone with a car, a camera, and the provided form.

The desk appraiser relies on this non-appraiser information. So, what does USPAP say about this? Well, the appraiser must provide a document called a “signed certification” as required by Standards Rule 2-3. A couple of things jump out. It says:

…no one provided significant real property appraisal assistance to the person signing this certification. (If there are exceptions, the name of each individual providing significant real property appraisal assistance must be stated.)

So, it appears that the non-appraiser inspector must not provide any significant appraisal assistance. In other words, no decisions that might be “significant” to value. No judgment about the highest and best (optimal) use. No decisions about functional or economic obsolescence. And no judgement calls about the quality, condition, interior appeal, visible locational impacts, renter occupancy, useful site area, and effective age. We must presume that these are factual, and require no appraisal competence.

But the desk appraiser must sign the certification. The Standards Rule 2-3 goes on to say:

When a signing appraiser(s) has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. [emphases added]

It goes on:

The appraiser(s) signing the hybrid appraisal is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser(s) also must have no reason to doubt that the work of those individuals is credible.

Can you believe it? There is that word again! “Credible,” “Worthy of belief” it says.

So why in the world would I have any problem of belief? A person competent in driving, taking pictures, and noting what the lender client says to fill out in the form. No ethics required. No appraisal decisions. Fast. Cheap. We got it.

The complete appearance of “better, faster, cheaper.”  We got it!

(…but what if? What if the appraiser selected the inspector… What if? …)

Stay tuned for the next exciting blog piece about bifurcating for hybridization.

Image credit flickr - Dale Moore
George Dell

George Dell

George Dell is the owner of Valuemetrics and author of the Analogue Blog. He is a graduate of San Diego State University with extensive post-graduate work in Economics, Statistics, Mathematics, Finance, and Information Systems, Certificate level work in Environmental Management and Geographic Information Systems (GIS). George has earned the MAI, SRA, and ASA designations.

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27 Responses

  1. David Buckley says:

    Collateral verification disappears from a reliable disinterested third party. The paper can not be considered reliable to third parties. NO ONE ELSE ACTUALLY SEES THE PROPERTY other than interested parties.

    DGB

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  2. chris says:

    Some idiots say, hey we can train 15 people to be so called appraisers to sit in our office, pay $30 /hr and get inspections for $50.00. YA we can can change everything, let’s keep screaming a shortage of appraisers !!!

    Ha, HA, Ha…..ya that’s the ticket.

    The world is filled with stupid asses. Hybrids are going no where !!!

    Appraisers need to see the house, go upstairs, go down stairs, go out back, drive the comps and then write reports.

    Anything short of that and the appraisal can not be considered “as-is” !!!

    When was the last time anyone read the definition of “as-is”…..?

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  3. Baggins Baggins says:

    It just, just never, never ever, ever ends.

    Nationwide Appraisal Network Non-Traditional Products

    We knew appraisal management companies would betray the trust but we never imagined to this degree.

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    • WOW! Click Baggs linked site ( https://nationwide-appraisal.com/appraisal-management-services/non-traditional-products/ )

      $30 for an AVM. I think toilet paper at my local market is much less expensive than that. Even for the giant packages.

      $125 for the toilet paper alternative and garbage package. Why pay for that which most normal folks throw away?

      $250 for a ‘home inspection by a licensed inspector AND hybrid by a certified appraiser??? I don’t know an ASHI certified inspector that would touch a house inspection for under $450. As for a certified appraiser performing hybrids, that MUST be a typo.

      Certifiable…a definite probability.

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  4. William Paul says:

    If fast and cheaper is the objective let’s see…

    1. Cut out the loan officer…. applications are online…
    2. Title policy can be done by the attorney. No closing fees…
    3. Plat of survey requirement gone…
    4. Closing officer… online document verification by our overseas brothers & sisters…(how’s that feel underwriters?)
    5. In fact, lose the underwriters too… (I can develop software to check for the things they do and it will be much cheaper besides, I have all this time on my hands from the loss of appraisal orders)
    6. Lose the Realtors, online home shopping is so much faster with interior pics etc. (Realtors cut their own throats on this one)… BOTH SIDES WILL SAVE THOUSANDS ON COMMISSIONS!!!!!
    7. MOST OF ALL… GET THE GSE’s OUT OF MAKING THE DECISIONS LIKE NOT NEEDING APPRAISERS… (Is that a fox in the hen house?)
    8. All of the above should well make up for the couple of hundred Dollars saved by using “hybrids” instead of human beings UNTIL, we’re gone and they can then charge what they want for the “big data”

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  5. George it was a sincere pleasure to meet you at Appraiserfest.

    While we may disagree with the relevance of big data, you have my utmost respect.

    Your analysis above is spot on. Part 4 of your serial article alone is all the reason any ethical appraiser needs to reject doing hybrids out of hand. Great job.

    Everyone else, take one of George’s data science courses (as I will too). Let me know if I’m nuts or if we over rely on BD/AI and broad data sets to the rejection of professional expertise and life-learned opinions. Let’s do it from an informed position though. George is among the foremost nationally acknowledged experts in this area, and one I’d trust to teach me despite my personal skepticism about Big Data.

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  6. merv conlan says:

    Hybrid, that is, bifurcated appraisal reports. USPAP keeps coming up in these discussions. USPAP is not relevant.

    First, let’s separate out the ‘appraisal’ of several real estate entities (REE’s) and ONE real estate entity (REE).

    You are gonna ‘appraise’ an REE, but no physical eyes or feet on the ground. OK. Try taking that camel with your client into any court of law in the land; before a judge and/or jury, claiming you and your client have a bonafide appraisal, yesiree.

    You better pray to God, your paid up on your insurance.

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  7. David Buckley says:

    PLEASE WAKE UP FELLOW APPRAISERS!! USPAP is very much in play. None of us, myself included listened to the USPAP CE the difference between “extraordinary” and “hypothetical” assumptions. HELLO, the latter is contrary to USPAP, it is MISLEADING, and you may not without violating USPAP adopt 3rd party data that you feel is unreliable (i.e.. provided by idiots). PLEASE PLEASE respond correctly – these assumptions VIOLATE belief and I can not adopt consistent with USPAP! USPAP can be you best friend!

    Dave

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  8. Baggins Baggins says:

    Offer a whistleblower reward for a disgruntled ex amc employee to tell all. There are a lot of them by now and the hits keep on coming. They’ll likely tell all for a months pay and have nothing to lose since they are not individually licensed.

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  9. Merv I Conlan says:

    Amazing, you guys are still reading/quoting/citing USPAP! USPAP is a honey pot. Will let you do anything.

    Til you can’t. Desktop apr….wait, Desktop ANYTHING: is not an appraisal. PERIOD, and I don’t care what USPAP calls it. You are gonna permit a bunch of bloated bureaucrats on Virginia Beach tell you how to ‘appraise’? Wow, what a ‘profession’. I recommend you read Brian L Trotier, JD, on why you should be afraid, very afraid of ever going near a 2075 Form.

    Bifurcated/Hybrid are not ‘appraisals’ OK? Never were. Will never be. Do any of you guys actually know what an appraisal ‘is’? You sure don’t if you pay any attention to USPAP. To quote that infamous Mick, Bill Clinton (his last name is not Clinton) you’all oughta  get down to the ‘isiness; of things.

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    • Merv We agree with you. The problem is that TAF doesn’t agree with us. They still see the theoretical possibility of these things conforming with USPAP.

      Sort of like “Is it possible for humans to fly at supersonic speeds using strap-on wings and a backpack-mounted jet?”  I offer a qualified ‘maybe’ but I wouldn’t want to be the guy that tries it. Actually, there’s probably more likelihood of this than there is of a hybrid being USPAP compliant.

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  10. Merv I Conlan says:

    Mike, after chuckling at your TinCheek last comment, I read the latest draft from the TAF or whomever and suddenly realized: ‘wait a minute, Mike’s comment about what’s possible for humans is directly approved, for appraisers especially, to quote (and its ALL USPAP enabled (even better than ‘compliant’):

    An appraiser may use any combination of a property inspection, and documents, 76 such as a physical legal description, address, map reference, copy of a survey or 77 map, property sketch, or photographs, or other information to identify the relevant 78 characteristics of the subject property

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    • Merv, yes, we MAY.

      IF someone is given adequate time (measured in days rather than hours); and an adequate fee (measured in several hundreds ‘plus’ dollars, rather than tens of dollars) and allowed to provide honest, straightforward disclosure of what was done and what was not, without canned boilerplate claiming “appraisers has determined” the inspection to be competent, etc., then I’d concur that these bifurcated ether-manure reports could be USPAP compliant.

      There’s still that requirement that WE must decide that the cited documents are ‘credible’.

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  11. David Buckley says:

    ONE MORE TIME Ladies & Gentlemen. You have ALL the tools. Let me bring it down to a six grade level. If you have confidence in the data supplied and truly believe that your license is worth stipulating same; then by all means do too much work for $75.00. BUT, come on, please, is “extraordinary” or is it “Hypothetical”? If it is the latter – KISS YOUR LICENSE GOODBYE! Are you all old worn out idiots or what? I know you know the difference. Somebody come back like a professional PLEASE!

    DGB

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    • I LIKE bluntness. Let me break it down a little further. ANYONE that thinks the model proposed for hybrids in most solicitations is remotely USPAP compliant, is a damned fool. The challenge is again repeated.

      IF you believe your firm completes USPAP compliant bifurcated appraisals for from $25 to $75 in five to fifteen minutes using third party non-appraiser inspectors simply submit a verifiable sample for peer review here. Redact the non-public, private information. of course. Show us such a sample and we could become your biggest advocates. At a minimum, it would shut me up.

      In the meantime, I can only conclude in the belief that every single huckster of these products knowingly intends to facilitate loan fraud.

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  12. Gadda Gow says:

    how about you speak like a professional nobody deserves to be talked to like we’re 6th graders, we’re grown adults

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  13. David Buckley says:

    That being the case start acting like professionals.! If you can not accept 3rd party data collection, then simple do not accept it. What could be easier! Why is this so F….. difficult?

    DGB

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  14. Merv I Conlan says:

    3rd party or any other ‘party’ reliance on….is not acceptable for the PHYSICAL INSPECTION of any single real estate entity in an appraisal REPORT. Period, not withstanding adherence to USPAP or non-adherence to USPAP. An appraiser in fact is entering the Twilight Zone when they ask an associate / intern / trainee to physically inspect the property in their place…and I don’t care if they sign a report stating they did not physically inspect. You may review the report from 3,000 miles distant, but that is not an appraisal REPORT regardless what the loose as a goose USPAP indicates / implies / states. Mr. Buckley, you can use hypo/extraordinary or any other weasel word. None will work in a US court, and I realize fully the distinction and the way USPAP interprets same. With USPAP you can fly to the moon, Alice! Uhhh, please don’t try it. USPAP will not protect you when you hit the moon or the sun.

    No judge, no jury in the USA will accept said report. Period. USPAP will not back you, the ins co will not back you, and your lawyer will not back you. And, speaking of lawyers, I hear tell that AMC’s are pretty much exempt from State interference due to the AMCs phalanx of lawyers. Yep, the appraisers are the ones to pay the price.

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    • David Buckley says:

      Merv,

      Your sanctimonious response is a perfect example of why clients hold a low opinion of us. You are totally, totally missing the point because you are reading the paper during the USPAP CE class and worse you have no respect for the few standards we have left. I can remember the departure provision for God sake. And you clearly reveal that you will never sign the report of a trainee or associate unless you inspect the property too. Get over it! I’m sure you have years of experience and appreciate good comps as much as the rest of us. My years of experience has taught me to bracket bracket bracket. That means finding a feature(s) of the subject that lends itself to best comparison and running with it (them). I can use a little help here fellow professionals. THE POINT IS, if it is hypothetical, you have cover in USPAP. Why not use it.

      Dave

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      • chris says:

        Didn’t they get rid of the departure provision because it makes the appraisal reports worthless?

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        • No Chris. The departure provisions removal was politically motivated within the ranks of TAF and it’s sponsors. It still required compliance with those parts of USPAP that were not in the specified departure. Too restrictive for the special interests TAF is beholding to.

          By replacing it with a Scope of Work Rule, a gigantic loophole in USPAP compliance was created. The argument becomes “Wasn’t required by my client nor within the agreed SOW” rather than “Was the appraisal performed in accordance with all applicable provisions of USPAP. This is exactly why I continue to point out that TAF has failed 100% in preserving OR promoting the ‘public trust’.

          Its what allows CRAP like bifurcated ‘appraisals’ to even be called appraisals.

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      • Merv I Conlan says:

        Dave, appraisers apparently have incomplete idea of what an appraisal IS. Let’s start w/what its not: it is not comps, its not bracketing, its not statistics, its not signing off on interns, and it sure as hell is not USPAP.

        Appraising IS Inspecting! OK?

        Inspecting? who’d a thunk? With Hybrid crap, the powers that be have actually taught us what an appraisal IS. The ‘analysis’ portion, while encompassing every discipline under the sun, is but a minor part of the definition, the very last part of the definition. First comes the inspection. After that play all you want. Think about it. I can’t tell you how many guys I had to let go because they couldn’t measure a square. Now, this is interesting, because it points a way to reply to the TAF, the banks, the Cuomo family, Big Data (which hugely relies on Inspections) and the rest of the folks. Thinking now?

        Merv

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  15. Merv I Conlan says:

    Ahh, Mr. Buckley, and I thot y’d use ‘pontificating’. It’s a better word here than sanctimonious. Here’s a cpl of dialogs. Me and my brother are sitting in our bedroom in the Hunter’s Point project of San Francisco busy painting little rocks w/gold paint to sell the rest of the gadjo kids…when outta the blue our dad enters w/what the H are you guys up to now? and brother under his breath says, dad’s kinda sanctimonious ya think? by the time the paint drys they will all fergit what they paid. And/Or: circling a pool table at age 15 w/3 Irish gypsy kids, one remarks “Sht, we ought not to go that far” and bobby responds “ahh davy you’re so damn sanctimonious, we’ll never get caught”.

    Look, Mr. Buckley, I’m not saying you can’t do all that stuff, and I sure don’t want to take an income source from you, I’m only telling you: you MAY not do that stuff. What USPAP is telling you is: you Can do all that and you MAY do all that! I’ve done years of strictly RE brokerage and yrs of appraising. Neither I nor any other re broker will ever do a CMA w/our signatures w/o seeing/touching/inspecting on the ground the ‘subject’, EVER. We don’t need the money and we don’t need Robby Banker’s permission either.

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  16. Merv I Conlan says:

    and, Mr. Buckley, your clients don’t hold you in low opinion. Our clients tend to be scared shitless of us. We are a bump in the road, an obstacle. Look, it’s been a tough day of helping a client put together a 2mil automotive deal and holding hands of another w/8mil 9 unit res bldg., for which I’m nearly getting zilch, but I want to clarify. Appraising so far as I understand is largely out of the banking industry. What Robby Banker wants, he gets. This part of the biz is closely aligned w/Risk. Due to the slapdash nature of the hybrid Report (not appraisal as we understand it), the TAF must get together w//Bankers and assume legal responsibility for this camel. Otherwise the intelligent appraisers will be scared shitless for the first time. It will not be enough for some clueless dufus to tell us USPAP is OK w/this. It must be coordinated w/Banking industry and the Gov’t (TAF) and it must be explicit. It will get done. The result can be speculated on but that’s for the future.

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Can You Believe That? Hybrid Appraisal Part 4

by George Dell time to read: 2 min