Desktop Appraisals: Has The Devil Infiltrated The Public Trust?
Are desktop appraisals with third-party inspectors protecting the public, or are these products about to destroy the very profession I love so much.
The Uniform Standards Professional of Appraisal Practice (USPAP) are the key to maintaining public trust in real estate transactions. USPAP is pretty much the equivalent to the Bible, but it MUST be followed for appraisers. Created by the Appraisal Foundation, USPAP set forth the guidelines for how appraisers should perform their work. By following these standards, appraisers ensure that they act in a professional and unbiased manner. To expand, even more, USPAP states, “While USPAP does not define public trust, it refers to the need for the public to be able to have confidence that the services provided by an appraiser are performed competently and in a manner that is independent, impartial and objective.”
Before we go any further, we must define what USPAP means by PUBLIC. According to USPAP, “The public, whose trust the appraiser must promote and preserve, exists on several levels. The most direct is the appraiser’s client. In addition to the client, any additional users would be part of the appraiser’s public. But, even beyond the client and other intended users, other parties may rely on an appraiser’s work, and the appraiser must be careful not to mislead such third parties. Finally, it could be said that the general public is also part of that public. The economy could suffer if the general public cannot depend on appraisers to act as independent professionals and provide credible results.”
Reread those first two paragraphs. Got it?
So that brings me to the reason I am writing this blog post. The appraisal profession has been in a rapid state of change since the financial crisis of 2008. Many of these changes that were supposed to have a positive effect have created more issues within the profession than they were supposed to solve. They range from Laws like HVCC (Home Valuation Code of Conduct) and the now Dodd-Frank to Appraisal Management Companies (AMCS). The latter was supposed to be the middle man and firewall between appraisers and lenders. Going back to the AMCS, they were supposed to act as the agent for the lenders. Somewhere along the lines, they were allowed to morph into having staff appraisers, building new technology, and selling that to their lenders and others controlling the entire appraisal process. I’ve written other blogs on the AMCS and how they operate, which you can read via the following links:
Now we get to the newest addition to my list of issues DESKTOP APPRAISALS.
Starting in 2022, desktop appraisals will now be accepted by Fannie Mae. I’m sure many of you are asking, “How can this be a bad thing? “Well, that’s what I am here to outline for you and have you think a little more from the mind of an appraiser and not a lender or AMC.
Let me first discuss what these desktop appraisals entail? Here is the breakdown from Fannie Mae and my comments:
1) The actual appraiser does not have to inspect the property and gather all relevant data that could impact the home’s value. A third-party inspector (Realtor, homeowner, Uber driver, home inspector, AMC trained property data collector, etc.) will come to your home, take measurements, make a floor plan, take pictures and notes. This person does not have to be licensed by the state as a professional. Appraisers are background checked by the state. Who is going to background check these people? Do you want just anyone in your home that isn’t a licensed professional and held accountable to state and federal laws? There is a database of appraisers nationally and state-wide.. Will these people be added to a database to be held responsible? Let’s take it further as an example I was aware of today. An inspector (not an appraiser) told a borrower they were the appraiser. When the actual appraiser called to get more info, the borrower stated that the person that was there told her he was the appraiser there to do the inspection… How’s that for sketchy, and the borrower does not have that person’s name. Outstanding.
2) Data Provided by parties with a financial interest in the subject property’s sale or financing (IE: Agents, Home Owners) must be verified by a disinterested source. THINK A MINUTE HERE… ISN’T THIS WHAT APPRAISERS ARE FOR? I mean, what could go wrong with an agent or homeowner inspecting their property or another industry peer’s property? I don’t know about you, but I am pretty sure they won’t be sending those pics or data of issues with the home to hurt another or their deal
3) Must include a FLOOR PLAN with interior walls. So besides an appraiser who is experienced at measuring a home, are we to be confident that the person creating this Floor plan has the experience to do so? Let’s take this further. In 2022 Fannie Mae stated they are adopting ANSI measurements for all appraisals EXCEPT desktops. I wonder why? I live in Atlanta, where tax records, sketches, and home data are incorrect. What I see here is many so-called inspectors taking the cheap way out and using tax records sketches to make a floor plan to do more inspections per day. That right there is a red Flag
4) If the appraiser does not have sufficient information to complete a credible appraisal, they must refuse the assignment. So what you are saying is that I need to wait for this info to come in, decipher it, and if it’s not enough for me to do a credible report, I must decline? How does this save time? How does this benefit the borrower? Wait. I get it. I will decline it, make the lender and AMC mad, they then send that info to someone else to do the report, or order a full appraisal days later and have the borrower waste more time. I must say, this ranks up there with Zillow’s Ibuyer program that had them overpay for homes only to lose money and time
Now I will outline my questions and questions you should be asking.
Question 1) Where are the protections for consumers to know who might be coming into their homes? Who do they represent? What is the knowledge or experience of these inspectors? Are they remaining unbiased? Are they providing all the info needed? How are they representing themselves to homeowners/borrowers?
Question 2) Are these third-party inspectors adequately trained.
Question 3) Are these inspectors licensed by the state or obtain a certification that shows they understand what is expected of them.?
Question 4) Are these inspectors being Background checked? Many AMCS require appraisers to be background-checked by them and the state. Third-party inspectors should be held to the same standards as appraisers, and the state should have a proper background check done and a database of these people for any issues or complaints down the road.
So now that I have explained the process, I will get back to the PUBLIC TRUST aspect and back to what USPAP states. How do these desktop appraisals with third-party inspectors involved protect the public trust? I believe that it goes against everything those first two paragraphs say. How is the public or any intended user confident they are getting what they expect from an appraiser if the appraiser or an appraiser trainee trained properly never visits the home to collect the CORRECT DATA? So does this mean that what USPAP states above is no longer valid for these desktop appraisals?
Let’s face facts here. In this current day and age, protecting one’s home, assets, and more is very important. Consumers deserve to know who comes to their homes and what role they play in the process. They deserve to know where all this information is going. I know of some companies that will have this information sent overseas, and well, if you have an unlicensed inspector with no standards, laws, and regulations to follow, might those pictures and sketches end up in the wrong hands? They deserve to get the best service possible. When they hire someone to perform a service, they do their research. They look for companies with good reviews, reasonable pricing, and a good reputation. However, they are at the mercy of an AMC or Lender when it comes to the lending process. They deserve to be protected by laws and regulations. They deserve to be respected and stop having the Federal Government, Lenders, and AMCS take advantage of them.
Lastly, I need to write about the protection of the appraiser.
Right now, per my knowledge, there are no laws or regulations that will absolve the signing appraiser of issues due to inadequate information the inspector collected. The signing appraiser is fully responsible for all information within the report. While many of the forms we use will have certifications that will separate each party, at the end of the day, there are no laws, regulations, or requirements for the inspectors being responsible for the data they collected. Appraisers should NOT have to take on the responsibility of poor information from a third party or figure out if the data is correct.
Third-party data collectors MUST be held accountable for the data sent to an appraiser to further this. For example, suppose an appraiser’s report is flawed due to the inspector’s data. The appraiser verified all data given, but a complaint was made due to information being left out. In this case, the inspector or data collector should be held responsible and NOT the appraiser. Any Complaint filed must be looked into to determine if the data collector or the appraiser was in the wrong.
So I ask you this? Is the Public trust being protected here? Are desktop appraisals with third-party inspectors protecting the public, or are these products about to destroy the very profession I love so much.
- 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
What????
Interlopers (Sponsors, AMC, NAR, etc) have been allowed to consistently reframe the Appraisal and individual Appraiser process since 2008. The problem, as a group the disparate individual appraisers refused to join forces, organizing the same way other smart professional business groups have done in both the past and future. The moment the Bacheors degree was eleiminated for the Certified Residential, yet the process remained unchanged for the General, it was obvious. For those appraisers that worked in other industries, this was a slow-moving takeover by the money folks as mentioned above. The pic attached says it all.
Why are appraisers required to do as much education and CE that we are, and our fees do not reflect our expertise? The powers that be are trying to eliminate our jobs.
Scary deal. These are not going away unfortunately.
I’m not sure what the problem is, they would go away if we all decided not to do them! I will do my part and just hit delete. Now if they want to call me to measure and take pictures, we can talk but Fannie can ask all they want but I am not providing the desk appraisal.
I’m not going to take any of those orders. I have already been asked by multiple AMCs if I would do them. I have said “NO.” Also, all appraisers need to join the AGA so funding for a unified voice can continue.
My buddy called yesterday to tell me that he is inundated with calls from AMCs (I have never worked for them) to see if he will do the DT reports, he is rejecting all of them. I have already removed the DTs from AppraisalPort and Mercury Network and I will inform all of my clients that I will not do them. Remember when the properties end up as REO’s they will be coming for you.
Some of the hardhead appraisers did not want to band together 30-40 years ago so now our profession has been taken over by FNMA. These might be some of the same people who count open airspace as GLA.
I do not have an issue with a desktop or drive by, but I do not want to sign off and be responsible for someone else. Why does FNMA not want the appraiser to go into the property. How does this save the client money if someone will still need to pay the other person to do the inspection.
If they want to save the borrower money do something about the Real Estate commission. I am finding more and more that some of the listing agents do not even show up for the appraisal anymore. They put the listing in the MLS, receive several offers the same day, read the offers, close at the end of the month and receive a commission.
I had one yesterday the listing agents commission was $23,000 for a property that was under contract in 2 days. He did not even show up for the appraisal inspection.
Well personally I’m really happy when a listing agent is willing to pass on the appraisal inspection but that’s a two sided coin. I also routinely inform them it’s important to qualify that an actual licensed appraiser is performing the inspection as the defacto understanding among realty persons is that is a requirement, even though it is not.
Q. Why does FNMA not want the appraiser to go there? A. Because mortgage backed securities are an empty bag and everyone knows it. They qualify borrowers primarily on the ability to repay. Accelerated fiat printing has rendered price to be rather meaningless. The value portfolio holders consider prioritized is the ability to repay. Shorts and repurchases actually help the big players to a certain degree, they’re write offs.
‘My buddy is inundated with amc calls.’ I’ve identified his primary problem. When dealing with unnecessary third party companies, liability is always passed down the line.
Oh, I was wondering why Fannie was moving to the ANSI measurement standard….NOT!
I will say this much, SOME properties and property types can fit this mold very easily. Think to the 2055 in a high-density area with plentiful data in PUD’s. How many people have done a 2055 on basic properties like this? I would imagine a lot of appraisers. Funny, we don’t mention the lack of data actually being collected for such scope of work. It all boils down to assumptions, EA’s, limiting conditions, and certifications. I am more focused on what we are certifying to on these types of appraisals rather than them existing in the market place. It is our job to put together a credible analysis based on the info that is gathered. If the data is so limited that you can’t opine credible results then pass on the assignment. If credible data is gathered then you disclose that anything outside of what was provided is not something you can or will be responsible for.
Before I get attacked- hear this: I am not saying that our profession isn’t being actively sought and infringed on. That has been the case ever since the dawn of time (at least for banking/mtg lending appraisal purposes), we are. The fact is we as a community hate being stripped of our profession. I get it and agree. However, we work in an industry just like any other: you adapt or die. If we all spent the amount of time searching for new avenues to work in the appraisal industry instead of complaining about all the changes it goes through we would collectively be much more productive. I invite all the haters of change to start being more creative in their business models in order to survive. The biggest changes for residential appraisals has yet to come. And yes, its coming soon.
So, any of us that don’t agree with your point of view and reply are just haters trying to attack you? Silence is deadly, so I think you should welcome replies. Just like we shouldn’t be quiet when the 800lb elephants try to crush us.
If his comments DON’T sound like someone with a “VESTED” interest in creating these new bogus valuations that can be prepared by a 3 year old with a long criminal history and zero education…..than I do not know what does.
Brian Kirkpatrick yeah, it’s called REO work
Brian Jarrard
Wouldn’t argue with that either!
One can choose to take a principled stance, or choose not to. This country was founded by principal stances. Departing from that carries more gravity than personal income. A position which rests solely upon personal liability protection without regard to the potential harm to consumers has the potential to create dire risks and eventual abolishment of checks and balances systems in general.
We don’t go along to get along with predatory interests but rather stand as the check to balance. Even if predatory interests are not currently present, reductions in checks and balances systems will act like a magnet to attract those interests in the future. This is often referred to as expanding government. Advocating for robust checks and balances rests at the core of posterity protection for future generations of Americans. It is the very reason why we refuse to let the government manage everything and resist when they try to usurp such power. Know your history or be condemned to repeat it.
One must define limitations to effective scope of work on an individual basis. Just because allowances are workable in one segment does not justify a total blanket rule change which may harm consumers in other segments. This is the problem with bureaucrats and their supporters, one size does not fit all and as the author can so confidently predict; for every problem solved other problems will come forth as unintended consequences. “We’re from the government and are here to help.”
We do understand the argument and it is valid, to a point. We all must make assumptions from time to time and sometimes that is adequately supportive of credible assignment results, but not always. The principled stance is to reject blanket rule changes which may harm consumers. Every single act and possibility of omission matters. One should constantly seek to reduce the possibility of harm and should never accept radical alterations and diminishment to checks and balances systems as acceptable. One can justify this position on ethical principals alone. The argument at it’s heart is not about process, it is about ethic. As the worm turns, they have already changed too much.
Did you read the article? The 4 questions alone are enough to not offer this service. It wasn’t talking about completing the assignment or if it was even possible. Maybe it is, I rely on the county assessor as my only source at times but again that was not what the 4 questions addressed. Who are these people doing these inspections, sounds from the example that they were stating that they were appraisers, just like me? Are they licensed with background checks like I am? Are they trained to measure to ANSI standards like I am? If they have to go through all of the training that I have then I might rely on the service but that all goes back around to then how is this saving any time or money?
I would write your own limiting conditions and certification page. Who knows if the pictures you receive from this unlicensed person are even from the house you are appraising
Would that really prevent anything from happening against your license? That’s the only reason they deal (put up with) with us is for our license.
Don’t do them ! That simple
Who are appraisers going to get to provide interior wall sketches? The homeowner? Really? A home inspector or realtor? Will they do that for free? I’m confused, but what’s new?
GREAT ARTICLE. A must read for ALL appraisers.
I think Amazon has a real business opportunity here
Why doesn’t Fannie Mae want the appraiser inside the home?
It’s all about the money! IDK what they pay for a desktop, but if it’s $150 and $50 for the non-licensed photographer well then you got your answer.
Yea, While the AMC fleece the Home Owner for $600+ as they ask then to do their interior inspection. Why is this predatory AMC practice acceptable and the Government not looking into this. How is this going to save time. It most certainly is not going to save the owners any money if the AMC can help it!
Fannie is clueless as usual with their abbreviated non sense “desktop” or “hybrid” products.
When I first heard about the “bi-purification” garbage back in 2019 at a CE class; I just laughed.
These are going to be valuations with misleading data that will end badly.
Think the Great Recession of 2007 was bad?
That was child’s play compared to this bubble forming.
For Fannie it is all about cutting costs & making more $ for the investors/lenders.
Turn these ridiculous products down.
Massive liability waiting to happen.
That’s right Henry, astute. Buckle up, it’s just getting started. Some lenders care about their borrowing customers though, they don’t just want cheaper faster.
Here comes Joan again…
https://www.appraisalbuzz.com/the-future-of-desktop-appraisals/
Haggar jumped in on ANSI, a good read.
https://www.workingre.com/ansi-ill-tell-you-what-you-can-do-with-this-ansi-stuff/
This was good. https://www.housingwire.com/articles/like-it-or-not-desktop-appraisals-are-here-to-stay/
Regulatory boards are paper tigers, the appraiser stands alone.
I put in a good hour trying to find some help wanted for field sketch measurement services and could not find pointed results. There are however tens and tens of thousands of measurement service positions out there. From home depot flooring temps to architects and rice special accreditation programs, the works. If the goal is to save consumers money one naturally assumes they will not be utilizing the well qualified people, as engineers and architects often have a higher billing basis then appraisers.
Appraisers provide some of the most reliable yet affordable sketch and measurement services through a wide range of industries. If they want improvements in sketching reliability they’ll have to add architect services to line item disclosures and tag on a hard cost more expensive than a full appraisal. Now that’s a proposal I can get behind, as long as they follow local measurement standards and do not blindly adhere to ANSI if that’s not the local standard. It is not the use of third party measurement services which is objectionable, it is the knowledge ahead of time that amc’s and lenders will seek out bottom dollar vendor service to accomplish that.
At the very top of the appraisal professional ladder there are a series of firms whom actually do hire architects and an array of other vendors like inspectors and surveyors so they can decrease assumptions and increase reliability. Their fees for residential start somewhere in the range of $2.5k – $5k+ depending on the challenges. They market to individual investors, estate managers, and hard money high risk lenders. Each appraiser can pick their own approach, as they hopefully also have a clue about measuring their own liability risk. What appraisers should be leery of is trusting people without licenses and without insurance to provide credible information.
I replied to Hagar’s article as follows: “Mr. Hagar misses the point. If a subject property 2nd floor ceiling is 6’6? I can easily measure it and comply with ANSI. The neighborhood comps may or may not have 7 ft ceilings. Our assessors and agents don’t know and there is no other source. I do hope Mr. Hagar will respond and tell me how he does this in his market over the past 20+ years. Personally if I were with Fannie Mae I would have suggested contacting the assessor organizations and use their method.”
The points being made are not just about the appraiser or the process. This needs to stop being about appraisers liking or disliking the FNMA regulations as the problems go much deeper than that. Appraisers have the ability to opt out if they like and if they want to proceed, that is their choice. The blog is simply explaining there will be consequences to everyone including the appraisers, lenders, genral public and everyone in between. it makes a valid point about the ridiculousness of the changes that is quite obvious were not thought out. Read the letter from the President of the NAR to FNMA that will give you more insight into the problems they see coming down the road for everyone. If any appraiser can’t understand what this blog is about then there is no hope for you. Appraisers need to stop fixating on small, inconsequential issues with the requirements and focus on the “big picture”. But I digress, there is no unity among appraisers, and everyone is an authority.
Thank you! YES! We need a voice. A large, public, collected, well heeled and reasonable voice. Yesterday!
My License, E & O, Signature and Business. No Thanks
Part 1 the AMC’s get Unqualified people to do the inspection. Part 2 Get unqualified people to enter the data. Part 3 Hire lots of AMC Appraisers to Sign and Rubber Stamp the Appraisal Process by the thousands. All the money goes to the AMC’s with the Governments blessing. All Independent Appraisers doing bank loans for the Government are gone!
On another note, in one of my first blog entries I suggested this could just be another attempt to get rid of appraisers all-together. They have not been able to do so up until now, as hard as they have tried, so now they are creating the “perfect storm” to do so. I would not be surprised if that is the end game.
this worries me most
There was a big push for these a few years ago remember. Here is how it works. LO tells borrower “all we need is this desktop thingy” for $500. Desktop is ordered – takes 2 weeks and comes back short. AMC is contacted and bids sent out for full appraisal – 10 days later the order is assigned. 30 days after application borrower is called by Appraiser to schedule inspection. Borower is agitated and lashes out at Appraiser for “taking so long and costing me extra $$”. Appraiser explains the situation to borrower and pops another Xanax. Prayers and Just Say No!!!
How are these property inspectors going to accurately measure Victorian, NE Farmhouses Antique and many of these older complex properties in regions such as New England? I’ve been doing this 20 years and am still learning on these types of homes especially with all the jut outs and finished 3rd levels with circular turrets etc. The GLA will be way off causing the appraiser to produce a misleading report. Lenders will come to value the experts in that field and will be better off ordering a full appraisal instead of cheap and fast to save a few hundred bucks.
https://www.google.com/search?q=strange+residential+designs+real+property&tbm=isch&ved=2ahUKEwj7_q-a6Pj1AhUpAp0JHT9wAl8Q2-cCegQIABAA
Good one Ralph. The above: strange residential designs real property.
In the bureaucrats minds, it’s all sanitized uniform DC area condo’s or whatever. In the real world people alter their houses. Let me tell you about the time I leaned against a DIY back wall addition and the entire wall came down like 30 ft across. Adventures in the reo world. Not too long ago I almost fell through a 110 year old stair set. My subject to was to ‘shore up the stairs with professional construction services’ and nobody even understood what I was talking about. They asked for clarification if it needed a new hand rail.
One of appraisers most valuable skills is knowing about construction principals. This is a skill the appraisal community will be denied and eventually lose if inspection duties are outsourced elsewhere. Everyones very first real estate valuation lesson should be to go to a house and list as many specific building components as they can. A house is real property, it is not just data on paper. Value may be the sum total of component worth in comparison to the surrounding market and comparables sum totals of component worth, aka adjusted values. Effective age matters. I don’t know, get out the dart board I suppose. Enter the FHA heated spaces rule for extra comedic effect regarding these proposals.
Wow, what a convoluted so called profession with the blind leading the blind, and most don’t know what they don’t know. I will save this article (and others) along with reader comments to demonstrate why no one should consider entering this job/field. I keep my appraisal system very simple as follows: thorough narratives reports only (forms are inadequate); require my own personal inspections/measurements of properties (except instances where a damaged/destroyed structure is appraised or there is a potential dangerous situation, etc.); no restricted reports; no work for residential lenders; and because of high demand – turnaround times range from 3-6 weeks++ and in some instances. several months. Most of my work is litigation/legal oriented. I welcome opportunities to be involved in cases where the appraisal is reported on a form, completed at a desk and/or relies 3rd party inspections/measurements. Question: Are the 3rd party inspectors going to adequately pick up on: functional issues, condition issues that should require bringing in a contractor/engineer; potential encroachment/adverse easement issues; external issues both positive and negative; and on and on and on.
The biggest change needed (but will not happen) is to get rid entirely of the secondary market and have each lender fully responsible for their own loan portfolio. The secondary market players are ultimately very destructive. But I guess they have our tax dollars to bail them out every few years. The residential appraisal field has been self-destructing slowing over the past few decades. It is sad but interesting to see this continue at an accelerating pace. Final Conclusion: residential appraisers are no longer wanted or needed. Their purpose has been changing for the past coupled of decades to a scapegoat status for institutional and governmental screwups. RIP.
Considering the appraiser coach sold his appraisal business and now works for True Footage https://truefootage.tech/join-us, where can we all turn to get the answers we need? When those at the self proclaimed top are failing and selling out, the end must be near.
Seek the truth.
Bill, Thank you for pointing that out.
Appraisal coach was always a discrace to the profession.
Click the ‘who we are’ tab at the above link. No coach, but still entertaining content. Don’t forget to hover over the images for the reverse graphic flip read. I’m still confident the block will prevail.
Someone should write an article regarding why we chose appraisal. The liberty of time. Not being always tied to a desk. Real independence. Benefits of the knowledge base gained and experience factors with reviewing so many hundreds and hundreds of homes in great detail, often learning valuable insight from home owners and construction persons. Desk jobs are out there though. They can pay well for appraisers if you’re not in the role of an appraiser, pass all the liability, punch in punch out, benefits, retirement, a reliable team to work with.
The real problem is the size of middle management amc’s. We don’t need more efficiency from appraisers, we need more appraisers to handle expanding populace volume. Billions of psiphoned funds to amc’s which would have fueled what could have been 100,000 or more appraisers on the scene today. All FNMA had to do to solve ‘appraiser shortage’ was honor the original intention of Dodd Frank RegZ on Appraiser Independence and in doing so basically require amc’s to bill for their ‘management services’ separately. Instead they’ll they’ll squeeze the entire industry for more efficiency and leave the fees improperly co mingled. If we were not paying the entire wage burden for the entire amc industry, appraisers could hire more help. Desktops won’t solve anything.
AMEN!
The company has yet to update their site Baggins, but rest assured the coach did sell out.
( https://theappraisercoach.libsyn.com/717why-did-dustin-sell-his-appraisal-office )
Seek the truth.
Bears repeating from Baggins
All FNMA had to do to solve ‘appraiser shortage’ was honor the original intention of Dodd Frank RegZ on Appraiser Independence and in doing so basically require amc’s to bill for their ‘management services’ separately. Instead they’ll squeeze the entire industry for more efficiency and leave the fees improperly co mingled. If we were not paying the entire wage burden for the entire amc industry, appraisers could hire more help. Desktops won’t solve anything.
Thank you Eric. Sometimes it feels like I’m just passing time and not many bother to read my comments. When I sit down to write about appraisal theory here I can often invest hours into each post. My appraisal pal was like; the end is finally here. I’m slightly more optimistic. Hybrids, desktops, multiple rounds of rising demins, opt out allowances, ever changing regulation, etc, they came and went. Full fee 1004 orders continue to flow forward. Rising rates is going to put the pinch on though, buckle up. It comes down to the lenders. The top players still push direct in volume. They’re not going to cast aside decades of appraiser vendor relationship building for the next time saving gimmick. I’m personally not very optimistic on sustained volume in the future though. Fed has backed themselves into a corner and the only way out is to continue with rapid rate rises. As cost of money increases upward price movement will eventually lose momentum. This will create the illusion of managing inflation in housing prices but there may be substantial lags and pain point instances as sellers will certainly be reluctant to accept updated realities on decreased purchasing power and cost of services and material is certainly not going to go down. Those flipping equity may finally get some relief from market competition but it’s doubtful they’ll fare any better economically than as if they would have jumped in the mix over the past few years when rates were lower, not if they still need to take any mortgage loans even if small, to get there.
If only we could have made more of the past decade and had been able to hire and expand as many of us planned when entering this profession pre hvcc era. Actually that’s 14 years ago now, how time flies. The ongoing violations of the original intention of dodd frank have the potential to be the largest class action in history. If only the CFPB interpretation of the safe harbor rule regarding C&R would not have changed a single word from customary and reasonable to customary or reasonable. aka; cfpb safe harbor rule. Every single day every single instance of an amc paying less than ‘as if an amc was not involved’ should have created a finable offense of $10k/$20k per repeat instance for below customary market fee setting. The amc’s are essentially engaging in racketeering and have made a business model out of that. Cleverly the lobbyists have made original proposed RegZ language virtually inaccessible in historical documents. If anyone can find the $10k/$20k finable language in historical proposed DF documents, please post or share. I have a reference to that in an old Alamode letter but that’s all I can find these days.
These are very important concepts for newer appraisers and regulators looking in from the outside to understand; the variable opportunistic fee raking is prohibited behavior for literally everyone else in the chain of mortgage lending and would be called; unearned fees, junk fees, fee skimming, etc, and is felonious behavior which is specifically defined as prohibited activity in firrea, respa, multiple references in the federal register, among other regulatory guidelines. The irony of reading market update articles on supposed cfpb regulatory activity as linked below when they are the ones whom denied separate line item disclosures and created a safe harbor rule for C&R definition, for the distinctly different service of providing an appraisal report with an appraisal license, vs relaying that report and managing the distribution of requests and payments with improperly co mingled fees, requiring no appraisal license… Imagine the calamity if such a company could be in charge of setting and distributing variable limited fee portions and never returning cost savings to consumers in a co mingled fee scenario for, brokerage fees, realty fees, inspector fees, title fees, notary, home insurance, home repair, etc, etc.
Amc’s enjoy a regulatory loophole which has clearly been detrimental to consumer protection, the viability of the valuation service industry, and mortgage lending efficiency in general. To state it simply; Because amc’s do not need to return cost savings for reduced cost of vendor services to borrowing consumers, they have a constant financial incentive to drive vendor fees down, consumer fees up, and pocket the difference. Quality of reporting, availability of vendors, sustainability of the valuation industry, efficiency, cost, all have suffered as a result. Regulating amc’s as companies had a nill effect because individuals can not be held accountable and there is insufficient check to balance when individual vendors seek regulatory relief against corporations whom sole motivation is to fleece said vendors for substantial portions of their fee. What’s your fee and turn time? aka; violations of the appraiser ‘management rule’ on providing a thing of value to be the preferred selectee. When appraisers discount for amc’s they are essentially bribing their way ahead of the order assignment line. As a result many of us refuse to even quote fees to amc’s on ethical principal. More irony as predatory unethical interests seek to guide the supposed ethical professionals and advise governance on sound regulatory and industry structure. These are violations of the RICO act, if anyone still cares about law and order.
Amc’s expanded at a rapid pace and bragged about business growth to the same businesses they essentially stole the market potential from, the appraiser community. In an effort to capture more and maintain growth these companies portend to speak for our entire community all the while continuing to deny us the potential for growth and apprentice hiring. Sure we can carve out enough for ourselves with a few direct assignment clients but as that potential is roughly one fifth of all mortgage loan volume (as 80% of all orders go through amc middle management fee raking avenues), there are very restrictive market forces which prevent appraisers from being able to take risks that come with expansion and additional overhead. The corporate model in appraisal servicing (and now appraisal management) was never going to work but they continue to beat the dead horse. Appraisers are not much different than the wide array of supportive vendor services for home owners. From inspectors to roof siding window hvac electric, even legal advisement, it is common for individual home owners to benefit more from individual smaller scale vendors.
The application of a commercialized model to the appraisal industry has clearly done more harm than good but they continue to punt for such a model despite it’s obvious failures and shortcomings. Now enter big tech as they digitally map property features and tie that to expansive correlative databases ready for increased exploitation by predatory corporate interests on a worldwide basis. Courtesy of mismo, reso and now ansi which is a global group whom has already carved out special allowances and proprietary market positions through many sectors. It’s all about corning the market these days, using proprietary relationships with governance to get there. A thank you to the author, indeed the devil is in the details.
https://www.lenderlawwatch.com/2022/02/17/cfpb-issues-request-for-information-regarding-junk-fees/
The irony… Consumer protection at all costs, as long as nobody bothers the top lenders at the fed. You can regulate their competition away but they will not be restricted themselves. A process of self asking regulation via a revolving door where excess bureaucracy prohibits market competition and fuels monopolization. They’ll say oh no don’t regulate us we’re here to help, while their same people write the regulation and hand it to politicians for rubber stamp approval. It’s the same thing that’s happening in medicine with the covid nonsense. Corporate government partnerships. They don’t care about efficiency in appraisal but there is money to be made with substantial industry restructuring.
Below attachment: A 10/19/2010 email entitled: JUST IN: “Customary and reasonable” fee regulations, sent via Biggers and alamode. Find this in your historical email for the complete document, and happened to be an alamode subscriber at the time.
All a result of AMC’s making $Millions and using a good chunk of that money to lobby and influence Congress and AARO.net. Our achilles has been cut on both legs. 1. Our Independence is constantly abused by AMC’s. 2. Our squidlike Regulators – no backbone and have become just another arm of REVAA.org. These Lobbyist are at EVERY lender and regulator function buying dinner and drinks for all in Vegas and DC in settings most Appraisers can’t even afford to get a ticket.
Eric, more lobbyists lobbying against appraisers then there are actual appraisers? I would not be surprised. When the HUD1 form was reformed about 10 years back if I recall correctly, a separate line item disclosure for amc services was on the table. What a monumental mistake it was to allow the amc fee and the licensed appraisers fee to remain improperly co mingled. It was TAVMA at the time rather than REVAA but it makes no difference, they asked, they received. The appraisal industry has been getting decimated ever since. And somehow those bureaucrats now think it’s appraisal racism that is the problem rather than the issues being direct results of their own inability to effectively regulate predatory middle management amc companies. By pushing for higher volume desktop work there will be even fewer appraisers to counter the amc meddling in the future. Amc’s don’t just want a slice, they want the whole thing and to eliminate licensed appraisers entirely, replace everyone with avm and third party services. If you ever wondered where the PIR’s and 2075’s went, they’ve got realty agents flipping those for less than bpo service these days.
Good memory with TAVMA. AMC’s never die.. they just change their name. A few years back I worked with our NC State Coalition to try and get a ruling that any AMC order would be required to include the Appraiser Invoice as page 1 for clarification. Hard to get that passed when our Appraisal Board Chairman is an AMC representative. It was proposed, kicked around, tabled and then dumped into File 13 I guess. Another fear right now is that since WE have been so busy the last 2 years it’s been very hard to stay up to date on legislation. AMC lobby has been working harder than ever – and we see the results with this new Cobra Effect. Prayers to us all.
If the purpose is transparency for bolstering consumer protection, it only makes sense for the appraiser to be able to and in fact required to disclose their fee. There should be additional rules the amc must also disclose the total fee for the appraiser to report on too. In our state amc’s are not allowed to force appraisers to sign indemnity agreements and if working with an amc the appraiser must disclose their fee. Wasn’t it NY that required invoices in GSE reports? I recall that happening somewhere because it created technical delays as the secure report portals had to retool some coding as there was a general prohibition on invoice form inclusion which always resulted in automated report rejection.
Also it may be worthy of note that the past 15 years of relentless amc fee and turn time quoting email requests may be considered as commercialized emails and therefore fall under the FCC CAN SPAM act. Appraisers should ask amc’s to stop and if they fail to do so, the appraiser has grounds to file an FCC complaint for violations of spam emails which may carry substantial penalties. Amc’s have been in violation of FCC CAN SPAM rules for well over a decade by not allowing appraisers any opt out or unsubscribe options from their ‘commercialized emails’. Amc’s have spammed the appraiser community more than felonious spammers ever did which landed those spammers in prison. FCC complaints can solve this.
https://www.ftc.gov/business-guidance/resources/can-spam-act-compliance-guide-business
https://www.fcc.gov/general/can-spam
https://drive.google.com/file/d/0B1QWwFfpPTbkUWthNW5kMDhwbmM/view?resourcekey=0-w21KtHAzJPThK150uBupww#list
CO amc rules. Pg 6-17, (b) on indemnity agreements.
https://www.gao.gov/assets/600/592014.txt
Some background on appraisal oversight… The tones are quite different than today. Obviously our industry has been co opted and commandeered by amc’s.
https://www.fdic.gov/sites/default/files/2024-03/fil10082a.pdf
They used to care about things like avm quality, third parties, effective oversight and licensing of people dealing with consumers etc. This above is a good document for all apprentices to read, and appraisers whom may have missed it. A sort of source code or summary for the entire rule sets.
https://www.gao.gov/assets/gao-12-840t.pdf
Effective amc oversight my ass. To this day the hot air the amc’s espoused to regulators was clearly smoke and mirrors. We have been sent millions of what is your fee and turn time requests by these amc companies. They just ignore the rules and pocket the difference. The serious concerns about utilizing amc’s have not been mitigated or even effectively answered and now they would have us all rely on amc sourced ulicensed ‘inspectors’? I don’t think so. No way. No how.
Rejecting amc’s across the board was the smartest business decision I ever made. I could list at least 2 dozen large scale direct assignment lenders, any one or two of them could sustain your entire business, no amc necessary. Just today I got a single from a NB pocket lender, open ended turn time and name your fee, all the while the order is already confirmed to me and me alone. It reminds me of the day when lenders and appraisers worked together well without unnecessary middle management injection or counter productive separation from loan production.
There are rules in lending and amc’s don’t get to just do what they want and buy out certain persons to carve out proprietary market positions to the detriment of consumers and appraisers alike. It comes down to the personal decision of each and every appraiser out there, if enough of us object they have to reconsider these approaches. There is no greater objection than absence.
Baggins we are reading your comments.
Thank you Jim. Shoot, maybe I should be more careful what I type! JK.
The appraisers blogs is one of the best resources because the moderator does not put any content behind a login wall and allows bot crawlers easy access. I access this site via desktop pc and an internet browser so no limitations with mobiles or facebook either. This site gets top hits on google and a lot of exposure. Kind of bummed I can’t use my real name but with all the amc pushback, just the way it has to be. I’m excited every time a new appraiser or a repeat appraiser decides to write articles for this site or contribute to rich blogging dialogues, much appreciated. Thank you.
The only only negative here is we are preaching to the choir. Those who should be reading our comments probably don’t come to this site.
Moderator, have any stats on view counts for us? I know when I google matters related to these issues, appraisers blogs gets first page placement. And you can always link people to this site. I gave up on the Appraisers Forum with their login wall and stuffy moderators, that site is truly an echo chamber. This site has a further reach than any other appraisal blog or forum site from what I can tell. Go with the best, post here instead. Website owner pays thousands of dollars a year to keep this site going, it’s no small effort. And 100% of course, but it’s behind a login wall so it’s important to note any disclosure or activism put forth there just won’t reach as far. Had not checked in a while but looks like it still has a lot of activity.
https://www.facebook.com/groups/100RealEstateAppraisers/about/
I’m not on board with this. My focus is on making non bank work my primary source of income anyway and lose the banks as much as possible. Even…gulp..divorces..
Personally, I will not be doing the 1004 desk-tops for a number of reasons including the inherent liability and isn’t that what they want? What I am taking away from all this is it’s a double-edged sword with the appraiser being the target. If an appraiser does them it is only a matter of time before the lawsuits come rolling in or the appraiser is being brought in front a disciplinary board and perhaps even loss of license for doing nothing more than their job, as required. On the other hand, if appraisers will not accept these assignments, then they will make the argument the appraiser is an obstructionist, eroding the public trust and unnecessary. They will plead their self-created scenario to their buds in DC and viola, appraisers are gone, and their replacement process is put in place. I do not consider myself a pessimist but a realist. There can be no other reason for this ridiculous nonsense going on. This is about money and big business having free reign. Be assured, there are a lot of powerful people behind this. Don’t kid yourselves, they believe they have found the formula to rid themselves of us and all they need to do is sit back and let it run its course. Ingenious if I say so myself; damned if we do and damned if we don’t. Must have been one heck of a back-room meeting with the good ol’ boys slapping themselves on the back and high fives when they came up with this idea. Of course, they are presenting it like it is the best thing since sliced bread however, from the comments so far, the people who do our job are in agreement it brings nothing of value to the table, is nonsense and opens us up to significant liability. If this were a medical issue and a Government Agency came out and said “from this date forward, all brain operations will be performed this way and you’ll like it” how far would that fly? Not a great analogy but you get the point.
I do believe in the need to standardize measuring, and I have been measuring properties for 37 years, but I don’t think ANSI is the answer (although my opinion is moot). Why on earth can’t our industry formulate our own measuring standard, developed in cooperation with appraisers and other industry leaders? Seems to me one should go to the authorities (boots on the ground) and not use a system primarily designed for builders simply because it is convenient. Heck, they can’t even agree in that industry as the other option FNMA reviewed, in addition to ANSI, called for ceiling heights of 8′. Do you see the ridiculousness of how they went about making their selection? If they had options contrary to one another then why wouldn’t an appraisal industry option not be a legitimate alternative? But I digress, it is all part of their master plan.
I just received this video on DeskTops. I don’t do mortgage lending appraisal, but after viewing this video, I find it difficult to understand why an appraiser would accept such appraisal work. It seems that the lenders and lender interest groups are, yet again, seeking a faster and cheaper appraisal process at the expense of the appraiser’s $, appraisal quality and maybe the appraiser’s professional integrity. https://us02web.zoom.us/rec/play/PL-QVFoyKDZ5d63So39LmEKQuAt6v7TkbQqspu9yANynoBiQsteTMmBKVcrdMwXbfEUr5c7hchccqtob.wqjiz-nBx3XP9VH3?continueMode=true&_x_zm_rtaid=I79Ji5J_TvKGUp3lpHkjZQ.1646326004928.5613f0252c9b35c40ac583e48d18e8cb&_x_zm_rhtaid=280