AMC sends a “non-appraiser” to photograph, measure, sketch, and observe a property, it’s quality, condition, and surroundings instead of using a qualified appraiser…
I’m not an Appraiser, You just think I’m one
Ever see the AT&T commercial where the surgeon walks in and he says “I Just got reinstated, Nervous? That’s ok so am I”. If not see here:
Or the late 1986 commercial with Peter Bergman that states
I’m not really a doctor but I play one on TV.
Well get ready Consumers because the person that is about to visit your home IS NOT an appraiser or just pretends to play one without the proper training.
See, Fannie Mae and the Appraisal Management Companies (AMCs) are ready to send appraiser imposters to conduct appraisal inspections on our homes. These same AMCs were created to manage appraisal processes for lenders, but without laws, standards or accountability, their self-defined charters have morphed into other functions.
They sell their services as being the only way for a lender to procure the best “Qualified” appraiser for a particular assignment. In fact, they will shop around until they find the cheapest appraiser. Hey, we all like cheap, right?? We routinely shop for bargain prices on all kinds of things, but honestly, would you settle for the cheapest mechanic trusting he’ll keep your car safe, hire the cheapest plumber for you home’s systems, or seek out the cheapest lawyer to safeguard your interests??
We research the best qualified plumber to reduce the risk of more costly…We want the best car repair service, the one with the best reviews. We research the best qualified plumber to reduce the risk of more costly household issues later. And when we face a lawsuit, or have to sue to retain our rights, we pretty much want the best legal representation available, right? So why would we settle for low/no standards when it comes to our homes, the most valuable single asset most of us will ever own?
That’s essentially what’s happening when an AMC sends a “non-appraiser” to photograph, measure, sketch, and observe a property, it’s quality, condition, and surroundings instead of using a qualified appraiser. That’s the AMCs’ bifurcated appraisal where the observation function is totally isolated from the valuation.
Don’t we have a right to expect that someone coming into our home, to develop an opinion of its value, is specifically qualified to do so? Aren’t we trusting that person to gather the information necessary to develop an accurate valuation of our real estate? And yet, are we willing to allow an AMC to instead send an appraiser imposter, someone who has little/no training, to perform the observations that will be the foundation for the value opinion of our home?
As a consumer, ask yourself those questions another way: Am I really okay with someone coming into my home, expressly to determine its value, who has zero appraisal training, zero knowledge of what is significant to observe, zero valuation experience, and not insignificantly, zero liability? That party’s only accountability is to hand over their gathered info to an experienced appraiser who will then do their best, under severely limited circumstances, to come up with the value of your home.
Why not just have a real appraiser do it? The fully qualified, certified, bound to standards of ethics and competency, continually educated appraiser? Good question
Ask yourself that again… Are you ok with someone coming to your home that has zero training, zero knowledge as to what to look for and zero experience only to hand that info over to an appraiser who may or may not be experienced to come up with the value of your home? Why not just have the appraiser who has all these qualifications already do it? Good question right?
Lenders and Fannie Mae along with the their Appraisal Management Companies have decided that to speed up the process, it’s better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation. Read that again. “Lenders and Fannie Mae along with the their Appraisal Management Companies have decided that to speed up the process, it’s better to have unqualified people go out and obtain the information on a property and submit that info to an appraiser to do a valuation.” This is like me an appraiser coming to your house to tell you how to run your electric lines on your new addition. I have zero clue but hey I’ve seen thousands of homes and should have some ideas right?
- To speed up the process, in theory. The reality is that the AMCs are spending days and weeks shopping for the cheapest and fastest appraisers before an appraisal assignment even makes it to an appraiser’s desk.
- To make it cheaper. For a bifurcated appraisal, they’ll pay an unqualified person $25-75 to observe the property, and then have an appraiser do the rest at $50-150, all while charging the consumer far more so that the AMC can pocket the substantial difference.
- To take advantage of the available technology. They’re enamored with “Big Data and are pushing appraisal waivers in lieu of appraisals. They think technology is great with all the appraisal data they’ve compiled over the years. However, look at Zillow and her sister sites where the estimates are based on broad algorithms and not property-specific.
Frankly, if I had to guess, I’d say 90% of their valuations are over-inflated. Does it make any sense at all to depend on such a product? Is it worth saving a couple hundred dollars when the value of such an important asset—our real estate—is at stake?
Let’s be honest here. AMCs bring nothing valuable to the valuation process. They were put in place after the housing crash to serve as a middle man between the appraiser and the lender. However, they haven’t been regulated, and their main lobbyist group, REVAA (Real Estate Valuation Advocacy Association), seems to think they have some sort of power, now that they are creating products that ONLY benefit AMCs and not consumers.
Want an example? Coester VMS, an AMC who has gone out of business, owes millions in fees to appraisers for jobs completed. REVAA allowed this company to be a part of their network, to be represented by REVAA, even knowing that Coester VMS had a poor history as a company. REVAA’s panel includes some of the most notorious, low-paying AMC firms, and those that have decided to be more than a middle-man and take advantage of the consumer.
Don’t believe me? Here is another example.
Clear Capital. An AMC out of California that has a product called a ClearVal. I won’t belabor the description of this product as it has already proven to be not only deceptive but completely inaccurate. There are many articles written about this product and how the company uses out of state appraisers to perform the analysis. So now adding unqualified inspectors to the mix, with the out of state appraisers performing the analysis… What could go wrong???
Think about this… We will go out there and find the best TV to buy and pay for it. We will go out there and find the best lawnmower and pay for it. Why? Because we want the best so we don’t have to deal with potential issues down the road. But when it comes to valuing our home, does it make any sense at all to allow someone, with literally zero clue about appraisal, to be the individual making the observations that will inform the appraiser?
Makes no sense to me…especially when that 50″ TV is sitting in the pawn shop or on eBay because I decided to allow Johnny-No-Knowledge to collect the data for my home for $50.00 and then expected an appraiser, who consequently had zero clue about my home and its surroundings, complete a valuation with uninformed secondhand data.
It amazes me how many people complain about the tax assessor increasing taxes based on incorrect info, and then they’ll carefully seek out someone experienced to solve that problem, typically an independent local qualified appraiser with the training and experience to provide accurate market-reflective data. If we can be that outraged by the county assessor, then how can we NOT be outraged by the ill-advised shortcuts, the untrained individuals, and the non-experts doing our home inspections to value our homes?
I will end with this. When we choose to use these cheap and fast products and untrained people, we have no one else to blame when things go south, and they will. It’s exactly the same dilemma as buying a car without the due-diligence research or buying a home and skipping the home inspection. Those choices come with consequences, all of which rest on the shoulders of the consumer and nowhere else. Think About It!!!
- Look in the Mirror - February 27, 2023
- AMCs Take a Sizable Cut of the Appraisal Fee - October 5, 2022
- Proposed Rule to Eliminate C&R Fee Tabled - July 21, 2022
The intended users of appraisals completed for most mortgage transactions are the lender and other related users. Identifying the intended user or users in the report is required. The home or property owner is typically not an intended user. The borrower typically reimburses the lender for the appraisal services required to underwrite the loan just as the borrower reimburses the lender for other services required to process and underwire the loan. This article is biased and misleading as it does not address these factors. We have a free market system in America and lenders are free to measure risk and underwrite loans as requirements and regulations allow. For those dissatisfied with the dynamic mortgage lending landscape they should consider other areas of the appraisal profession or possibly a change of profession. Disparaging the free market is not a viable solution.
Wayne, Coltrane. I think the articles and others like it, are more about safeguarding the public trust. We, as appraisers, are one of many guardians of the public trust. The system is becoming ala-cart. Whom does the borrower appeal to if there is an error in the inspection report; the appraiser who has not seen the house or the non-licensed inspector (who likely may or may not be insured for errors)? The public needs to be confident that appraisers have first-hand knowledge of their homes and are geographically competent, so that the report is also accurate. Again, it’s about the public trust.
Fannie and Freddie know the tax payers will bail them out again and again if all goes south. If I had a company in which I could gamble everything with no consequences, I would. Why use due diligence? There are no pitfalls when there is a safety net. You could grant loans to the lowest credit score, offer waivers for low LTV loans (BTW, how is that determined in the first place?), and disregard the need for those pesky appraisers who want to see the property for themselves. Fannie and Freddie need to be broken up into several smaller mortgage companies. There is no free market when there is a shared monopoly of only two players.
If there was no taxpayer bailout guarantee, I think Fannie and Freddie would be more cautious about lending money and would want more thorough reports rather than bi-furcated reports. Fannie and Freddie know what is going on at the ground level. They care more about their profits. They don’t care if they could be heading back to a catastrophic melt-down. At least that is the message I perceive from their decissions. They don’t care about the public trust. They have a bailout whenever they need one.
For mortgage transactions the GSEs, lender, and property owner/borrower have the same goal. They want the appraisal at the value they need to close the loan and somebody to blame if things go wrong. However, when the property owner gets their tax bill they protest their “high” assessed value because they want to pay lower taxes. Appraisals have nothing to do with public trust.
PS Out of my 35 years as an appraiser I spent six years at Fannie Mae in Credit Loss Valuation, National Underwriting Center on the Centralized Repurchase Team and Quality Control, and Enterprise Risk Management Valuation. Although I’m now retired, I have an inactive General Appraisal Certification and an inactive Broker License. My BBA isn’t really a factor at my age. I didn’t put all my eggs in the residential appraisal basket so I have numerous alternatives and opportunities if I ever want to restart my practice. My original post was intended to motivate other appraisers to do the same. There’s more opportunities even in residential appraisal than just mortgage lending. Play the cards you’re dealt. You’re supposed to be entrepreneurs so stop whining like a bunch of Gen Z/Millennial snowflakes!
Mortgage lending is where the most vulnerable are taken advantage of. Since most people have become accustomed to this, why not push the line a little further.
Wayne, in response to your assertion that appraisals have nothing to do with the public trust, I give you the preamble to USPAP (This is found at the very top of page 1 of USPAP, just after the table of contents):
The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public trust in appraisal practice by establishing requirements for appraisers. It is essential that appraisers develop and communicate their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading.
The Appraisal Standards Board promulgates USPAP for both appraisers and users of appraisal services. The appraiser’s responsibility is to protect the overall public trust and it is the importance of the role of the appraiser that places ethical obligations on those who serve in this capacity. USPAP reflects the current standards of the appraisal profession. Source: USPAP 2018-2019 edition.
Wayne, the above preamble is not new. The public trust focus has been the focus of USPAP and is referenced prior editions. Unless you have been retired since 1989, you should have a copy of this in your library.
I am a bit alarmed that you once worked for Fannie, but did not grasp the public trust segment. Worse, it seems you were not aware.
Also, please refrain from name calling. “Snowflake” is a euphemism. It is a term most used by the Sinclair Communications group. Given what you have espoused in your comments, I would not throw mud.
By the way, I too am close to retirement. Glad you made it and good for you. I have 28 years in as an appraiser. I acknowledge that the system is changing, but most of our arguments are about due diligence. I have been around long enough to have experienced numerous changes in the profession. I survived by adapting. Most all of us have.
We all want to do a good job and be confident we are accurate in our valuation and report description. I would have trouble being confident that a bifurcated appraisal can be truly accurate because I did not inspect the property first hand. If I can’t be confident that our reports are reliably accurate, then why should the general public be confident and trust our profession?
I think a good way to explain what’s going on here is to recognize that appraisers are primarily interested in their livelihoods, steeped in their own positions, falling back on the micro and individual scale of observation, measurement, and objective reasoning.
We’re talking about fundamental changes to a 5 trillion dollar mortgage market, falling investor confidence, desperate radical process changes to fund a swift and unexpected capitalization effort, likely removing monopoly status of gse’s when the true free market of non federally guaranteed lenders may one day be able to compete for regular financed borrowers business again.
This is so big, so huge. Let’s think about this for a second. Bolster checks and balances for a 5 trillion dollar mortgage market, or remove those and go full throttle no restriction and see what happens. What could go wrong? I’m nowhere near retirement but do only have 10 years to go on my mortgage note… If appraisers don’t see this coming down the tracks, they’re blind. Why they continue to provide services for the companies fueling these radical changes is beyond me. I go with the lenders whom don’t use middle management and are not short cutting traditional process. Support the good guys. It’s not rocket science.
The fact that they worked for FANNIE and that is how they feel says it all. FANNIE doesn’t even get appraisals on the REOs they are selling so now you know. On the bifurcated issue – we will once again be our own worse enemies. Let’s race to the bottom.
Wayne Coltrane. You’re out of touch with reality and obviously trying to ingratiate yourself with AMC’s. Probably voted for Trump and actually think the economy is improving.
These problems with the gse’s, mortgage markets, and quality of service concerns have carried through multiple administrations on both sides of the isle.
The economy is recovering. You’re right to not believe the hype though. Those dollars keep rolling off the printing press day and night. Next comes a dramatic increase in costs of goods and services. Inflation is here.
That’s why appraisers are their own best advocates. I did try to share the burden with amc’s myself. They never achieved a position for me, their panel appraiser, anywhere near equivalent what I was able to achieve directly, without their ‘assistance’. That’s a pretty simple consideration and business decision right? Whom best deserves my time, because they best supported my hopeful business plans.
Thank you Baggins!!!
Captain, Road Prison 36:
What we’ve got here is failure to communicate. Some men you just can’t reach. So you get what we had here last week, which is the way he wants it; well, he gets it. I don’t like it any more than you men.
Cool Hand Luke
What does Trump have to do with this discussion?
Are all appraisers from Texas this stupid???
You spent 35 years inside the most corrupt financial institution in the history of the US and we’re supposed to listen to your opinions???
Nobody is whining about anything. Stop antagonizing us. You need to enjoy your retirement and go play some checkers at the Barber Shop.
There is a special kind of stupid in Texas. It is called the herd mentality, and there are a lot of copycats there. Being a strong Republican state, Texas is a leader in the way to be “one up” on being the “most” conservative, reflecting the influence of the Bible belt which encourages conformity and when I hear Texas politicians speak, they rarely make any sense; it is much about bravado and false pretenses, like a Southern Belle flitting her eyelashes while her relatives are lynching a Black man who picked the cotton for the clothes she wears, but they are sometimes clueless. I have relatives in Texas I can’t speak to because they are rabidly biased against anyone from California because their dense heads somehow perceive all of us women being hookers and men being gangsters (thanks to tv and movies).
Fannie and Freddie are private investor groups, not mortgage companies or banks; they are there to package mortgages and resell them. The quality of the product is very low as experienced in their mismanagement and “crookery” that led up to the 2008 world financial crisis, also perpetrated in concert with Wall Street brokers, derivatives, and banks who crossed the line between being a lender and investor (ending the Glass Steagall Act meant to protect the public trust after the Great Depression).
So why are the gamblers still running things? None of the people responsible went to prison and many are still running things, or have been rewarded by high positions in government. Fannie and Freddie were not really regulated because they have too much power. They have invaded our appraisal profession because they don’t have any respect for anyone who gets in the way of their profit-making schemes, many of which are not sound. I remember after the 2008 bailout Interthinx reviewed the original appraisals on homes appraised in the run up to the crisis, and most of the people at Interthinx were Indian or Pakistani computer nerds, and none of the company’s owners and directors had any qualifications for appraisal related work. They employed the appraisers who worked for IndyMac and Countrywide to “review” the original appraisals to determine the responsible parties involved in the rampant mortgage fraud leading up to the bailout. Now they are engineering the next bailout and they can blame the appraisers again, and now their “modernization” actually is dumbing down the process of valuation and breaking it into tasks so they will function only a rubber stamp using the lowest qualified appraisers at the cheapest cost as they are going to make those loans anyway. Homeowners want cheap loans. When the homeowner needs the money they want the highest value, not thinking the objective, ethical, well-trained and licensed and insured appraiser could protect them from over-encumbering their biggest asset by giving an honest, supportable opinion. People who refi all the time are playing a game thinking they are out-smarting their bank and getting away with a high value while the lender is taking that house back if the homeowner can’t pay the mortgage anymore; and fake equity falls like a house of cards. This profits investors who buy them for less than their former “value” or when everyone is over leveraged, then they convert to rentals, and more people are out of the home ownership position. There are so many homeless in this country and prices are so high that young couples postpone marriage, starting a family and other life experiences because they owe too much on their student loans and can’t afford to buy a house because there is not much in affordable rentals where one could save for those big ticket items. So while homeowners or borrowers may be sold an appraisal waiver, they will have to pay for it while getting absolutely no protection, or the one objective person to study and report value on a big purchase. While some Fannie guy like the joker Coletrane says this property doesn’t need an appraisal for whatever bs reason he can come up with. My impression is that he is of the herd mentality at Fannie and that he wouldn’t know the truth if it hit him in the head because he is a parrot, repeating what he heard from what he considers a good source- none of his ideas are new, just salesman stuff!
Someone asked what does Trump have to do with it? He is a slick salesman and the ultimate liar. None of us would want to appraise any of his property as the pressure to deliver on an exaggerated value would be so extreme it would give you a whiplash and if you didn’t please him you would wind up with him accusing you of ignorance. He hates experts! That’s why he appointed an idiot savant to HUD, so he could develop more projects in the new “opportunity zones” designed to benefit he and his cronies.
The republicans are now a cartel and everybody who doesn’t like Trump gets an insulting nickname. He is obviously racist and is separating children from their parents if they dare come here for asylum. People have migrated over all of history to find better living conditions and we are causing more refugees by war, and he capitalizes on people’s fear they are taking our jobs; corporations run by greedy punks who don’t like laws or regulations are taking our jobs in the name of technology, and it is a bad thing. Appraisals have not gotten better with big data, just more artificial intelligence instead of human element. I know personally from research into luxury homes that Trump is money laundering (Palm Beach home he bought for $41 million held for 2 years sold to Russian fertilizer magnate for $94 million and neither of them lived in it). Later that home was torn down (mold, bad design), so yes, Texas culture, New York Culture, or the culture of greed is infiltrating into our profession, in favor of those who justify greed.
These people are the problem, not appraisers doing their jobs. Appraisers are judges of data, imitating the actions of the market. People don’t buy houses by proving adjustments for differences on a micro level, or performing regression analyses, so why should we accept Zillow and artificial intelligence when we are conducting an analysis of the behavior of people? Resist the so-called modernization of appraisal and use the principles and techniques that traditional appraisal theory developed for guidelines to good judgement, while remaining a neutral third party to the transaction of a real estate deal. If it is based on salesmanship or lies, it is just manipulation. Who expects the nerdy programmer to understand what we know, and what we learn with each appraisal which is that everything in real estate is local, and there are different strokes for different folks. It is our job to understand participants’ expectations and there is always a range when we are reporting value, but hopefully we reason the opinion by solid facts, correct application of the principles and reconciliation of approaches, not convoluted programming by people living in the digital world or the latest gadget someone is selling us to make our job easier. This is not a science, it is an art in need of understanding human behavior, recognized by patterns in an environment of trends that are constantly changing.
Don’t rely upon Fannie or Freddie to agree with USPAP and don’t think the AMC isn’t exploiting you, your license, your profession or your time; these people are just blood sucking leeches feeding off appraisers because they just can’t stand that we are very independent, based on the nature of our need to uphold the public trust.
Yet most lenders and AMC’s won’t permit an experienced trainee to inspect without the certified supervisor.
Emily Hutchinson Snyder exactly!! Makes zero sense
They wont even let an experienced licensed appraiser do a report you have to be Certified.
Herb Martin great point!
I don’t understand why I have to undergo background checks, be fingerprinted as well as apply and pass a check by the Department of Public Safety in my state…….but are these same requirements being asked of the ” appraiser imposters”?
Consumers/homeowners have the reasonable reassurance that the appraiser coming into their homes with their kids, their belongings and everything they hold dear has been checked out by the state and other agencies, to be safe and trustworthy…..but if the “appraiser imposters” are not going thru this same process then who knows who is coming into their homes….potential criminals or thieves? Just a thought.
We must address the problem with Fannie, Freddie, Banks and other lenders believing in algorithms, programmed by non-appraiser nerds, and technology which does not come close to a trained, experienced appraiser who has sought the path to become a professional, and jumped through the hoops the peers have developed that test our knowledge, and guide us through the challenges of appraising property.
Every property has a problem; that’s what I learned early in my career by brilliant, high paid and experienced appraisers who were highly qualified! Not everyone in this profession is as smart as some of those who I trained under; and even some of those people were not the most ethical in the business, as I learned later in my career when I was up against them in court, finding how they could twist themselves into a pretzel to come up with a number that favored the client. I took serious the standards and ethical rules; I worked hard with each assignment and consulted with some of my peers when I needed to have guidance. There is no substitute for that experience; we all haven’t appraised every type of property nor have we seen every problem, but with education, support from peers, hard work and ethics we can be a fiduciary for both the borrower and lender!
We are objective third parties, not operatives seeking a number to please someone’s personal interest. A computer and software can’t reason like humans when they decide how much to pay for a property. Stay in the middle; do what you can support, do your own inspections and don’t bow down to the PRIVATE ENTERPRISE OF FANNIE/FREDDIE! That’s how we contribute to the public trust!
I will go out of business before I ever do this type of appraisal report!
Troll Alert: This comment/commenter was flagged as suspicious!
Dear Appraisers: Keep pushing back on bifurcated appraisals and we will do away with the need for you entirely.
Frannie, Please let us know what lender you are so we can help you start getting rid of us. We will know who not to take work from starting now!
Received an email from a lender in my area this morning stating this is the route they’re taking. Well, nice knowing you!
Primary intentions of FNMA/FHLMC is to “monetize borrower, mortgage, and real estate property data”. Accuracy of Appraisals and who is performing those valuations is SECONDARY to them. Pretty obvious that Consumer Protection and Appraiser longevity is the very last thing they are concerned about.
Appraisal waivers are facilitating USER GROWTH.
Maximizing USER GROWTH is the same approach that is being used by Tech companies to maximize their valuations.
Kinda suspicious of the “UAD Survey” that has been recently emailed to us.
Since when have Fannie and Freddie given a rats ass about what appraisers think or want?
I smell a dead fish.
It’s important to recognize that GSE lending is not a true free market environment but rather is a highly regulated restricted market environment by design. If lenders were loaning their own money, and not benefiting from participation in the GSE programs, neither them nor the borrower would fall under FRT regulations. GSE’s are regulated institutions intended to protect the liquidity of individual lending companies, so citizens can continue to benefit from affordable access to the lending institutions. The GSE’s force a higher degree of risk management attention on lenders whom would seek to participate and benefit from this protective institution with predefined rule and risk management parameters. The GSE’s are not supposed to be wielded as economic weapons to offload unnecessary lending risk to taxpayers with a free pass to operate however they want without adequate restriction or oversight in the interest of maximum profits.
Who reimburses the taxpayer? It’s not a purely free market scenario when the consequence of possibly excessive risk is borne by the individual, while the corporation is indemnified, in part, by that same individual through the taxation applied to them.