AMCs Responsible for the Hybrid Inspection
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
- Bias in Automated Valuation Models - February 28, 2022
It seems holding the appraisal management companies responsible for the hybrid inspection is the best option. The thinking was they choose, engage and pay the inspector.
The Virginia Real Estate Appraiser Board met for its quarterly meeting on July 30, 2019. We are happy to report CoesterVMS no longer has a license to operate in Virginia. The Board voted to accept the consent order accepting the voluntary surrender of his license.
The Board also passed a motion to draft legislation to be introduced into the General Assembly giving the Board regulatory control over the hybrid inspection and those individuals that perform the inspection. In other words, the Board wants those individuals to be licensed to protect the public trust. The exact language of the legislation is to be determined and the Board will work with DPOR staff on the issue. As legislative change takes time and there is no guarantee of the outcome of any bill introduced, appraisers were encouraged to reach out to their own representatives to encourage a legislative change, VaCAP will be discussing legislative issues within the coming weeks. We will be asking for your help in meeting with your representatives.
There was interesting discussions around what the Board could do in the meantime. It seems holding the appraisal management companies responsible for the hybrid inspection is the best option. The thinking was they choose, engage and pay the inspector. They also are responsible for reviewing the report for USPAP compliance.
Perhaps the most exciting news that developed on July 29, 2019, is the news that the FTC case against the Louisiana Real Estate Appraiser Board was issued a stay. Judge Brian A Jackson, The United States District Court, Middle District of Louisiana signed an order issuing a Stay until further notice in the case. See the order below.
The AMC’s responsible for the inspector shouldn’t even be a discussion. That’s conceding that this whole hybrid concept is acceptable if someone takes responsibility. It’s not acceptable. Splitting up the appraisal process makes no sense whatsoever. I agree that not every home needs a full appraisal- and that decision should be made by the lender- but the hybrid is not the answer for what Fannie Mae is intending. Let appraiser trainees hired by the appraisers do the inspections instead of saying that trainees can’t inspect by themselves. Fannie Mae allows it but lenders don’t. What happened to preserving public trust? How trustworthy can this be? It’s a shame it’s come down to this. We had a crisis 10 years ago and now they are going back to worse practices than before that. It simply makes zero sense.
I do not want the responsibility of hiring someone, training him/her, being held to certain standards that may or may not be relevant to the process in hand, concerned about any potential E&O issues that may arise, for $75 per report. Let them hire the inspector, he/she is their responsibility for errors and omissions, and free us appraisers from that liability.
Respectfully John, it does not free you up from ANY responsibility. You sign it. You own it. Entire report and analysis with your signature on it.
1. That the Board finally enacted appropriate action against Coester nearly five years AFTER he was caught dead to rights operating an AMC in Virginia without a license or proper registration is a positive thing. Albeit akin to closing the barn door after all the horses had escaped. Thank goodness Mark Skapinetz had the intestinal fortitude to take Coester down legally in court!
2. Holding the AMC “responsible” sounds rational on the surface, but as DWA on Facebook reported, it’s more of a de facto concession that they think bifurcated hybrids are in some way legitimate products or services. Secondly, if they hold AMCs “responsible” (whatever that means) will it be the same way they held Coester VMS “responsible” for obeying state AMC licensing laws in 2014 to present? Will it be the same way they enforced reasonable and customary fees?
3. At the most fundamental level, AMCs are incapable of assuring USPAP compliance in everyday appraisals. How will they do so in the much more ambiguously worded and parsed bifurcated products? It takes an open-minded appraiser to critically review hybrids for compliance. It also takes an appraiser to verify USPAP compliance but at least AMCs have a built in software crutch and CU to serve as canaries in the mineshaft. No such system exists for hybrids.
4. Virginia could not reasonably have been expected to ban hybrids, but what they could have done is follow the Illinois model and require two simple rules (1) that all hybrid filed inspections must be performed by a licensed, competent appraiser that will also sign the certification and report; & (2) require reasonable fees for the 1004P style (or any other) hybrids. A complete appraisal still takes half a day or more for actual analyses; verifications, zoning research, resolving permit issues, undertaking highest and best use analysis as if vacant as well as ‘as improved’; market research of comparables including proper adjustments (supported adjustments) and reconciliation takes time. It is not a default AVM insert!
Virginia ruled their minimum reasonable fee for an appraisal using a 1004 formatted report is the VA rate. A reasonable fee would still have been not less than 80% of that rate for the developing hybrid appraiser and not less than 20% for the field inspecting hybrid appraiser if hired separately.
5. Lastly – all BHs so far have a disclaimer in the boilerplate that the field inspectors report MAY NOT BE USED for RELIED upon for an appraisal! If so then there has effectively been no inspection! Requiring inspectors to take responsibility for their field inspections would have been a logical requirement.
In fairness, my understanding is the Virginia Board is not comprised of appraisers so they made a good-faith effort but simply appeared to lack understanding of what’s involved. We can all only hope they correct their requirements with meaningful and specific requirements rather than meaningless ambiguous broad ‘Hold the AMC responsible’ wording. A LOT of people wrote and offered sound suggestions. It appears the Virginia Board simply did not pay attention.
The Virginia Real Estate Appraisal Board is comprised of residential and commercial Appraisers, an amc representative, banking representatives and citizen members. The Board fully understands the issues and has taken the steps necessary to regulate all activities relating to appraisals, including the inspection by a third party. The public comments on Town Hall opposing hybrid appraisal was not ignored. If anything it triggered more action from both DPOR and the Board. If it was up to the Board they would have flat out stated hybrids are not allowed. Unfortunately, the Board, per State Statute, can only operate within the authority granted by the legislature. They do not have the power to create new regulations.
As far as holding the AMC accountable for the inspection, this was a discussion among Board members and not a motion that was introduced or voted on. The AMC should be held accountable for their actions, just like any other business. Remember the Board can only regulate those that are licensed.
VaCAP is pleased with the direction being taken by both the Board and DPOR staff. Each state operates differently and it is important to remember that what one state has done, may not be possible in other states.
Thank you for the background clarification of backgrounds.
The rest of their actions were meaningless if they failed to state HOW they would hold AMCs accountable.
As for only being able to regulate those that are licensed, they could have been easily done (like Illinois) and stated that licensees may ONLY rely on inspections by other licensees that are also co-signing the reports! VaCAP may be pleased, though I certainly can’t see why.
Just looks like more meaningless wishes with no specifics for enforcement.
As a PS I have previously been told BY VaCAP members the regulators did not have an appraiser on staff. Please clarify.
The Board does not have the authority in Virginia to make those determinations. They can only enforce the current statutes and regulations. That is why they are working with DPOR to have the laws changed.
Hybrids are a cheap work around to substitute a bpo. As if this remote inspection by a non qualified person means anything, it does not.
Read through these latest juicy Mueller Reports worker reviews. Oh so delectable! The new home inspector may have a tough time transitioning from their intended position of being an advocate for insurance companies to avoid settlement payments, focusing on every crack and scratch and taking a photo of that. That may not fly so well for appraisal practice. Insurance claim inspections and inspections for minimum standards for mortgage insurability are two entirely separate matters. Your pretend home inspector will bill by the minute.
My state says; Individuals who do not render significant professional assistance do not have to be licensed or certified. This means that appraisal office administrators, secretaries, data entry clerks, and others are not required to become licensed.
Is the person doing one of these property inspections offering significant professional assistance? My opinion is yes, but I know that’s not worth much..LOL
If the state registers the AMC they are required to both background check the AMC owners and to supervise the activities of the AMCs.
We all see how well they are doing that part of the requirements.
AMCs that are publicly traded companies, here, or registered in other countries, have a duty to their share holders to bring in the number that keeps their businesses flowing. But go ahead and take responsibility for their lowest level people who might accidentally send the appraiser the interior photos of a different house, to appraise.
Where is that part about collusion that the board is not addressing?
Where is the scope of the work, for a required appraisal, that the agent of the lender, an AMC, is involved, that allows for the scope of the work only available for a hybrid?
Because all the intended uses of required appraisals, where a lender and their agent are involved, do not allow the collusion, or for the appraiser to sit at a desk and never go see at least the comparables. Yes, there are desktop forms. Those are not required appraisals.
With mortgage default rates so low, as reported by the Fed, why is there such a large push to ignore the written appraisal requirements for all intended uses of appraisals, that lenders and AMCs could be involved in.
Don’t legitimize the kool aid.
If you think the Wamu / EAppraisit / Countrywide thing was bad, wait until this crap its the fan.