Lies, Damn Lies and More Lies
These so-called accurate and ‘reliable’ data sources are factually wrong…
I was reading the Scope of Work contained in a sample Hybrid Appraisal, one of now dozens being promoted by multiple AMC’s, lenders, software developers, etc., which seem to be sweeping the secondary lending arena these days.
Identified and verified subject characteristics from a reliable data source such as MLS, County/City records, GIS, and online data sources. – Researched comparable sales and listings from reliable data source such as MLS, County/City records, etc.”
“Reliable” is the ugly lie and supposed truth promoted by very naive or unaware people who write this junk, and then disseminate inaccurate statements like this.
Other unsuspecting people within and surrounding the appraising profession, and lenders, then jump on the band wagon believing that ‘data sources’ are the ultimate authority – and the appraiser who wades through copious amounts of this stuff to arrive at a decision is not to be believed or trusted.
In fact, many times these so-called accurate and ‘reliable’ data sources are factually wrong. Quality appraisers know this to be true. But it’s hard to convince the Kool-aide drinkers that junk data, is in fact, junk.
I’m aware of an appraiser currently going through a ‘state regulator report investigation’ based on a frivolous real estate agent complaint. *** The “investigator” in question is not a licensed appraiser, never has been, and apparently never has been involved as a real estate sales person… based on research we’ve done. This “investigator” appears to have a “data truth bias” and just forced the appraiser to give an explicit response to why the report commentary says some data used for research is factually inaccurate and the appraiser has to use judgement and multiple sources research to decide what to use. The “investigator’s” question was this:
“What is your margin of error for lack of reliability with any data you collect?”
In other words… prove a Negative. Or in the perspective of the “investigator”… I don’t believe you have more faith in the inaccurate data sources.
Some data = lies. Work hard to get to the truth.
*** In our state, any ‘complaint’ turned into the investigations department is considered to have merit up front, regardless of final determination. In Oregon, I believe, the submission is considered to be an ALLEGATION until all details are investigated. When and if technical violations are found, it then becomes a formal Complaint. That is a fairer system, because an ALLEGATION does not have to be reported to the appraiser’s E&O provider. In our state, any time a ‘complaint letter’ is given to the appraiser by the investigations department, it must be reported to the E&O provider. Then this situation has to be reported to the E&O provider for FIVE YEARS.
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I work in Dayton OH, I got “complaint” in the mail about 5-6 years ago. I did an appraisal on a historical home in West Carrollton, 125 years old or so. Big beautiful, older home, nicely restored. I compared the subject to other, similar historic homes in the West Carrollton area (the town is quite small, I did not have to go far). The owner filed a complaint with the state, not the lender but the state license board for negligence. The owner wanted me to use new construction dwellings being built a few blocks over and thought my process was negligent……………………/palm to face.
The complaint went nowhere but you still have to go through an annoying process at the state level.
My 2 cents.
Not all states are as honest as yours was in addressing the complaint. Annoying as it was, you were still lucky.
Those complaints are reasons we charge appropriate fees, keep your fees up, and happily answer all complaints
The guys doing 1 a day certainly are not going through the data thoroughly.
I’m not sure who is crazier, the appraiser who relies on a stranger’s inspection/information or that person doing these inspections for less than $150.
Clients will push for these types of product to save a day or two in turn time and maybe a buck or two to a borrower. But we all know this is not about benefiting borrowers but increasing profits. Of course hybrids will be spun to fit this false narrative that it will help borrowers by reducing cost & turn time.
Will appraisers be held liable for relying on fraudulent data provided by a dishonest 3rd party?
“When a signing appraiser(s) has relied on work done by appraisers and others who do not sign the certification, the signing appraiser is responsible for the decision to rely on their work. The signing appraiser(s) is required to have a reasonable basis for believing that those individuals performing the work are competent. The signing appraiser(s) also must have no reason to doubt that the work of those individuals is credible.”
“have a reasonable basis for believing that those individuals performing the work are competent”
I would like to hear from appraisers doing hybrid appraisals. Are you vetting these 3rd party “inspectors” or simply relying on amcs for selecting the fastest and cheapest “inspectors”?
Sure it’s reliable, absolutely. Unlicensed home inspectors are reliable right? I mean those fly by night high turnover insurance inspector position guys certainly have strong working history in real property inspection and physical state analysis. Last time I shopped for a competent highly skilled inspector for just one single utility system review, the cost was minimum 100 dollars. I’m up for avm’s, and I only need 550 for them, so I can recreate appropriate process as is already well established with the 1004 form approach.
Nicely said Dave;
Excellent post Xpert
If the forms are really USPAP compliant, why don’t they say:
Extraordinary Assumption One: “Identified [delete and verified] subject characteristics from an ASSUMED reliable data source ”
Or more broadly identify the ‘valuation guesstimate’ as a made up value definition that has nothing to do with market value and in which we employed a hypothetical condition that all the steaming pony loaf (ok, so call it hybrid data if you prefer) was credible and any adjustments made supported.
The lenders do not WANT to be honest, and more egregious is that neither federal, nor state regulators have the integrity to stand up and say these types of reports are inherently misleading. Small print giving the appraiser ‘permission’ to add such research and data as they feel is necessary (for the original chump change fee) does not adequately protect the public and United States.
This should not be a serious consideration right now. ONE GLANCE at the forms proposed; and ‘leveraged big data’ (I still contend steaming pony loaf is a more accurate description) is enough to say (1) these by themselves don’t come close to USPAP compliance; and (2) they will promote non compliance and facilitate fraud.
ASC and other feds stopped PACE PRO as it was originally proposed why are they so silent now?
As mentioned previously, moms is doing them so I learn a little bit about them. And I did test lookie once but never actually completed any. What gets me is they have the comps pre selected for you based on various utility tools software. Word on the street is their time estimates to complete are a minimum of 75% understated (states half hour, but 2 hour min), and also the comps are typically very aggressive and unreasonable. I’m thinking that if anyone gave alternative product approaches a serious review with the intention of submitting to regulatory authorities it would be easy to prove the biased intention behind the structure of engagement. Just guessing because I won’t engage. The system runs mirrored to what we know, a system of backwards rewards where if you don’t take the time to be ethical and detailed you naturally get higher income than those whom are complying with the proper spirit of ethics. People often position and argue it’s in the book. What people are missing is the spirit of ethic, the spirit of law as intended. The spirit of consumer protection is obviously being circumvented with quickie products and avm use. Then again on the other side, they’re likely jr liens and such so there is some fair balance. But wait, if this process gains wide spread credibility will the engagement still be limited to jr liens? Doubtful.
Regulations are not going to change for the better for appraisers because lenders want the alternative process to succeed and eventually push appraisers out of the profession altogether. The AMC once this push gains momentum will rebrand and replace the appraiser.