House Measurement by Property Data Collector Gone Wrong
The lender allowed an unlicensed property data collector give bad data to the appraiser… I work for this lender and they will not let my trainee inspect. The owners are now underwater by more than $100,000…
I’m sad and I’m mad!
I recently took on a measure job for a client who was questioning the square footage of their home. The couple bought the house at the height of the market last year. They paid 12% over list price to get the house. They put an appraisal waiver in the contract which meant they could not walk away if the appraisal did not come in at contract price. This was very typical last year.
I did a little research before going to the property. The buyers put 50% down. This, with their credit score and other factors allowed for not requiring a full 1004 appraisal.
A hybrid appraisal was done. Opinion of value was about 3% over list price. I do not have a copy of the report, it was shown to me at the subject.
This is where the train goes off the tracks. MLS showed GLA as 4200+ sq. ft. from tax records (CAD). The “trained” property data collector also came up with 4200+ square feet. The staff appraiser, a Certified Residential Appraiser with two years experience used 4200+ sq. ft. per sketch provided by property data collector. I pulled up the listing on the MLS. It took me all of two minutes to realize the issue. The listing photos show a large area of unfinished space on the second floor. Tax records show none. I go to the house and measure. Sure enough, 600+ square feet is unfinished. My measured GLA per ANSI standards is 3600 sq. ft.
The owners are now underwater by more than $100,000 due to paying above list and incorrect square footage. Their agent requested them to have the house measured during the opted-out period. They declined as they did not want to lose the house. The banks appraisal will show if there is an issue. They lost out on several properties before getting this offer accepted. It’s like they bought a carton of 18 eggs. When they got home, there are only 12.
This is where it gets me. The lender allowed an unlicensed person to collect property data who gave bad data to the appraiser. The appraiser was not experienced enough to figure out there was an issue. And there is no direct communication between the two. But I work for this lender and they will not let my trainee inspect on her own. As another appraiser said “it’s not the plane, but the pilot”.
Because the borrower put 50% down, the lender and investor (Freddie or Freddie) are covered. It’s the borrower who is left holding the bag. Best I can tell is everyone was covering themselves. No one was there to protect the borrowers. The borrowers made a mistake, but the system let them down.
Keep these anecdotal examples coming. I’m looking for as many as I can get for a class.
Kimberly, let me know when you get the class done. I would love see it! Thx.
Years ago, I accepted a divorce job Whear both the attorney’s client and spouse occupied the house*. The husband meet me at the front door with money, and explanations of the best of the home . I meet the wife at the back door carefully listening to the poor maintenance and problems with the home.
The Problem: Who would tell The best lie or the best truth, and I had to explain so the judge would believe ME.
* economics don’t accept half a payment
.
This is unconscionable but will be discovered more and more. Also, how many of us believe that the homeowners/agents will be totally accurate or truthful about the data supplied? At the end of the day, who is liable?
They are likely $100K underwater because they paid 12% over list price to get the house and put an appraisal waiver in the contract. This case is a nothing burger. GLA is one element and really not that important, most any appraiser can prove it, caveat emptor. I wouldn’t put this on the appraiser, they buyer had an appraisal waiver, why was there an appraiser involved at all? Is this story BS??
What the author means is that the sale was not contingent on the appraisal. A hybrid appraisal was done because they put 50% down.
Because while the buyer may not care about the value, the lender does as it’s their money. How much they care is likely directly related to their liability or ability to sell the loan.
Most sales I appraised in ’21 were ”appraisal waived’. In fact most were ‘inspection waived’ + ‘appraisal waived’ + ‘financing waived’. The buyer still tries to finance before closing and lender requires appraisal of some nature.
My favorite ones are where the agents get wild and try to write away FHA standards within the contract. Borrower is cool with this deficiency and seller refuses to repair, so just write it away in the contract. Like, um, sorry, that’s not how this works. You are below the financier, being the ones seeking financing, all applicable lending rules apply based on your own selected loan type. That’s when eyes glaze over and tempers rage, lol. It’s like listen guys, the appraiser has to comply with the GSE rules, the underwriters rules, no exceptions and if you want an alternative solution with more leeway, pay cash. That being said I was advising everyone whom would listen that relieving the seller of home inspection compliance and gifting them a no objection clause regarding the appraisal results is a highly risky irresponsible decision. I mean if you have to give seller friendly terms, pay more down, offer higher, or come conventional with appraisal gap clauses or some escalation clause, all this inspection waiver and appraisal objection waiver stuff was just poor representation. About just as irresponsible as lenders issuing appraisal waivers and accepting hybrids with incorporated third party service inspectors. The demins is uncoupled from reality, that should be set back to $50k tops.
From an appraiser perspective, it is painful to hear your statement that misrepresenting GLA is a “nothingburger” & basically a non-issue. For one, GLA may only be one element, but it is an important one that anyone who claims to be a RE professional, agent or appraiser, should be able to determine fairly accurately. I see this misrepresentation of GLA consistently where an agent just puts whatever the county states as living SF or includes some porch in the GLA because it has an airbox in the window. It is misleading to everyone but the appraiser, which I would hope knows what constitutes living space, but is it really asking too much that realtors know how to and do calculate the GLA on a listing & be held accountable for misrepresentations in listings. This is not rocket science and just knowing a few basic facts of what living area is could go a long ways. I am in Florida & it is a problem here that needs addressing. Appraisers depend on these calculations of GLA in comparables utilized in other appraisals, so the mistake ends up being repeated again and again. Furthermore, per the article, the appraisal waiver in the contract meant they could not walk away if the appraisal did not come in at contract price, not that they didn’t need one. I do agree that it should not be on the appraiser which is the real problem of the low cost’s hybrid appraisals being completed, the state is allowing these unlicensed people to do the measuring when they had the right people doing it before, the appraiser. Everyone should realize that these hybrid low costs appraisals carry just as much liability as a full appraisal. In a time when appraisers are being scrutinized by buyers, sellers, realtors, Appraisal Management Companies, DBPR, Fannie Mae, & anyone else who wants to make a complaint because an appraiser did not value their house at what they thought it should be, should be cautious. One more point, not sure where you are located, but here in the Florida the Supreme Court has made it clear that the doctrine of “buyer beware” doesn’t apply to people who are buying homes here in the Sunshine State. Instilling trust in the real estate industry might work out better if all participants were held responsible for their actions. Very Frustrating.
I’m sure the lender is glad they got an appraiser’s signature because that’s who’s on the hook! Wait what about the comparables?? If the MLS/Tax Record for this house was incorrect how do you know if any of the comps were not measured the same? It seems the ANSI standard is not used by the local MLS/Tax Assessor so did anyone measure all the comparables to ANSI standards? Trash in Trash out!
Anyway, I won’t touch Fannie orders with a 600+ foot pole. You all that do them keep on doing them and we’ll see if/when it bites you in the arse. LOL
Oh Yes, its common that the Tax assessor guesses on the second story to add all the floor level they can add for tax purposes even if you have a meznine or cut out area looking over the living area or even an unfinished area, the tax assessor from the beginning of the record would have included all that which looks included in the boundaries of the second floor from the exterior view of the 2nd story exterior walls. They will include it inaccurately for taxes in GLA. I know because I just accurately measured by ANSI one of these beasts shown in Tax record 300sf larger on tax than it actually was. Assessor included cut outs and the two unfinished attics in GLA. I encountered a comps in the neighborhood was miscalculated by tax record the same way. I looked at the MLS pics & saw the cut out on the second floor of the comp. Yes, – I adjusted down the comp too and disclosed how I arrived at that lower SF number of subject and the comp per ANSI. My subject borrower wanted a equity line for $$ Refi to fix major damage on the home from prior owner neglect. He basically did his own appraisal using tax record SF and his Realtor.com comps he gave me. I laughed when I read through it knowing he was going to be angry to be told the truth by lending guidelines and ANSI standards. Be aware people on Desktops and Appraisal Waivers the lenders all order AVM’s. A lender who orders an AVM are required to give the borrower a copy of the AVM its the mortgage lending rule so when all the data shows wrong and YOU are the one that is Right….Now Your Arsh is on the hook and YOU DIDNT EVEN ASK FOR THE AVM they all get?? The borrowers all get mislead upfront with these AVM’s showing wrong square footage and wrong values and that’s what they rely on as True. The realtors disclaim EVERYTHING they take from public record in their contracts. The rules of this trade were stacked against appraisers for liability and it will never change. Appraisers call your EO and ask if you are liable for SF GLA on a Desktop when you didnt verify the comps or discrepancies which you said you did In The Certification. Toast! Ask if you are still liable no matter what the borrowers contract stated they agreed to which has Nothing to do with Your job verifying data!
The scanner has no liability, they are just a person off the street hired to use an App and send in a video or data of what was observed in 10 minutes working for $40. an hour which is a lot more $$ than you make with no liability- None.
I love this forum, constant intelligent commentary, really engaging. Quite right! And that’s what these yahoo’s don’t understand, that just because it can be done for 50 dollars, or less, does not mean it should. They just only see the front end costs of typical routine vendor engagement and have no clue about the realities of appraiser liability or the gravity of mistakes which happen if appraisers move to quickly. Often even appraisers themselves only become aware of this after they grind for so many years, finally have something to lose. Entitled people may come out of appraisal, but the far majority of appraisers in their early years are either just starting down a professional path or are starting over with not much to lose. Check this out, my girls were doing winter light saber battles, interesting effects. Wish I could take a light saber to all the non appraisers trying to run this industry, let me tell you.
It’s true tax records are often wrong, Therefore, it’s the appraiser’s responsibility to double check everything. However, with that said, in a Hybird appraisal, it should already state “that the lender hired a 3rd party inspector to inspect the subject property. The appraiser assumes that this person is trained and that the lender takes full responsibility for any information provided by the 3rd party” With something like this in your report the appraiser is covered. Remember, it could also have gone the other way. What if the subject had GLA added that also is not listed in the tax records?
Maryland Commission of Real Estate Appraisers cautioned its appraisers that they are responsible for the 3rd party data they rely upon.
“Ultimately the appraiser is responsible and liable for data collected by third parties.
The Commission is also aware of the new Fannie Mae 1004 Hybrid and 1004 Desktop appraisal forms. Both utilize property data reports on which an appraiser would need to rely as a source. An appraiser preparing a desktop appraisal should refer to USPAP Standard 1 and Advisory Opinion 2. Ultimately the appraiser is responsible and liable for data collected by third parties.”
You should check with your appraisal board or simply stay away from hybrids
https://appraisersblogs.com/appraisers-are-ultimately-liable-4-data-collected-by-third-parties
Finally, some real progress. Thank you for posting this.
Sadly the appraisers doing these are desperate, have bills to pay, mouths to feed and Willingly Risk their liability because the GSEs, AMC bully collaberators in deceit with their lender partners in crime, colluding neffariously behind YOUR back lieing to your face who dont care have orchestrated the demise of the ‘fee appraiser’. When youre gone there are 10 more to take your place. Appraisers You may skate for awhile however getting sued no longer is tied to buyers who get what they want-:they all eventually figure out no matter what You Did they find out was by certification ‘an error’ it can be used *Anytime* to hurt you, recoup their perceived losses, ruin your business and your career. Can You afford that- in exchange for your desperation? Just ‘X#’ more – then I will stop. Its suicide!
sadly with these things assumptions of any kind are not allowed, appraisers should not do hybrid reports. It’s like being a parent of a wild teenager, all of the responsibility but no control
I agree a little with the author and also disagree a LOT with the author.
Square footage is only ONE factor in what a Buyer typically pays for a home.
Underwater by $100,000 because the GLA was off? I seriously doubt that.
I have ALWAYS told the National Association of REALTORS and the state association of REALTORS that brokers and agents MUST be held responsible for the square footage they place in the MLS data. They should NEVER be permitted to place a disclaimer that states “check it yourself”.
Appraisers need to DEMAND that REALTORS be held accountable for the descriptions they provide because it is their inventory, their merchandise and the public does rely on that data more often than not.
That would be $167 s/f if totally attributed to GLA. Pretty pricey but I guess it depends where it’s located.
Good luck telling your local and state Realtor association and NAR what they need to do. Their religion is CYA and avoid accountability at every possible turn.
Correct. I suspect that a great deal of that money was blown from chasing a property in an overblown market.
Let’s all of us keep getting older and successful in our defense of both work and a Profession.
Excellent example. Welcome to the future. Eventually “modernization” must be applied to the National Association of Realtors.
that is why no appraiser in their right mind would do a desk top or hybrid with an ”inspector” feeding them the subject data, as the limiting conditions state the appraiser certifies the qualifications of the inspector. The home owner can file a complaint and rightfully so, as it will impact them when they go to sell. be interesting to be a fly on the wall and see how this comes out. the person who wrote this article should make the home owner aware they have recourse.
The owner may not have an interest in the appraisal. It could simply be for the lender. No buyer involvement.
If they waived financing, the Lender could have paid for appraisal, gave buyer a copy to verify value opinion and said ok, we’ll lend you this much. They were going to pay full price + regardless.
It gets personal too. Normally the errors are discovered after a long period of time, during a resale process. I’ve seen home owners laugh or cry depending on my detailed discovery of actual size. My accurate sketching results even had an agent crying once too, but that’s not my fault, being apparently the only person qualified to accurately measure complex to measure homes, those homes are rare to market but they are out there, perplexing difficult to sketch out and measure designs. It’s remarkable, how properties can resell and resell again, property data never being corrected over decades and decades of service, just copied data, copied again and again. That’s not data verification, that’s systemic data deficiency which no assumption or extra ordinary assumption can rectify. FNMA truly dropped the ball in pushing hybrids without also having had a policy which requires assessor correction of home sizing data if that is identified in the appraisal process. It’s just one important step they skipped in the race to closing, advisement and additional caring service such as helping borrowers have their property records corrected and re verified by a county assessor if the origination appraiser discovered discrepancy. Fannie must know the frequency of appraisers size data being in poor alignment against other records, repeated over decades of gse engagement for that particular house, but they so irresponsibly pushed this hybrid program anyways, instituting ansi as a blanket rule when they know many jurisdictions and agents do not use ansi, as a means to cloud accountability on this matter.
Don’t make the mistake thinking that Realtors are data providers, they are not . They are marketers that promote the property and many are very good at it. I would not hire an appraiser to sell my house and it irrates me to no end when banks and their reviewers treat Realtor data as other that an estimate and marketing opinion. I recently did an appraisal and city assessing estimate the bungalow as 1450 sf which the Realtor repeated in the listing, but it was based on a factor of 1.5 times the first floor sf. My on site measurement indicated 1650 sf so they were understating the size by 12%. Of course the lender came back and wanted me to confirm my measurments and luckaly I needed to do a final anyway so I confirmed the size. There is nothing that replaces an unbiased appraiser, not even a wiz-bang computer program.
if real estate was static the AVMs and CU data would likely suffice, fact is nothing is static, and in half the counties I work in the data in the public records is terrible – if appraisers were allowed access to the UAD data, at least the data on homes that have been inspected by an appraiser, that would fix a few things.
Since market conditions and markets change a credible AVM is a much more daunting task than say a chess supercomputer where there is an absolute answer and it never changes.
I’ve never done a hybrid for this very reason.
There is no amount of CYA verbiage to say the’ data was collected by a 3rd party and cannot be guaranteed…etc..’
They are coming for the parties with E & O insurance, and thats the appraiser.
It gets even worse. Many of these “bifurcated” appraisers will not do final inspections due to the 2 hours of round trip driving or because the appraiser is actually located out of state. I was recently hired to do a final inspection on one of these bifurcated appraisals where they used a third party inspector. The appraisal reported a “public” street but it was in a gated neighborhood of privately maintained streets, no mountain view was noted, the mud room off the garage with no window was reported as a fifth bedroom, the inspector did not properly measure the house to ANSI standards, the subject and all comps were reported to have a three car garage instead of actual two car tandem garages and, finally, the poorly written report had an adjusted value range of $100,000. POS appraisal report in my opinion.
Yeah Will, but if you complete a final inspection for someone elses work, you basically accept complete liability for their work. The final inspection is a legal document, much like the appraisal. It rides ‘by attachment’ to the primary appraisal report, via standard contract law. One may describe the final inspection as a stand alone limited scope service but that does not change the fact the very nature of the service is riding by attachment, as the final inspection service simply can not be a stand alone service which could otherwise be completed without any other primary report behind it, so it’s always ‘by attachment’.
The best disincentive is to simply refuse to follow up others work and state it would be better to use your services for the full appraisal with in person inspection from the start, and you’ll always be or become available to complete finals. I dared to try and offer to help with a follow up 1004d a few times, every single time there was some sort of gross omission and I withdrew. It’s like doing a free review, offering free indemnity for the first appraiser, and signing off the entire package with your own signature for a tenth of the initially potential service fee.
Before the lunatics took over the appraisal industry it was standard practice that if there was anything identified which could possibly even remotely become an issue of unreliable data or result in an unreliable valuation opinion, the appraiser was encouraged and often required to simply request the desktop be moved to a full inspection. Most appraisers made the request as a standard rule of thumb, so much so for several decades lenders really were never able to make any progress towards hybridization or reduced service level appraisal engagements.
We can thank the idiots within the amc industry and the mindless drone bureaucrats at the GSE level for this departure from sound valuation practice to that of high risk appraisal modernization. Collectively we need to all push back on the notion that we’re protected by assumption. The appraisers very first and oftentimes most important task is qualifying data. Appraisers whom perform desktops and hybrids obviously just gloss over this important step, just relying on data from anywhere and everywhere, living their lives under the false premise that it’s acceptable and ethical to use extra ordinary assumptions on every single report they sign.
The companies marketing and soliciting hybrids and third party inspectors as being an equivalent trade off without quality sacrifice are either incredibly ignorant or are simply lying. It’s better to just steer entirely clear of lenders and/or amc’s whom actually use this process. Portfolio holdings of full service appraisals from lenders whom utilize fewer waivers are stronger, more robust, and result in lower liability risk and daily concern for the appraiser. I’ve straight up dropped clients if they try to sub out my final to someone else, or offer me someone elses final report duties, or even try to entice me with hybrid requests. I only select lenders who’s primary workflow is full service requests, the rest can hit the road and deal with the next guy. How to naturally better insulate yourself from liability in the gse world.
Has anyone been nailed for anything in the original report for doing a final inspection of a different appraiser. I fail to see why I should be responsible for their entire appraisal to see a handrail put up. Of course if its not complete the form asks how it effects the value.
The lender could just ‘cert the condition’ and does not actually need the 1004d. They order the product from an appraiser for the insurance tie in. Required insurance = liability.
A $100,000 range might not be bad. It depends on the percentage. If we are talking about homes selling around $5,000,000 it might be a fine range, if we are talking about homes selling for about $500,000 that would be huge. Bifurcated when you have a bad inspector (no incentive to be a good one!) and a bad appraiser is double trouble and I imagine it happens a lot since even average appraisers won’t touch hybrids.
Good point, Frank. In the case I referred to the house sold for $550,000. Will
how odd, why would an appraiser that did the hybrid be asked to do a 1004D? you’d think the ‘inspector’ would be sent back out, just put Hybrid or Exterior in the MSA field. This stuff is so bad
Because they his insurance to go after it SHTF.
Because it was new construction.
The lender gets what they sign up for. The homeowner gets what they sign up for. You do it half-ass, and you get half-ass results.
I can give some homeowners slack for not knowing the process or knowing what a hybrid is (are they told this?). The lenders that use these products however have to know they are garbage.
Re: The lenders. Of course they know what they are buying. They are playing the odds. This is nothing new. Same with credit cards. They know they will lose on a certain small percentage. It’s no big deal. The big picture is a constant win for the house ( no pun ). Like the lottery or a casino.
Home owners, home buyers, basically have no clue what appraisals are. To a borrower an appraisal is like a fire engine. We all know fire engines are red, except some aren’t. Fire engines put out fires. Appraisals tell you “exactly” what your home is worth, except sometimes the appraiser is wrong. Appraisals provide loans.
Ideally you want to be the house.
The only thing that has changed in 40 years for the appraiser is a 6 page report has transformed into a 26-36 page report.
To me the big part of the issue, is a lot of lender, buyers, agents etc. have lost faith in our appraisals. Why? my opinion is that too many appraisers come it right at the sales price almost all the time. So it makes us look not good, as comments have been appraisers see the contract price and just hit that number. That is why the powers to be feel they can replace us with computers etc. Just ask yourself this question or even ask people you know to answer you honestly ” how can it be considered unbiased or steered etc. when almost all of the appraisals just hit the SC price. It makes us look bad, I do not do that as the odds of the appraised value and SC being the same number is slim and none. I here well it is in the range of value, is that not more like a collateral check and not an appraisal. I heard this from a good appraiser friend who worked at FNMA, he said that is exactly why UAD came into being so they could get our data and use it in desktop UW etc. for waivers etc. we are killing ourselves.
They make hybrid reports look just like an appraisal, why is that, why does it not detail right up front what it is and how it is done, the home owners I talk to about it are aghast when they see the deception, intended or not that a hybrid looks just like an appraisal.
Please state the name of the third party inspection company. Was this an instance of open space like a vaulted area being counted as usable floor space? Submit the appraiser whom completed the desk based report to the state, and recommend the borrowers pursue insurance remedy, which may extend to the realty agent or even the lender themselves. This is a good liability risk example case. It’s the blowback and end accountability which matters most, nobody cares or even bothers remembering how much time or money they saved during the origination process, when the end result is a gross omission which is specifically covered under errors and omissions policies. That appraiser may pay a much higher insurance premium for the rest of his life and could be civilly liable. An independent 1099 appraiser would have to complete even more discount hybrid reports at an even faster pace to compensate. What a self destructive idiotic cycle to allow yourself to be placed in.
Appraisal modernization is merely a way for lenders to brush this sort of accountability on down the line. They all use regurgitated lines because it reads well on paper, ‘without compromising quality’ and what not. In the real world, there is a trade off, time and money are indeed traded for quality and reliability. The professional advisement from the vast majority of qualified appraisers is simple; Every appraisal should come with a personal inspection from the appraiser themselves, fewer appraisal waivers should be issued rather than more, as well as the position that hybrid desktop and no inspection appraisals are literally never able to be as reliable as in person inspections, never, literally. Anyone whom claims otherwise is either incredibly ignorant or is lying.
I fear Mr. Baggins has gone far afield regarding the 1004D in regards to the final inspection. If you read it carefuly it says Under the Update section that the Scope of Work includes (1) “Concur with the origional appraisal”. In that regard you, the appraiser, are agreeing with the complete prior appraisal and its value opinion-you are doing an appraisal function by offering an opinion regarding the direction of value. However under Certificate of Completion there is no Scope of Work because it is NOT an appraisal function to observe that a repair has been completed and you are not offering any opinion regarding the prior appraisal or the value opinion. As a business decision I do not do finals on others work, but do not confuse an appraisal function with an inspection function-you are simply stating that a repair is completed not that the origional appraisal is accurate or that the value opinion is valid or reliable.
Correct. Speaking of GLA though. You better be sure they built what the appraiser reported with regard to new construction.
Sure, a long standing appraisal argument. In the real world the everyday person does not understand parsing of forms so the defacto position is by attachment. Some states have requirements to submit a complaint if there is faulty appraisal development observed even if not in a review scenario, others read that into interpretive law even if it’s not the exact case, which failing to do so may be a penalty in itself. Suffice to say it’s complicated. Sometimes I have a hard enough time just explaining why the value update boxes are not checked and not applicable. Eventually some upstart reviewer comes around and tries to demand the value update. Probably one of the most complicated factors is that my opinion of health and safety may not be answered by the simple generic repair requests the first appraiser made. I’ve ran across this many times where I imagine the first appraiser refused to sign off on inadequate repairs or inadequate project finishing which is why I was called in as a second. A few times I’ve added additional requirements which basically enrage everyone but hey it’s obvious that there are more concerns to be addressed. For finals I think the simplest advisement is to just detail the standard expectation of by attachment because regardless of all the technical details, that’s how these engagements can shake out. Technically I agree with you but you know, in the real world. Reasons why I constantly request only licensed appraisers be involved with appraisal request distribution. Don, countering with factual appraisal form data, you are a pro. I’m more like, how in the heck to keep this show rolling along when dealing with everyone else who’s not an appraiser, with their often zany across the board expectations and preconceived notions.
Of course this gets confusing because the form asks how it effects market value if the conditions of the report have not been met.
Thanks Tom. In my area there is very limited new construction as the Detroit market I serve has little new construction to offer, but a good point regarding remeasuring on the final.
The 92051 is a bit more wordy. They ask you to go inspect an exterior window sill for paint and two rotted boards on a shed. The Cert though says you inspected for all non-compliance. I disclaim that down to only the repairs and client instructions to only concern myself with the listed repairs.
I also do not do finals for other appraisers. Don’t want to be responsible for their opinion. I will do the 92051 though depending on what work was done.
I repeat, Mr. Baggins has made a statement of art when he says “legal document”. What does that mean so I looked it up and found:
Legal instrument is a legal term of art that is used for any formally executed written document that can be formally attributed to its author, records and formally expresses a legally enforceable act, process, or contractual duty, obligation, or right, and therefore evidences that act, process, or agreement. Wikipedia
So the order we receive is a “legal document” as is the email from the clients analyist asking about a particular aspect of the appraisal. In essence all comunications we deal with are “legal documents”. I point this out not to take my esteemed colleague to task as he has demonstrated his passion for our profession repeatedly in his posts. I do so to merely establish that the task at hand in a final inspection is to confirm that an action has occured whether it be an inspection by a professional, the repair or replacement of a deficency or the completion of construction. You are not tasked with the review and agreement of the origional appraisal, that occures with an Update and unless the assignment includes an Update as well as a Final you simpley do not assume that responsability. Mr. Baggins, please stop using the term “Legal Documents” to add weight to your argument as it is a ubiquitous and non-spacific phrase of art.
Hi Don. Thank you, I had to think about that for a day. I will try and avoid using said language. However, I personally will continue to err on the side of excess caution and treat it as such, legally binding. Because an appraisal report is something a legal expert may review, or one may eventually need legal counsel to defend if things go south like false complaints or what not. Like Mr Bagott said; Justice for an appraiser, you betcha, and then a hefty price tag. I have just lost confidence that disclosure and disclaimer will actually protect an appraiser if some zealous zealot rolls around. It really is like open season lately. How is Tom getting 92051’s? I’ve never even seen that before. Thanks.
https://appraisersblogs.com/justice-4-texas-appraiser-ninety-nine-thousand-dollars-price-tag
” How is Tom getting 92051’s? I’ve never even seen that before. Thanks.”
Reverse mortgage properties. They will often have a HUD peeling paint, rotted wood, missing hand rail situation. For whatever reason some of these repairs end up being 7-8 months or year out. Original appraiser gone by the wayside.
So it helps the owner get some money back that’s been escrowed. I am instructed to only inspect the listed items.
It’s a repair inspection more so than a ‘final’ inspection.
Oh that’s why. I only did reverses for a few years and then bailed when the new terms hit. I dealt with several borrowers whom were explaining why there was a rush to enter FHA reverse, as there were new reduced compensation programs. Or something like that. And it was a generally uncomfortable experience, dealing with widows and widowers, the heightened attention to report scrutiny, etc. One time after this reverse mortgage lender moved to amc’s and I withdrew, a mortgage broker even called me personally requesting I continue taking orders. I provided clear disclosure how fees were now cut in half, the amc’s terms, all of that. Broker was surprised, which is when I really started getting a feel for how severely amc’s misrepresent their service injection and conceal how they actually deal with appraisers from their lender clients, into an otherwise smooth process if there was no amc involved. Broker said it came from the top down but there was nothing he could do. There is a substantial portion of mortgage professionals out there whom object to amc’s too.
Oh damnit, I tracked another lead just today, submitted an application, and it turns out it’s an amc. They had no indication of that on the website. Not again! Another worthless lead and complete waste of time. Of course, I received instant approval. That’s how amc’s work, anyone with a license and a heartbeat is qualified. I even subbed appraisal samples with my flyer and business card, they don’t care.
Yeah, I don’t do reverse appraisals except on a very rare occasion. Fees were fine.
I do the repair inspection if they are close by and in my travel direction. Pays for a tank of gas or so. I’ve never heard anyone speak positively of a revers however when I show up to do a repair inspection they are glad to see me.. Comments are usually.. ‘oh great, I want to get this over with finally’.
What about the Statue of limitations.
OR what about the worth of the signee, or whether or not he has insurance.
Liability can be defended by a defendant, an insurance co. or not.
A legal document can be almost anything thing Look at Trump or Biden, or Hillary.
Appraisers MUST defend themselves and also most professionals who keep a successful reputation.
Such totally unnecessary BS and this is the end result! Buyer left holding the bag for no other reason but greed.
and bring your own tape measure
A properly trained Appraisal Trainee could have done it correctly, but lenders won’t allow them to do it. They are fine with an untrained data collector who has no clue what they are doing! End result is the buyers get screwed!
Appraisers can’t be trusted with cameras anymore. And apparently, we can’t operate software applications quite as well as a regular independent vendor whom specializes in mowing laws. Can’t make it up, that is FNMA’s position. Sketching at first is like, oh this is so simple. Then one day… I just constantly make sure nobody mistakes me for an architect, which is why I only do permiters, not floorplans.
Who knows if the person has a financial interest in the transaction? Best case scenario if they just don’t care because its not their signature.
Ever heard of a hybrid where the appraiser does not even need to adjust, does not need to perform any additional market research as that’s all fed to them by the ordering company, and just signs off on the brokers pre selected comps? Now you have. It’s called appraisal modernization. I’ll remain mystified why appraisers insurers have not chimed in on this or at least put in place some additional rider or sur charge alongside renewal questions if appraisers complete this type of product or not. The best part about appraisal modernization is there are no rules, these companies can push whatever they dream up and just call it a valuation product. Equity, and progress!
the fee paid to the appraiser is just for buying their signature and E&O, anyone that doesn’t realize this is a fool
You would think by now it would be obvious. Personally I have no problem with that.
Doesn’t mean I’ll sign off on anything I’m presented with. But yeah.
It’s a simple concept. Occam’s Razor
The system (mortgage loans) isn’t designed to protect the buyer. They can literally buy themselves out of protection, with a larger down-payment.
I don’t understand how anyone making the largest financial decision in their lives, allows the lender to talk them into an appraisal waiver or hybrid. Pay the extra couple hundred bucks and get a qualified, unbiased 3rd party appraiser in there to be a check. Everyone else on the other side of the table makes a commission, so their level of the buyers well-being isnt really a top priority.
It gets even worse that that. I once ran across a resale in Tucson wherein the property resold for $50,000 lower than it did 3 years earlier in an appreciating market. The property had a 3.31 acre site. The reason for the lower resale was that the owner discovered that the garage encroached on the adjacent site because the original builder was too cheap to spring $500 for a survey prior to the original construction.
I’ve got a real world photo of such a sort of event, lol.
My rear neighbor was occupying around 5 feet deep of 120 ft line run, encroaching into our yard. I suspect the owner set up a special deal with a previous tenant or something, as this home had previously been held for forty years by a landlord living in another state. I paid $3k for a property survey and another $2k for a new fence, but it’s certainly nice to have that space back. When the surveyor came out the neighbor like panicked and was on the phone but they never once complained, they must have known, how could they not? I told them I was calling a surveyor but they laughed it off like somehow their property intentions created a successful annex situation, which of course it did not. I’m not a railroad land holder and their length of hostile occupation was irrelevant. Fence lines are not like castle walls bumping back and forth, they are normally straight.
Of course nobody identified this in the past, and I had to be the first, typical. Property records did not change but actual property characteristics certainly did! Tell me a third party inspector is going to bother looking at plat maps and property lines, they will not be performing those additional essential tasks. Appraisal modernization is a counter productive rather stupid endeavor. Dear Fannie and everyone else supporting hybrid appraisals and third party inspectors; you’ve done a great job, but we’ll take it from here. We will call you, if we need you. It’s not you, it’s me.
Also I’m just talking about one of my home owner adventures above. That house in the photo, I had just found that on the internet randomly when researching property disputes, fyi. That is not my property or what happened to me, fyi.
But it can happen you know, substantial investment while skipping a very important step; property surveying and boundary verification. Just last year I helped out an agent lady whom had this aggressive rural bumpkin trying to annex chunks and chunks of her inherited acreage every time she was not looking. There was bulldozers, police, security guards, fencing destroyed then reset, destroyed monitoring cameras, home owners with guns and mean dogs, the works.
It can get messy in a heartbeat and remote inspection is like just stupid, people benefit from talking to appraisers in person. These companies claim like; ‘get back to doing what you love, spend less time on inspecting and more time appraising!’ Talk about clueless to the audience. The inspection is literally half of the appraisal service. Listen up tech nerds pushing hybrids and third party inspectors, what appraisers love is field time and meeting the people, otherwise we’d demand benefits like all the pencil pushers trapped in soul sucking cubicles staring at pc screens all day. People have lost their minds these days, drowning in narcissism and delusions about their snowflake importance, they don’t even listen, they just push. There is no greater objection than absence and most of us are not taking pay cuts and will not be completing hybrids. End of story.
Once long ago I was trying to buy a building lot for myself. It was located off an easement alley in unique neighborhood, formed by Federal treaties with two alien countries, several years apart. The neighborhood had 5+ surveys all disagreeing. The subject lot was either buildable or NOT! according to which TITLE company I used. I had planned a 75′ wide house and needed a 90′ wide lot.
I eventually bought another lot in another town and lived their 10 years..
The borrower most often doesn’t even realize. I’ve taken some hybrids but I always make sure both agents and buyer know that I’m not stepping foot on the property. Once I explain what’s happening buyer doesn’t like it and I tell them to call their lender. Once they do that the lender who really wants every loan right now especially immediately changes it to a full appraisal. This happens almost every time.
Doing hybrids, just curious how do you feel about being liable for the actions of the inspector under the limiting conditions? Item #19 under certification where the appraiser certifies the ”inspector” is qualified to perform the tasks”
Does that bother you that you will be held responsible for the actions of the inspector, after all all they want on a hybrid is an appraisers signature? so then they can come after the appraiser if the property goes REO etc. That is my concern and why I will not do a hybrid report relying on someone I do not know and did not train. I have seen several hybrid reports on properties I have worked on and am shocked at the mistakes and errors, mainly in measuring etc. Not judging anyone just asking how others feel about the liability for such low pay
If you sign it then you bought it
It is what some appraisers do not realize. You’re in the hook big time when a hybrid goes bad. Think the inspector has E&O ? Highly unlikely
When you quote your fee, you defend your work, you make your reputation, and possibly protect your net worth.
That ain’t hearsay so charge and collect a reasonable fee.
Whats all this little bitty print format? ain’t everybody getting older and seeing dimmer.
Don, we added a text resize tool on the left of each page which you can use to increase the font size.
Thanks
There is a comment above Concerning Certification #19 Saying to the effect the appraiser certifies the Joe the Inspector/PDR collector is Qualified ; Question is that certification #19 on the Fannie Mae Desktoppy/burb it up report. I would like to read that certification. Can someone direct me to that form? If this is true that is HUGE…How the Hell do I know if Harry the Aluminum Can Collector-Part Time Home Inspector is Qualified?
Your point is the primary objection I have always had regarding these products. That and the quality of Harry Aluminum Can Collector’s actual data provided. Look up samples for a Mueller Reports Bifurcated Hybrid. I thought there was one we all analyzed here in AB?
The “deemed to be qualified or competent language is embedded in the form itself.”
Links to Mueller reports
https://appraisersblogs.com/mueller-REO-hybrid-appraisal-report-vs-USPAP
https://appraisersblogs.com/sample-mueller-bifurcated-appraisal-report
Excellent! Thank you Maria…
This is exactly where our survival lies.
Buyers/consumers demanding PROFESSIONAL appraisals!!!
Buyers are emotionally attached to the property, real estate agents are financially attached to the property as are the lenders; appraisers come in unattached to anything about the property. If the appraisal comes in below contracted price everybody throws a hissy fit. During Covid Realtors got all giddy when there was a bidding war and got all bunchy when the appraisal come in below CSP. What most people don’t realize is that sales agents have a fiduciary relationship to the seller; they are under contract to get the most they can for the seller. Appraisers keep things in check, but every aspect of society these days do not want to be kept in check. This is just another step in the downfall of this great country, just like the Roman Empire, it was not taken down by another empire, it crumbled from within, morally, financially and ethically, the US is sadly following the same scenario.
Good on you Joe.
Learn more and do the best, if it ain’t right, figure it out.
Information changes all the time.
Don’t WEBSTERS publish a new book ever year, Ain’t Elsteins idea’s only a theorem? Why would an educated, dedicated group push forward?
As this happens more and more going forward, a few of these stories need to make national news.
Unfortunately, this won’t happen until there is a major downturn. I wonder who in the national news is going to blame?
Hmmm…
The major issue in my heart and mind is PUBLIC TRUST!!!
Pat
Reliable pricing was the most important issue with our trustworthy forefathers. Those forefathers with little stores on the prairie needed reliability in pricing to be ability to sell a plough, stove or a kitchen sink.
Every farmer kept an almanac, and or a catalogue out back. Many catalogues’ companies-built reputations with their advertising in the house out back.
Now those houses are changing, and PUBLIC TRUST, is highly questionable.
Appraisers and other must insist on individual trust.
Say what you do: do what you say and defend your work.
Pricing is pretty important.
That old shit house ain’t no good no more.
Albeit other items may be a consideration, if true, it does raise a good example of how the current appraisal policies can go awry with no accountability. As we all know the end result will be the persecution of the individual who signed on the bottom line.
It would have been nice if the original post had stated some more specifics. Original price paid? How the current under water value was determined? Typical $/SF adjustment range for a similar home. Something is simply not adding up. Has the local market had a downturn in general since rates have gone up?
$100,000
Buyer paid 12% over list and won bid. That tells you right there that was the highest price the market would stand for at the time. Possibly even higher than market? Maybe all other offers were 6% or less over list. The appraiser comes in 3% over that.
Underwater due to buyer (self guided) and appraiser with respect to value — ~$15,000
Now you have 600sf of supposedly finished GLA that was actually unfinished. That would need to be worth $85,000. About $141.50 S/F. I assume the unfinished space would have some value? Maybe $5K to $10K just guessing. So maybe $125 sf. Is that typical for comp market?
So there seems to be about $75K unexplained or improperly reasoned or both. Granted the entire process on everyone’s part was flawed from start to finish but the article doesn’t provide enough information for anyone, especially other appraisers, to determine what actually went wrong and/or changed.
What if the list price was 10% over value to begin with? Not out of the question by any means.
I just don’t see how you are going to convince anyone that hybrids are a bad thing if you don’t outline the steps that took place and outline a reasonable set of alternative events / adjustments / conclusions that should have taken place.
Not that I do hybrids but lenders -know- they are going to get some bad deals. This was not a bad deal for them. 50% down.
Owners bought at height of market so this suggests the market has turned down there. “Underwater now” — No they were underwater the day they bought it and they knew it.
There simply are not enough facts to determine where these value opinions are coming from and what they relate to. Underwater implies there is value opinion. The original appraisal hybrid. Sale price last year. Were wrong comps used due to unfinished area? If they bracketed high side then they may have used a comp that was 4,400sf for a 3,600 sf home.
Public Data wrong
Onsite data collection wrong
Appraisal analysis and report wrong
Owner buying top price at peak of market — not necessarily wrong. It’s their money. They could have bought stock, played the lottery, went to a casino…. very likely they would have come out with lighter pockets there as well.
So the owner has an unusual situation. They had been looking at houses and losing bids. Most buyers, at least all I’ve ever met, can see if a home has a large unfinished space. Does the home feel smaller, larger, about the same, etc.. When you are talking out 600sf. So they were in the market. Aware of alternate housing available and recently lost bids on. They knew what they were buying and choosing to pay more than what was being asked only because they felt it was equal to others they had lost bids on. In their minds an appraisal was not needed. They purchased based on personal knowledge having been immediately active in the market. Now the market is not at it’s peak. Well we are all in that boat.
It would be nice to see a retroactive appraisal the day before it was listed last year. Forget the list price. Just get a clean value with correct GLA etc.. Then sit down and get a current value and figure out when and where the money went.
Market change
Data correction
Other
The lender hasn’t lost anything. They can just blacklist the appraiser
The buyer / owner really has no point as they were acting self directed and waiving all checks and balances.
The appraiser apparently should have caught the GLA area issue but I have a hard time believing s/he made a $100,000 mistake.
The owners gambled on an insane real estate market and that market has changed. How many people did that same thing? As well back in 2006/8.
The story here is not that a hybrid GLA mistake is worth $100,000 because no one has shown what should have reasonably happened to value from day before list until now with current value.
Segments of any given market is the market at hand for individual property analysis. The actual proportion of size difference expressed in a percentage is a good first step for anecdotal property data sharing. Certainly that much space would result in a slightly different market placement and comps analysis. And yes, what you said. I’m willing to wager that the trained property inspector did not have a nifty phone option to cut out open spacing, as there is no wall there, if he even noticed during the brief 10 to 15 minute ‘inspection’.
The dream of hybrid is just that, a pipe dream. People whom push these concepts simply do not understand how size statements come to public records in the first place. The building department is given data, then that data is shared to the assessor. A myriad of factors can change in between initial application and construction finalization. Guess what, counties are not perfect and neither are builder employees whom may submit the plans for permitting approval or even swing the hammer to set up the framing.
Sometimes things happen and updated plans and specs although approved with building departments, that data is never updated to the assessors record. If you’re in doubt for perplexing size data, be sure to see if a ring to the building department may bring alternative or additional data, although better managed assessors don’t have that problem as frequently as in the past. The builders themselves can make mistakes, especially in mass produced tract housing. All it takes is the buyer waltzing in an under construction unit and saying, we’d like this instead, or perhaps some financing or material sourcing issue, and just like that, material size as built is not as initially recorded. Perhaps someone spilled their coffee and that particular piece of paper simply went to the trash can. Imagine a county assessor pouring over simple downsized plans and specs papers, and just dialing it in. How about a builder whom submits only several generic plans which the assessor relies on for the entire project, yet change orders are made to some of those houses which the assessor is simply never informed of, builder did not pay additional fees, property was sold, nobody was the wiser until a qualified appraiser one day shows up to measure the home.
There are countless possibilities for what can go wrong without qualified data qualification. To presume data is qualified simply because it says so on some government website is the height of ignorance. Like all other matters in life, the very last place we turn to for product safety advisement or honest declaration is the government. The government sets all these rules, they’re good at bossing people around and creating taxable opportunities. Spending time on verification, that’s not something government entities typically specialize in outside of tax focused or rule focused auditing. Again, FNMA is cart before the horse because if they want to put this much emphasis on property records there should have long since been a firm requirement for assessor record correction for at least the past several decades, if not longer. It’s truly idiotic of FNMA to want all this detail and quality, yet refuse to share such basic information as what previous appraisers measured this exact home for, they have the records in the CU system. Care to wager how FNMA and lenders will reconcile CU data on size discrepancies into the future, if actual human appraisers state size variance from record, but public records were never updated, in hybrid scenarios? I’d bet you can guess.
I don’t know, but for this article, it’s reasonable enough. We know there are going to be problems with third party inspectors, it’s beyond obvious there will be many issues and inconsistencies. Such is typical with unnecessary outsourcing efforts, save a buck, answer all the problems the outsourcing effort contributed to later. I want to know how much the inspector got paid, because when I called a half dozen companies offering this mortgage lending inspection service, they were telling me like $8 each, sometimes slightly more. True story, how disappointing.
What!? Are you sure they didn’t say $80. How can anyone measure a house for $8?
True story, you can research it yourself. I called MCS, Radian, Xome, VRM, Guardian, a half dozen other individual 1099’s whom outsource the work to fourth parties, and another long run of them but I don’t have that folder stack right here with me today to reference them for you. I spent months in mid 2022 looking into this, as I was honestly pursuing a dream of professional lawn mowing at the time. Interestingly enough, most appraisers could probably earn more at lawn mowing, the pay is pretty good and requests roll like clockwork bi weekly for basically as much as you can handle with a substantial volume of clients whom subscribe to the vendor services network, basically any commercial interest with grass and dirt. The guys whom also are willing to clean toilets and haul away junk after performing evictions alongside sheriffs get first dibs. That’s kind of where I had to set that dream down. It would make more sense to be a process server if one is o.k. with heated confrontational engagements. lol.
The vendor services industry is substantial and there is already a robust network of people who just drive all day long to take insurance verification photos of everything from auto to houses, all these service needs for everything from rental to repossession, etc, etc. The most sought after position is that which requires the least effort, simple property inspections and photographs. The guy offered me the NE CO coverage area which encompasses a quarter of the state through expansive rural areas and literally told me $8 each and I’d sometimes only get a few to perhaps a few dozen, maybe even only a single, but there was no exceptions on service fulfillment terms, everything needs done in 24 hours. But I would get every single request first in line. I was like you’ve got to be kidding, that would not even cover the gasoline costs. He was like yeah, in the rural we end up subbing it to the preservation guys and even lawn mowing crews if we need to.
Welcome to your new ‘hybrid appraisal inspector’. I’m not making it up, true story. The number was $8 dollars. No extra zero behind it so don’t get your hopes up. At least Radian uses licensed sales agents whom skate by liability free and perform the service as a sort of favor so they can also get big commission listings too. Radian right now, having ended their full service ordering methods from appraisers, utilizes agents for inspections than expects a hybrid report from the appraiser, based on an agent bpo, your signature and your insurance and everything, for $25 to $50 per. Basically the same compensation as the agent.
These companies do not even understand the basic premise that price is not the same thing as value. Many even refer to a bpo as a valuation service right on their websites. So now the name of the game is tracking down default managers whom are not taking this idiotic stance in favor of hybrid and remote inspections. Support the good guys. Eventually these people whom are apparently asleep at the wheel will wake up. Maybe not though, they don’t care about losses other people may experience, they’re in it for servicing profit and volume fulfillment.
It may be important to revisit the notion that appraisers should not legally be allowed to even refer to a bpo, much less reconcile them or complete them. It would be a smarter engagement just to get a sales license and refuse to complete appraisal services for companies whom are pursuing hybridization and third party inspectors. Agents can use third party inspectors without concern, the same can not be said for the appraiser.
https://propertyvendors.com/
Here is the pointless false claims again; ‘without compromising quality’. Ever heard of an appraiser reconciled bpo? Well now you have. I did not even bother to check if that’s covered practice under my EO, why bother. There was a convenient 1 hour training video on how to complete them, which of course, I passed. They’re all doing it copying each other. It’s like the amc proliferation event all over again, except for hybrid appraisals. Predators circling the watering hole.
“Reconciliation” of horse shyt is nothing new. Old Republic used to run ads for appraisers to do it all the time. Talk about a pressure cooker and literally ZERO USPAP compliance!
you have to come back at least twice to measure back-to-back 4=plex’s, because not every one’s home the first time around. How can you inspect the owners closet? or verify the rents?
It takes only 15″ to measure an ordinary tract house ( unless something is wrong), what an opportunity for professionalism to be charged for.
Who is (your) client?
What’s all the BS about the property size and utility? Isn’t that part of the report signed, and attested by you in your statement of confidence.
Past your drawing and figures on an included page
But FNMA says they will be “professionally trained”, and vetted at least once a year (Attagirl CRN!)
Training: Walk in take pictures the way we told you to. Everything else is average.
Vetting: You off parole or probation now?
All of what you say makes sense. Except for the personal responsibility part. This is 2023!
Systemic racism in lending AND appraising. Evil appraisers either under-appraised because they are racists OR evil appraisers overvalued the property to make sure that the Green aliens PAY for being green.
Even other green appraisers can be accused without credible evidence.
You just say that because your Irish?
Hadn’t even thought of that Don, but it helps make my point. You were jesting, but others who read our appraisals would take that obvious effort to avoid any prohibited bias and turn it into an HUD reportable bias accusation. (PS-HOW do I make the font sizes even smaller again?)
LOL Mike 🙂
Font size and line spacing was increased. Hope this helps.
Mike, we added a text resize tool on the left of each page which you can use to increase the font size.
Irish again!
Was the hybrid appraisal completed by a company called True Footage? Considering their faster, fairer, better, laser focused on going the extra mile for their customers, and empower professional appraisers to do what they do best, I would think not.
Seek the truth.
Good one Bill, I love it when you stop by. All the darn tag lines and false claims, these third parties just copy them from each other at this point, same old thing. All the while they ignore actual qualified appraiser advisement on the matter, how the vast majority of appraisers consistently object to hybrid and remote inspections. It’s yet another case of someone sold it, and someone else bought it. What a waste of time and effort, they could have skipped all the development and contributed to the appraisal industry rather than continually assisting in it’s destruction. These tech companies don’t just want a slice, they want the entire cake.
Appraisal modernization efforts are not about saving a consumer time or money, or following the GSE mantra of maintaining liquidity in lending, the effort is solely focused around appeasing special interests, promoting tech which is more convenient for corporations, and eliminating valid checks and balances systems which actually protect consumers. How flimsy can this argument get, drive down an industry for decades, alienate over half of the qualified work force to the point they refuse engagement with GSE’s, create artificial market conditions to create excess demand (low rates), then decry the lack of servicing while moving to automation in the same breath as the artificial market conditions are rescinded. Who’s actually buying this? The people whom are not qualified to perform this task in the first place, that’s who. The Appraisal Coach has entered the chat.
Considering True Footage is, “appraiser owned, appraiser run, they know the sweat equity of their past, and that its essential to build the efficiencies of the future, how bad could they be?
Seek the truth.
https://truefootage.tech/
3,000 years of cumulative experience? Oh brother, talk about meaningless stats and overdoing it. I suppose we’re all assimilated into the collective now?
‘We are committed to leveling the playing field in the real estate technology space and seek to impact the world by driving equity into the appraisal process.’
What does that even mean? Someone please tell me what the heck that even means! New slogan for the appraisal industry; Value is not the same thing as equity.
I’ve combed through the entire site and the links and am still not entirely sure what they’re selling other than some tech program. Holy smokes, they’re claiming it’s better than a double shot of fine whiskey, like life changing. These people may have landed in the wrong profession, I’m getting this Siskel and Ebert vibe like I’m reading promotional blurbs or something. They need better web development because pop up new windows is highly annoying, just let me click through, dang.
My take away is this company is not just attempting but actually has created a national appraisal firm, like a corporation to itself, not bound by amc management rules. It’s interesting but if they ever even once outsource work orders or farm them out somehow, they would be functioning as an amc and should be regulated as such. I mean it’s an appraisal management company already at that scale right? How many appraisers must there be to require additional oversight? Clearly, there appears to be more than three trainees. The current regulatory model for appraisers is built around individuals and small firms from a local level. They appear to be challenging the model. Since when does a regular appraiser firm hire back end engineers for $100k? Can anyone clearly describe what regulatory umbrella a national firm would fall under? If not, they should have an amc license in every state they operate.
https://www.housingwire.com/articles/true-footage-acquires-spark-for-appraisers/
________________________________
That was a waste of time. Focus on this instead.
cfpb_hearing_on_racial_bias/ I’m just watching this now. Looks like even a few people whom frequent this blog were even in the live chat.
The Root Of The Problem Lies With The Borrower, The Listing Agent, Or Both. You state: “They put an appraisal waiver in the contract which meant they could not walk away if the appraisal did not come in at contract price.”
Bottom Line: You can’t fix stupid. ALWAYS use as many contingency clauses as possible.
If the borrower wanted to overpay (they knew they were, just not to what extent) the waiver makes sense for them if they don’t want to put more money down.
Correction: The borrower, the selling agent, or both
R. A.
We I, us, always does good. Its always the others; the agents, brokers, teachers, Realtors, Big money, The Polititians, whoever.
I also go into retirement conscience free, and not gritting my teeth Happy with my engagement letter and mostly my fees.
Don’t just fill out somebody elses FORM
Frank, go to bed already. Any way, with an appraisal waiver as stated in a purchase agreement its only the buyer that is waiving the results of the appraisal, not the lender. The lender will loan what ever percent you agree to as a buyer, so if the loan is approved at 90% the lender will loan 90% of the sale price OR 90% of the appraised value which ever is smaller. So in effect the buyer is agreeing to increase there down payment as needed and they better have alot of ready cash in a market like 18 months ago-the down payment is not capped. Not maybe you were refering to the lender getting a waiver, in that case no appraisal is required.
They were buying value in use, when they thought the purchase represented value in market. Collectively, the push for housing did temporarily increase value in market based on perceived value in use. Wherever they were coming from they played for keeps and were not going back, often untied from contingency as they had already sold and then entered new markets as completely liquid participators, ready to spend. Then market conditions changed… The question out there now is will all the people whom bought over the last several years be more inclined to clutch onto the low rate, or will they prioritize being mobile in their housing interests. Only time will tell. I’m seeing people default on units they could have otherwise walked away from in the green. I don’t get it and one agent told me that it’s just financial ignorance, some people really don’t care. Consequences of softening qualification standards I suppose, no skin in the game. One day people may look back and say you know what, 6%-7% was not all that bad…
Most of us are buying value in trade, When those twelve GRANDE KIDS move in with you, ITS value in trade. Close on it to day don’t let it go higher
https://www.thesmitsteam.com/blog/many-recent-buyers-believe-they-overpaid-for-their-homes-as-the-market-corrects/
Only 1 in 5 regret their recent height of the market price purchases…
Baggs, If I bought at 2% or 3% 30-year fixed and can easily afford it and don’t intend to move I might not regret it either.
Those who bought at 3.5% when they started and closed at 6.5% and work in the California tech industry might regret paying 10% -15% too much.
The difference in a loan @ 3.5% and 7% is 100%. Differing Thresholds of activity exist, as mortgage rates change. buyers or sellers will hold off until a POINT. Buyers or sellers will hold off on a price point. Agents, anxious sellers or buyers are all human governed by circumstances and emotion.
To me the big part of the issue, is a lot of lender, buyers, agents etc. have lost faith in our appraisals. Why? my opinion is that too many appraisers come it right at the sales price almost all the time. So it makes us look not good, as comments have been appraisers see the contract price and just hit that number. That is why the powers to be feel they can replace us with computers etc. Just ask yourself this question or even ask people you know to answer you honestly ” how can it be considered unbiased or steered etc. when almost all of the appraisals just hit the SC price. It makes us look bad, I do not do that as the odds of the appraised value and SC being the same number is slim and none. I here well it is in the range of value, is that not more like a collateral check and not an appraisal. I heard this from a good appraiser friend who worked at FNMA, he said that is exactly why UAD came into being so they could get our data and use it in desktop UW etc. for waivers etc. we are killing ourselves.
I see no issue with appraising at contract price providing that value is well supported, if do apply all your adjustments property, do your reconciliation and end up within +/- 1% of the contract price, why in the world would you not just hit the number? The problem is if you go a little high some reviewer want’s an essay as to why, go below you get blowback, and its unncessary. I firmly believe we should be able to provide a range in value rather than a single point, afterall, nobody is that good. Lastly, you have a buyer and seller agreeing on a single price, those are two excellent data points . . . why not agree with both buyer and seller if the contract price is supportable?
Exactly! For a typical sale in a healthy active market.
I was told 45 years ago by an appraiser that had been in the business many years that a value range should be what the appraiser delivers in rounded numbers. So don’t anyone hold your breath on that one.
With respect to Value = Contract Price.
List Price = $500K
Scenario Contract Sale Price = $500K. You get knowledge of 7 offers from agent. $435K, $490K, $498K, $500K, $500K, $502K, $525K
It doesn’t take a rocket scientist to see it’s worth $500K. If your adjustments come out to $497K and you report that as value…. well,, good for you, you are smarter than the market. If your adjustments come to $530K then they are wrong. All this assumes you have ample sales data and know how to analyze it.
Now if someone rolls into town and knocks on someone’s door and offers to buy their house and they say sure. Give me $600K knowing it’s probably worth $400K and the guy says no problem. That’s a different story.
Neither of those scenarios would negatively impact the appraisal profession public trust.
What is the issue is that we should NOT see the contract period, we can disclaim personal property etc. but that is a huge issue as the public feels we are being steered which we are as then there would not be appraisals coming in at the sales price. we dont have a ”target when we do refie or not supposed to or when we do private party, estate or divorce work.
So you don’t want to see up to the minute undeniable market data? A meeting of the minds under current market conditions regardless what they may be.
You can’t render an unbiased opinion with that knowledge? Why don’t you just not read the contract until after you reach your value opinion? It’s a pdf document, just don’t open it. Fill in that last section of report and click send. Your problem of being steered is solved and your value is just like a refi, private, relo, whatever.
if you are that influenced by any one thing you should not look at the contract, its just data points, and if its truly an arm’s-length sale, there are very good data points, a buyer and seller agreeing, and most of us know you should believe everything you read. USPAP is spot on regarding contracts, they need to be reviewed.
I understand your point, I am talking about the perception of the public and people who use their services are not fully educated at what and how we do things is all, sometimes perception is reality, just like some buyers wont touch a modular home at all, others will that know more. I was just talking the reality the public, lenders and most RE brokers have of almost all their appraisals come in at the sales price. I understand the rationale from your perspective, I don’t agree as I am simply talking about how our services are perceived and why all the push for alternative valuation methods, ie AVM, hybrid, desk top etc. The thing is banks know they will be bailed out again as they always have been so they can push down the limits
” I don’t agree as I am simply talking about how our services are perceived and why all the push for alternative valuation methods, ie AVM, hybrid, desk top etc.”
The only reason for alternatives is to get our money.
“…almost all their appraisals come in at the sales price.”
If the brokers are doing their job that’s how it should be. They are supposed to be getting their client the highest possible price the market will carry. Ever heard a real estate ad where the agent / broker says “we’ll sell your home super fast but don’t expect the best price”
Chuck, range will never happen for transactional lending appraisals. Value 490,000-520,000.
Contract $505,000
Lenders concluded value? $490,000. (OR FNMA post-purchase audit would be the lower end).
Its a legit philosophical discussion but not pragmatic in the lending world.
#1004 form has an opportunity for analysis; I frequently state (I have been influenced by the offer for $98,468 on VA terms with the seller paying 3 points and the agent accepting 1/2) of the commission and mowing the front and back lawn for two weeks. The property has been on the market for 8 weeks at diminishing prices. Most sell in 3 weeks
Dave, It could just as reasonably be a testament to the ability of brokers and agents to price property accurately most of the time. I concur that may be the perception but it is one without convincing data to support it. Despite OUR elitist beliefs, we aren’t the only ones who can get value right. The market we emulate does it all the time. Why would it be unreasonable to accept that people who earn their living selling real estate would have no idea how to price it?
Any loss to our credibility is primarily directly attributable to the recent generally false claims of bias; a President that confessed the federal government had been systematically biased in housing for decades…and who then decided to scapegoat the appraisers for it. HIS confession of OUR (purported) guilt!
ATF has also failed miserably to protect or preserve the public trust in the profession. That was THEIR job! They were more interested in building their own empire instead. (The President of TAF reportedly earns about the same as Doctor Fauci did…the highest paid guy in civil service.)
Mike,
My experience has been most brokers do not know how to come up with a value, as they use MLS CMA formats, price it to what the seller wants, I would honestly say only about 5% of the brokers I deal with know how to comp and adjust etc. for example they get hung up on sf or lot size as gospel. I agree the govt has screwed us repeatedly, now the hybrid report which looks like an appraisal but is not. After 30 years doing this, I have lost all hope this profession will make it, my daughter backed out as she saw no future in it. I respect your point of view and dialogue
As long as she continues to OVER list, an agent will keep a license.
A lot of houses encourage to continuously re-sell to both their client and to a buyer. Many, most houses sell after being relisted at a lower price.
the appraiser is held to a specific time.
Hi Dave, thanks for the kind words. I agree that many agents haven’t a clue as to how to adjust. On the other hand, any agent that regularly works their farm area can qualitatively compare and price the property correctly. They don’t have to do it the same we do.
Clearly, managing brokers have been remiss in their obligations. It’s also amazing how many agents think they work for themselves rather than a broker.
Let me share a true story:
Back in ‘1986 before I tossed in the towel as an agent (sold from ’71-late 74 & again in ’84-86); my Dad and I (he was a broker since the mid 1960s) were going to co-list an sfr in my farm area. An area I grew up in, within a couple blocks of the high school I went to (or one of them anyway).
Given it sided to a fire station and was technically three lots outside of the preferred sub-neighborhood we proposed a listing price of around $170k. The owner wanted $185 or 190k NOT A PRAYER!
My Dad and I both worked for two different Coldwell Banker offices. I called him in to double-check my misgivings about the value. We both agreed, better to decline the listing than to take a seriously overpriced one.
One of my co-workers heard my later conversation with the owner and asked if I’d be ok if he called them? I said, “no problem, but even if you get the listing, it will never appraise.”
Anyway, he listed AND CLOSED that sale for $185,000 less than a month later (basically 10% over the HIGH end from closed sales). All cash buyers; less than 30-day escrow.
It taught me two things: Markets change (including those I think I knew like the back of my hand); and in an increasing market with declining rates, it’s not too wise to insist on being right based on historic data rather than listening to the owners ‘gut’ too. BTW $185,000 for that property was the “ain’t no way in you know what” price that should not have sold period.
In some markets, no one really knows what’s happening ‘today’. We assume yesterday will apply today. Sometimes markets jump in giant leaps no one can anticipate accurately.
You & I have to seek the most probable price under specific circumstances. Agents have to try to get the highest price possible within sellers’ specific circumstances (time, net, conditions, etc).
Some agents TRY to get it right. In rapid increase periods, they have to take what they can get, or someone else will do the same thing to them that my Dad & I did to ourselves.
I haven’t lost all hope for the profession yet. I think we are going to have a boom reviewing FNMA waiver values for litigation related to predatory lending or investor fraud down the road. I HAVE pretty much lost any faith I once had in TAF & some of our regulators.
1st an only Hybrid I tried to agree to they sent me photos of a rural ranch. I did my own drive-by to confirm data and found a DW manufactured located in the back yard on brick foundation. Couldn’t see it from the original photos. That was 5-6 years ago and haven’t accepted another since nor did I complete that one, cancelled it.
I just delivered a $254,000 appraisal report on a $277,500 pending sale with Realtors involved. I don’t care what the purchase agreement says which I read immediately upon receiving an appraisal order. I care about what I can prove value wise. Unlike 15 years ago before Dodd Frank, I won’t be getting any nasty lender or Realtor phone calls or my life threatened like in the old days. That I really appreciate.
“I just delivered a $254,000 appraisal report on a $277,500 pending sale with Realtors involved. I don’t care what the purchase agreement says which I read immediately upon receiving an appraisal order. I care about what I can prove value wise.”
Exactly!. Pretty simple concept.
Lots of interest in your article JS. Thank you for taking the time.
There is so much wrong with the scenario you shared.
1. Predatory lender and loan officer
2. Possibly an irresponsible agent/broker…or a responsible one whose advice was disregarded.
3. Uneducated buyers, Smart enough to be able to put 50% down, but whose egos or fears of losing out allowed them to be seduced into overpaying.
4. Blatantly dishonest system of value verification effectively circumventing the intent of FIRREA. Waivers and horse sh*t bifurcations were never intended to sidestep FIRREAS intended checks and balances.
5. Incompetent, and UNDERPAID data collectors/inspectors. The only surprise to me is that we haven’t heard about a bunch of winos or drug addicts gathering the date. I doubt it’s related to screening as much as even winos won’t work that cheap.
6. Either desperate or dishonest appraisers that have fooled themselves into believing the Emperor’s New Clothes (bifurcated “stuff”) are wonderful.
7. Failure by regulators to stand up to MISMO and FHFA and TELL them Bifurcated Horse Poo doesn’t remotely comply with USPAP anymore than the old PACE PRO did. (Several articles on that are here on AB)
8. I note there will be a FIFTH Draft to the Ethics Rules revisions being proposed for next USPAP. ‘For greater enforcement’. Meaning, lets keep up the chimera of plausible deniability for all the actual crooks and figure out more ways to pin the tail on the appraiser. Either that or they will make saying grandfather; ‘superior’, ‘good’ or any other traditional RE terms capital crimes.
I listed and sold real estate in the crazy 1971-75 period before the mid-1980s disclosure pushes. Dishonest brokers and related accomplices ‘bought’ VA eligibilities from downtrodden vets; engaged in blockbusting, and ran their own escrow companies to facilitate all the fraud that went on back then. I saw a LOT then, but my parents handicapped me with morals that adversely affected my income then.
Those folks were rank amateurs compared to the officials, hucksters, and manipulators of today.
JS contact your former client and ask if they are concerned enough to share a copy of their bifurcated appraisal? Free review. In writing. Even if they intend to use it for litigation purposes. They and I run the risk that they may have the very first USPAP-compliant hybrid I’ve ever seen.
Not likely a very big risk though.
Brilliantly written Mike
Thank you “#4”! That means a lot coming from you. Hope your health is OK. BTW reach out to Mark and Josh T. on the upcoming CFPB discussion(s).
Already have reached out to them and they let me in the club!!!
Mike I hope you are doing well
All is well here Pat.
Too busy with phony FNMA ‘complaints’ against appraisers from their Collateral Underwriter Repurchase Enforcement (CURE Underwriter Teams), & LQC Team E.
Inside sources from FNMA told us last week (guessing the actual time was about two weeks ago…leaks take a while to reach us) that FNMA DC has told FNMA Houston to stop leaking information to the outside. Guess they never heard of Whistleblower protection laws.
But they are upset that inside info keeps popping up on blogs and on FaceBook and other online sites.
Promise to keep this quiet *g*…Apparently, DC wants the repurchases ramped up to sanitize the portfolio of loans they are trying to foist off err I mean to sell to “investors” as Triple-A paper instead of toilet paper.
What’s surprising isn’t that they are trying to clean up a sketchy loan portfolio. It’s that they still have investors (other than the U.S. Treasury)!
Anyway, tell your folks in Virginia that anything with a CU score over 3.0 from 2021-present seems to be fair game now. Not just high 3’s either. I expect to see over 2.5s to 3.s next. Probably nothing to it, but Missouri complaints seemed to be in the vicinity of Ferguson (slightly northward), and Georgia seems around Atlanta. Good thing I’m not cynical or I’d be wondering if it has anything to do with race too? Probably just a coincidence.
Anyway, despite claiming ‘after review’ in their notices to banks and later state regulators, there is no hint of USPAP compliance on the FNMA’s part. Heck, their ‘complaints are so spurious in nature that most aren’t even signed anymore.
It’s going to get really interesting when they fully implement the “Value Acceptance” process. They claim there won’t be any repurchases, BUT these are the same folks that once claimed collateral underwriter wouldn’t be used to rate or review appraisers either.
Stay in touch, Pat!
Value Acceptance seems too bland a name. Not very descriptive either. Im thinking we need to have a contest for a new term to describe that new service.
I claim “Collateral FRAUDULATOR” for my submission!
All kinds out there. Knew a CPA who was sentenced to two years for processing CAL-VET eligibilities in the late 1960s.
Lots of Licenses involved in getting all of them people together.
Remember Cal-vet is a STATE agency, and the transaction is a Contract of Sale, not a deed.
How come smart well-educated Appraisers are mentioned these dumb for criminal offences?
While USPAP does not require a physical inspection to be completed by the appraiser, the appraiser is responsible for verifying any and all information contained in this report, this includes the GLA count totals in accordance to ANZI standard of measure. The appraiser failed to recognized the error. The “trained” third party information provided failed to understand the scope of work, however it is the appraiser’s legal responsibility (he was sworn to adhere to USPAP) to verify all information contained in your reports. If you want to complete these HYBRID assignments, good luck with that because you can’t verify this information 1st hand and verifying it 2nd hand is shaky at best. The last time that I checked, there is only one way an appraiser can verify the GLA count totals and their compliance with ANZI standard of measure…be there in person and do it yourself.
100% concur.
Hybrids really don’t require any other discussion than the above.
They are NOT USPAP compliant. Not one of them. Not even those designed to be used in conjunction with FNMAs own fraud-inducing forms.
I fully agree with you that they are not USPAP compliant, but nothing will change because it is on the appraiser to make it USPAP compliant. The state boards will come after the appraiser for not complying to USPAP, but never dream of going after FNMA, of which is a government own entity still. Longest conservatorship known to this country.
Again, I 100% concur. That is their plausible deniability. Buried small print embedded in the bifurcated horse-shyt form stating that ‘nothing contained herein prevents the appraiser from adding such additional information as they consider necessary…or words to that effect.’