Let Appraisers Train Their Own Inspectors
If we are to make a third party inspector liable for the data they provide…
FNMA’s recent newsletter states that a third party inspector should be hired to deliver photos, sketches, etc about a property to them. After their review, if they believe an appraisal is needed then they can forward that information to the appraiser and a desktop can be performed with ease and accuracy. In their words, this is no different than an appraiser relying upon other forms of data in the report such as public records, MLS, etc.
I really do appreciate the perspective of some who want the idea of detaching appraisers from inspection data to be successful. But it is my belief that a few things in our world need more precision than others, especially when we are dealing with the largest investment of most families. I used to be an executive in the banking industry, and I get concerned when too many moving parts are tossed into any profession that impacts so many people, which happens in finance too often.
A really credible appraisal begins with really good data. If there is to be any delegation of roles in that process, then I like the idea of appraisers training inspectors in their firm to do their inspections. That makes sense to me, because a massive level of trust, liability, and responsibility exists between appraisers and their coworkers. Simply stated – I know my staff and they know my level of comfort pertaining to the data I require. I sign my reports – I’m ultimately liable for my opinions – My staff would be liable to me if something wasn’t done correctly.
That is where this conversation should go. Appraisers should be able to use their own inspectors with the understanding that, just as it should be, appraisers are liable for the reports they sign. Inspection information is NOT the same as public records, because there is somebody liable for inaccurate public records. Inspection information is NOT the same as the MLS because Realtors are contractually liable for MLS inaccuracies. If we are to make a third party inspector liable for the data they provide, then that industry will require some kind of certification, qualifications, and insurance which would then ultimately be priced much higher than we are seeing in one man shops today. If the goal is to be quick and save money, that would cease after the first set of new property inspector regulations are approved by the new agencies required to keep everybody between the ditches. I believe that would defeat many of the reasons we’ve heard which requires this change in the first place.
Why not look a little deeper into this – Why not just hire appraisers to submit the inspection information first? Then allow the FNMA’s of the world to decide if they want the appraiser to complete an appraisal or not as of that inspection date. Let the appraiser hire and train their own personnel to do the inspections, if that is necessary to keep up. There would need to be some language alterations in certifications and the such. But the appraisal firms already have that liability, insurance, and license without creating a huge chaotic system of additional steps in this process. If not, the idea of detaching everything will ultimately lead to even more regulatory steps to make sure everybody does the right things.
What a novel idea!!
By Glen Dale Floyd, Jr., ASA, IFA, MNAA. Glen is the owner and chief certified residential appraiser at Floyd Appraisal Works located in Hohenwald, Tennessee, which provides professional valuation services for several rural counties of central Tennessee. Glen has been directly involved in the Tennessee appraisal profession since 1986, while also working in the financial sector of the state. Glen is the former vice president, credit administrator, loan coordinator, and senior appraiser for Fidelity Federal in Nashville, Tennessee, Union Planters Bank of South-Central Tennessee, and Sentinel Services Corp. He has designations with the American Society of Appraisers, National Association of Independent Fee Appraisers, and the National Association of Appraisers and was one of the first in Tennessee to obtain his appraiser credentials after licensing laws came into effect in 1991. Glen is a graduate of the Southeastern Banking Schools at Vanderbilt University, and has hundreds of credit hours pertaining to the valuation profession. He is married to Cindy, and they have five children (Benjamin, Rachel, Mallory, Ashley, & Dawson) and two grandchildren (Henry & Jack Floyd).
Isn’t this what we were hiring Trainees for? Someone we were training to do the inspection, etc.
Lenders wouldn’t even allow trainees anymore and now they’re all about sending someone out that isn’t being trained at all? Maddening
Specifically to the “desktop” appraisal I do these for 1 client, just to keep the pulse on this. Is this the future of appraising? Many other questions. I was OK in the beginning because this was a bank saying, hey, I have a loan that is a couple of payments behind and might go into foreclosure. Can you have someone drive-by to see if I still have a building that is standing and have an appraiser throw me some comps to see where I might be on this. If it goes into foreclosure and I need a more accurate value, then a full appraisal is ordered, complying with regulations, etc. It seemed reasonable to me. I just did one two months ago that was for an actual loan. Maybe the loan was a 25% LTV, not sure. As long as these are used in some form of common sense, I can see the use of these and how they can be helpful. However, we all know, there is no common sense when it comes to lenders. I am already prepared to have to defend one of these and basically, I will NOT defend one of these in any way. You want a quick and dirty value range, sure, I can see the need for that. You want to exchange these $75 appraisals for a full in-depth appraisal report that is normally $400-$700. No Chance. I don’t care what USPAP says, you get what you pay for. I have verbiage that I put into these appraisals that says just that. Whether that stands up, who knows. Lets face it, as much as appraisers try to put 25 pages of verbiage that states “I am not the ice cream man, I am not a professional contractor,” people will still sue you if they lose money. Bottom line, people will sue you over the comps you use, not all the legal crap that is or is not in an appraisal. How we keep these skeleton appraisals to common sense usage is the puzzle here. Most residential lenders are on a 3rd grade level, so we have to keep this stuff on that level. One of these skeleton appraisals should NEVER be mistaken for a full blown appraisal analysis, even though you know they will try. To me, this skeleton appraisal is very similar to what the tax man (person, excuse me) does. Spend 15 minutes and spit out a value, little accuracy needed, just give me a ball park range of where I am at.
I think I just invented something for the next USPAP. Full appraisal reports, restricted reports, and skeleton reports. My genius is boundless, LOL, LOL, LOL!!!!
Hell no! on us training the field inspectors! They are, now, trying to get us on the hook for everything!
Question: Why not let the appraiser complete his/her own inspection? Answer: Because, FNMA wants low cost information to expand it’s ever growing data base. So they can charge the lender $600 of the Appraisal Waiver. This is not about appraisers, fees, nor turn times, it is all about FNMA wanting cheap data for the Appraisal Waivers. Instead of the appraiser working for the lender, now these $20 home “inspectors” will be working for FNMA.
There is direct evidence in Fannie Mae’s news letter that specifically states that they are relying on a past appraisal and appraisers data to determine current loan decisions. WOW
They have been doing that for a few years now, like I said I think they want these cheap inspections so they can updated the data they already have in the system. They will still charge the lender/borrower for the Appraisal Waiver, so FNMA gets the money. They can point the finger at themselves the next time the market crashes. Dang it I forgot, they never take responsibility, now do they?
I’ve been saying this exact same thing that your article is about and I appreciate you providing an article that raises the question and depicts the double standard when it comes to our profession. Appraisers if allowed to run their business within USPAP and without external lenders scope creep then I believe we wouldn’t even be in the position we are in today.
They really just want our profession gone !!!
No, not doing it.
just say no
Have you noticed the big companies that are on board with ordering these hybrids. Some very well known lenders. Its the future in Residential appraising. There is so much data out there that they are confident that a hybrid is just as credible as a desktop for a fraction of the cost. Its now 2019 where data is king….Ive also noticed comparisons where someone completed a hybrid and a 1004 on the same property. What do you know, same conclusion within the lenders % perameter.
But they aren’t confident enough to make uninsured loans using their own money; without taxpayer support or guarantees.
Like I keep saying when this junk explodes my lawyer clients will be giving sooo much work I’ll be retiring much sooner. 😉
Wall Street investors NOT accepting ANY of this BS at all. Take away Corelogic’s SMOKE AND MIRRORS stock buy backs and the stock has been in a free fall since the Alamode acquisition.
INSIDE TRADING/FNMA B*TCH CEO – FRANK MARTELL (PUBLIC ENEMY #1 TO APPRAISERS) WILL BE OUT ON HIS ASS VERY SOON.
Mr. Floyd, appraisers have always trained their own ‘inspectors’, though we call them LICENSED APPRAISERS.
Until prohibited by most AMCs and lenders we even used to send them out on their own once we believed them to have achieved a level of competence that when coupled with demonstrated and verified past integrity warranted our review; correction (when needed) and co signatures.
The appraisal does indeed start with good data. Data that clearly outlines our client’s needs; intended use and special requirements. Followed by RELIABLE PROFESSIONAL APPRAISER OPINIONS about neighborhood characteristics; property characteristics, externalities, comparative relationships with comparable sales (despite the silliness of UAD ‘absolutes’).
Sadly, AMCs, lenders and FNMA have all decided that Dodd Frank requirements for reasonable and customary fees as well as USPAP compliant real estate appraisal are no longer required.
Now that the powers that be have decreed USPAP compliance and traditional competency or integrity or no longer required, I simply have no desire to train ‘inspectors’…or to use them in lieu of real appraisers.
Y’all make all the bad under-collateralized loans desired in the market today. Just don’t ask us to train those substandard, unlicensed and unregulated ‘inspectors’ for you.
PS-FNMA is not now and has not been a credible arbiter of proper appraisal techniques or principles for quite some time. Though in fairness their 1004P bears little resemblance to any bifurcated hybrid in use today.
IF the appraiser is not held liable for inspection data inaccuracies, I fail to see how that information is any different than any other information that the appraiser relies on, yet is not liable for inaccuracies? IOW – if the appraiser’s client is willing to accept full responsibility for any inspection inaccuracies (which would be part of the SOW agreed by the appraiser and client), then why would an appraiser not be willing to treat that data any differently than any other data he/she relies on? I believe Vincent is correct – this IS the future of appraising – at least for FRT’s, which constitutes the vast majority of residential appraising. It seems to me that a much more proactive approach to dealing with the issue is becoming familiar with those aspects of bifurcated assignments that might not meet USPAP compliance and working to address/correct those aspects – instead of burying one’s head in the sand and hoping it will go away.
Gregory, TAF developed a set of minimum standards already. All appraisers have to renew education on them every two years. We know what goes into a USPAP compliant appraisal and report.
I say this with no rancor or anonymous toward you at all: It is NOT OUR JOB to have to ‘work with’ people deliberately promoting fraud and unacceptable practices in our profession to help them design better products to put ourselves out of business.
There is a huge gap between the bifurcated hybrids in use and the FNMA 1004P draft (06/2017). One COULD work with FNMA to make theirs more sensible, but that six-page form is not going to be any faster or notably cheaper than current 1004’s are. Only driving time and measuring time are saved (an hour? Two hours?) the rest of the 1004P process is still a 6 +- hour task to be fully USPAP compliant.
Here’s the real issue. TAF says an EVALUATION may be USPAP compliant. FIRREA says an Evaluation SHALL not be called an appraisal. Its USPAP compliance becomes a largely moot point. Bifurcated hybrids evolved from the highly abbreviated evaluation concepts (& forms). TAF discussed philosophically and said “yes-they CAN be made to be compliant”…but left that hanging.
Customers / AMCs etc put together their modified PACE-Pro style products telling appraisers they can be done in 15 to 40 +- minutes. FNMA put together THEIR 1004P which by any measure must still take a good 5 or 6 hours to complete (HBU; credible market adjustments, etc). It’s the product misrepresentation that is the real issue.
Let us have our own single sheet limiting conditions page and we could make an old 704 driveby work for the bifurcated product…and it would not misrepresent the scope at all. But clients want it to ‘appear’ to be so much more.
I don’t disagree with any of that, Mike. And it is definitely advisable to ALL appraisers to not take anyone’s word from whether a form is compliant or not – it is incumbent on us all to make that decision for ourselves. I also agree that neither Fannie, nor HUD, nor TAF, nor ASC have appraisers’ well being as their primary interest – money is always the primary motivator – not appraisers. I really appreciate that you are being proactive and looking for ways to make the future work for appraisers – and not just decrying all the big bullies as some do. We do have a future – I honestly believe that – but it WILL evolve, like it or not.
This is true. It’s a damned shame that all this swindling and irresponsible process is coming into place though, as taxpayers are forced to continue backing the risky plays by lenders nationwide.
It is about money. So why do lenders still need the taxpayers backing? Inconvenient questions. They’d all operate entirely differently and your little soap box would become instantly invisible without this government backing lenders have acquired through regulatory capture and revolving door politics.
Most forms are not USPAP compliant nor do they have to be. Appraisers must comply with USPAP not forms.
Love it! a negative yields a positive. 4,657 Forms and more on the way. Says to the appraiser: You control the Form! Pretty exciting.
Buuuut, it tells ME, that the Forms control me. No?
True Mat, but original forms were designed to facilitate compliance and to give clients information deemed essential to understanding the report in a consistent location and format.
Anything ‘extra’ that is required could always be added to an addendum form before micromanagement became so pervasive.
My primary complaint about hybrid form products is the preprinted embedded language that makes them non-compliant and blatantly misleading. Look no further than FNMAs certification Number 4 on their 1004P (06/2017). That preprinted statement which may not be altered is not exactly what USPAP requires…either as an action or in a report. (& that FNMA 6+ page form is miles different than a typical 2 page hybrid).
Now I’m reading and understanding these commentaries in a different light. That is helpful. I don’t think any of us here need to apologize for taking instant high alert status when appraisers promote amc’s though. These things really happened.
I think a primary point in regard to these pressing issues is that appraisers are unlikely to be as well equipped for challenging work, if they lose access to all the bread and butter routine requests.
Bingo! what so far is unmentioned: appraiser skills are bound to deteriorate, and rapidly, as the quantity of appraisals drops and the appraisal is segmented and distributed to ‘others’ over time.
It’s more than just making the decision to do or not to do these ourselves.
Since licensing, there has been one group that knowingly and deliberately cheat. They’ve been sending unlicensed (& undisclosed) people out to do the inspections for years.
Another group that scrupulously avoids improprieties and some go well beyond the MINIMUM standard imposed by USPAP.
There’s another large group as well. A group that doesn’t know what they can or cannot do; lacks the confidence to stand up to improper pressure and takes the approach that if FNMA says something is ok, then it must also be USPAP compliant (NOT the case!). There’s a lot of cross over between this group’s practices and the deliberate miscreants. Usually, because they have been taught by the non-compliant folks (unqualified appraiser; reconciler, AMC or mortgage brokers, and lenders that prefer a see no evil approach to appraisal).
When the non-compliant groups start competing on the basis of unrealistically low fees alone, then our highly regulated profession ceases to have a level playing field. Worse than that, it undermines the entire profession.
The acceptance of alternative standards by some states (that include my own) only promotes acceptance of bad practices and outright fraud. Frankly USPAP permits all the desired abbreviation of work ever suggested. It just requires that they not be misleading and have their limitations accurately disclosed. Especially since the SOW became a separate Rule rather than a part of something else. Compare the ClearVal report article on this blog (2 completed fraudulent reports only) and the FNMA proposed 1004P. NEITHER product does what they purport.
We (appraisers collectively, with regulators) stopped First American’s old Pace Pro because we caught it in time. It’s the same with other newer bad bifurcated hybrids.
Mike, well said. Especially the part….”and takes the approach that if FNMA says something is ok, then it must also be USPAP compliant (NOT the case!).”… Many appraisers unknowingly found themselves in big trouble after 08 because of this. Some are still with us and some are not. As I stated, “Forms don’t comply to USPAP appraisers do.” If your a somewhat newer appraiser you best understand this. Completing any intended use appraisal product on whatever form someone tells you to complete it on without knowing what complies with USPAP and what does not could be read as misleading based on the intended use, etc. Compliance must be determine by you not the lender, Fannie Mae, Freddie, or any of the GSE people. Remember, they do not care they just want it and they have no skin in the game since your signature is the only one on the certification……Again, well said Mike.
Thank you Mat.
Greg, for every single objection appraisers, have had since HVCC we have (collectively) offered suggested alternatives that would work. Unfortunately as can be seen with both Dodd-Frank compliance and TAF ‘convenience policies’ toward their sponsors, those that think they are in control and untouchable don’t listen til they get hit with a hammer.
Have to get their attention first, apparently. The AMC system could (and should) have worked as bad as the model was. Extreme greed caused an irreparable breach of trust between all parties now.
From my perspective the whole argument about any appraiser benefit from being detached and not liable for bad inspection data, reduces our whole profession into nothing more than a BPO or AVM which can never be reliable. Afterall, those non-appraisal products have no reliable inspection information either. Again, inspection data is NOT the same as the data from public or MLS records. Inspection data involves the property that somebody trusted us to deliver a professional appraisal about in the first place. Let’s get this right.
Outside forces are trying very hard to make it easier to become an appraiser. Outside forces are trying very hard to reduce the need for appraisers. Outside forces are trying very hard to detach the appraisers from the reliable data we need to do our jobs. Isn’t it time for the appraisers to get on the same page and begin to offer solutions rather than letting everybody else do it? My hat is off to Mike and the other leaders in our national organizations who are not afraid to speak loudly for us. I hope this blog thread I began is helpful in that endeavor.
Agree 100% (& thank you, and ongoing thanks to the admin of AB who has always had professional appraisers concerns first and foremost.).
Thank you Mike!
Yes we should come up with our own form and price for the product where an appraiser or staff appraiser does the inspection and we provide three sales three interior photos and no redundant data importing. No MC form. We can do it better and faster and that’s what lenders need to realize. All the hype is just hype. Lenders will soon realize that and if we are offering a product that can compete some will start using this option to have a report for a competitive price and quick turn time. They will want the most creditable report they can get for a quicker turn time and lower cost. We know what needs to be done and how to do it. We just need to convince lenders we have a product that is more reliable and better than what anyone else is offering. Fannie Mae needs to allow us to facilitate the process in a way that competes with this hybrid crap. A simplified 1004 but not a 1004P. Maybe we need to create an AMC in order to launch something like this. We can call it AGA AMC
The problem with all ‘short forms’ is that they typically do not include all the information of a long form – specifically intended to lead the appraiser and reader through the maze of USPAP compliance in the appraisal process.
While we are allowed to “limit scope” (skip steps), the client’s investors on Wall Street & overseas still want to see the words “appraisal” without qualifiers like restricted or limited scope. If it requires committing fraud to give them that, they are fine with it.
As for an AGA AMC; “Nope!.” We could limit admin fees and even advocate for C&R but the primary thing that we do (help defend appraisers against false charges or coercion) would automatically preclude obtaining or retaining a lender client base.
Another AMC is not the answer; though direct retention by lenders AND direct payment at the door by borrowers may be. Lenders already have access to the ASC directory. They have more than enough options to choose from.
I guess mainly what I’m saying is we need to have the independent ability to provide products and employee staff at our own discretion and lenders need to understand that we are capable of providing services faster better and more reasonable than anyone else if we are able to dictate what and how we do it rather than the lender.
Our forms have gotten this big because of appraisers NOT doing the job right….reporting past sales within a year, using the 3 highest sales, not reporting over supply…hell not even reporting the true predominate value in the area….cheaper and faster is NOT better. It takes as long as it takes on each and every assignment. When we are under time restraints, quality suffers, and in the end they wont settle the loan for weeks later…its all bullshit so the borrower doesn’t have time to talk to another lender or maybe borrow some money from a family member. Remember, it all about “sales” to these people. They have no liability for an appraisers work…we do….!!!
Good afternoon Mr. Reynolds. It is my belief that the most proactive way to approach change is to first analyze the process being considered, and compare it to the things we should have learned in the past. I’m unconvinced that resigning to these heavy handed suggestions is the most appropriate way to respond.
Let’s get very real about something. Expecting a non-regulated inspector to do everything right for a minimal fee without doing something unethical for the purposes of a credible appraisal from the desk is simply ignorance. There’s going to be mistakes, and many are going to be huge. It is my believe that a very loud outcry about inspector incompetence and about the appraiser who uses information which wasn’t vetted properly will bite our industry in a very short amount of time, if these ideas become reality.
And in another short timeline, we are going to suffer hard hits once again because we have a license and qualifications that scream loudly about our professionalism which will be viewed as nothing more than another tax assessment or evaluation conclusion lacking depth and credibility. Some may wish to just give in, and seek to do nothing more than comply. It is my belief that we should make a little noise about some of these things. If the task is to train, certify, insure, and regulate an inspector to be sure of a quality job, then so be it. But that will not lower fees ultimately nor will it accomplish the end goal of doing this in the first place. I say, let the appraiser be the valuation expert. He/She already has been trained, holds a license, is regulated, and is insured in most instances to get these things done. Eliminate the barriers keeping the appraiser from employing and training their own staff and being responsible for ALL the products which come out of their firms. Perhaps the powers that be, should try something within the framework already in place before looking elsewhere.
Hey Glen. I don’t disagree with you at all – we should never be passive about our profession. In reviewing history, however, I think the writing may be on the wall. I wish that appraisers were driving the bus, but much like 2009 (HVCC), 2011 (Dodd Frank), and even 1989 (FIRREA), appraisers aren’t (and weren’t) driving the bus. That said, I absolutely believe that CONCERTED efforts by trade organizations to help guide the bus is imperative. I’m not very optimistic about any concerted efforts, however, as currently the trade organization landscape is a splintered group at best, and is akin to dogs fighting in the yard at worst. I also agree that, after some period of time using unqualified folks to provide the inspection data, there will be some backlash from the involved parties. I don’t think, though, they’ll try to hold appraisers responsible for inspections they didn’t perform – but I could be wrong about that.
I believe the appraiser will still be the valuation expert, and I (possibly naively) believe that the appraiser’s opinion(s) will continue to be valued, but I think the ultimate intent is to allow the appraiser to focus on that which truly (at least at this point in time) cannot be performed by a (cheaper) 3rd party – namely that of being the valuation expert. Remember, BPO’s have been around as long as appraisals have, and yet there still is no significant credibility placed on those products by the mortgage industry – even though they are MUCH cheaper, and MUCH faster, than traditional appraisal products. The reason – they simply are not reliable as valid estimates of market value at the transactional level – and the market recognizes that.
Well you would know about these issues that are difficult for mediocre appraisers to detail. Who is ‘the market’, and when and what will cause them to care and provide necessary process corrections and/or solutions? Serious question. It’s like we’re dealing with the institutional memory problem, here today, gone tomorrow, back to business as usual. I’m not so sure we should continue to hang our hat on value and analysis alone though. The experience gained from the interactions with other industry persons, personal or not, always helps build a better broad understanding of how it works, what tricks are played, identifying who’s honest and who’s not, etc. Most certainly, as just a regular origination appraiser, I’ve helped far more people with quality of home and safety and soundness compliance than I ever have with valuation correction issues. A lot of people have requested me to return when they’ve re engaged lending years later and it’s always been a tough conversation, I’m sorry you’ll be unable to specifically request me to be your appraiser this next time around. That detailed consultation where an appraiser can answer nearly any and every question about mortgage, servicing, and policy questions can be one of the most valuable functions we serve as far as individual borrowers and investors may be concerned. Cheers.
“A really credible appraisal begins with really good data.”
No, an appraisal credible or no begins w/an INSPECTION.
Data??? Means nothing w/o an inspection, which should be the beginning of data. Poor inspection, ever an afterthought. Data, interpretation, analysis; ever the big guys; make everybody look so important.
…uh, that is until ‘they’ suddenly discover: ‘Hey Bob; Yeah Joe?, I think ‘we’ can monetize this inspection shit! OMG Joe, do it!”
We’re quibbling Merv. Before I inspect I want to see the data on what the specific ownership interests is / are that I’m being asked to appraise. Then I want to get and cross-check public record data on what the County thinks is there; to be followed up with a pre-inspection interview with the owner to see if there may be additions; safety issues or permit problems.
Then I inspect, but as noted I think we are quibbling procedurally on it. if you mean inspection being the best source of acquiring factual data on characteristics I’d concur.
Joeshittheragman says an appraisals for him starts w/a phone call…tells me he takes every deal that comes in!
A ‘real’ appraisal ONLY starts with a PHYSICAL inspection of the property. Period. Not data gathering or PDC ,for the uninitiated, Property Data Gathering(!), the latest gig baloney pushed by the con artist purveyors and assorted money lenders.
These guys want to parse every event into so many little pieces to price tag anything that moves. Called a gig economy. Quaint. Photos, measurements, you name it, and then the Valuation, as yet another separate item for commoditization. This saves the consumer?? Don’t think so.
An Appraisal should be a symphony of coherent music; think of the Appraiser as the Conductor. The con artists want to separate every instrument then pay the Conductor $25 bucks to put it all together! So long as the taxpayer is on the hook, why not???
Hey that’s what corelogic MLS did! Everything you may need is now a per diem charge and such.
Although I had resisted all this time, I finally did pick up an ipad and set that up. Oh god with the full screen ads popping in your face, the constant crashing, the inadequate user controls, lack of cohesion between ‘apps’, impossibly time draining requirements to sort through the myriad assembly of user reviews which undoubtedly are heavily populated by interested parties, lack of effective product search filtration in the apps stores, censorship and absence of previously gangbuster popular items and apps, the complaints of billing issues, seeing functions I know are available free ware on pc’s, now for sale from ‘developers’ on the stores, just all of it.
You know, I knew that was the deal long before I ever actually tried using one myself. We’re ditching that mobile nonsense for a quality laptop. If I’m on the highway, I’m going to hit the gas and do not appreciate transmission speed governors or billboards every 10 feet while I drive, a gas tank that goes empty every time I perform a vehicle function.
But that’s the new thing, the new economy, shuttle everything, provide nothing, profit. Service shuttling, middle managers, businesses without brick and mortar, they really did outpace every other traditional company for many years. Now that the base which people used to have as a comparative savings or honest market comparison point are shuttering and folding left and right, down with worker compensation, up with the prices and out with aggressive ads, as well as an accelerated pace of breaking up comprehensive software into per diem purchase choices. I like to hold a product in my hand. I like to pay cash. I’m not really keen on authentication and data tracking. If this is the way they’re all running ‘new and advanced technology’, I’m more happy than ever to have never really participated. It makes a good comparison point to what’s happening in appraisal because it’s directed by a similar mindset, tech nerds running the show. Welcome to the new bubble bust vulture capitalist sort of economy. There is a better way. The way where every worker matters. Every person matters. Every industry carves out fair terms. People actually shut the doors on censors and racketeers. Where contentious consumerism actually matters. I don’t know, if you can make sense if it all all more power to you, perhaps I’m simply too old these days to be able to just roll with it.
With every instance and use of unnecessary third parties, additional more efficient out of house labor, and just all of it, the inevitable end result is a cumulative decrease in the final products reliability.
Lenders seem to be purposefully obscuring liability through the entire origination chain, purposefully dismantling more meaningful all encompassing checks and balances and service industries that support high quality at every turn.
“Just slap a new label on it. Lower priced and higher quality. See if it sticks.” As usual, big lenders and systemic fraud go hand in hand.
I do appraisal in Missouri which is a Non-disclosure State. Counties have to do their own measuring and gather their own data but do not get to enter the home. Realize this is for tax purposes not an accurate measurement. So the Realtors throughout this area use what the county has furnished. I have appraised properties within this area for nearly 15 years and find rarely is the county correct on size. Since counties in this area do not get to enter they have no idea of how big a garage is nor the finish of the basement nor how big an upstairs is. They guess and therefore they do not have correct information. If I start with corrupt data I end with corrupt values.
Lenders like middlemen (AMC, Realtors, etc) are in it for a buck and most do not care if the measurement is accurate. After I go out and measure and find the county is several hundred square foot short or long and the realtor has mispriced the house then they are upset that I gave it too low a value or too high. If they want to do this then everyone needs to start with the same premise on size and thus information and comparison will be more accurate. I teach my trainees to measure using ANSI as it is a recognized standard and once a standard is used by all then maybe this idea has some plausibility. But I would rather send someone out that I know has been trained to inspect the property rather than someone who just wants a buck with no liability. I want to see the flaws and the good points not be directed by a third party at what they think. Besides how much does this really save. They get paid something or they wouldn’t do it.
I always ask myself who planned this action and who has the most to gain. Obviously not the consumer who then thinks this is an accurate valuation. Show me how a picture shows that the home is functioning has heat and air hot water, and pictures are so limited that one can not focus on faults. I have looked at many realtor listings and you can tell they are trying to sale the house as they use multiple disclaimers to avoid liability such as buyer to do own diligence on size, etc, etc. This is a major investment for consumers and should be treated as such. Not dwindled away for some lender to make money.
Outstanding analysis and conclusions Jim. Agree 100%.
Yes. The problem with ‘supplied data’, is that as a general rule of thumb you can count on, people do not advertise deficiencies in homes.
I’ll just accept every hybrid order that comes my way, then make an official recommendation I can’t rely on this data until I’ve spoken to the home inspector personally.
Then I’ll make him run out there with stipulation requests, since he does not know up from down, being a person whom is so far at the end of the employment line, they’re getting 1099 work from craigslist and don’t even have minimum wage protections.
Buddy, I’m going to need all these photos, all this data, stop by the county seat for me and pay for this record. This is an official revision request from the appraiser whom you have provided services for.
We’ll drive them out as fast as they come in.
Just for the record, the information extracted from the actual inspection is included in “data.”
A credible appraisal requires really good data – that includes the inspection data.
Lots of comments on this one, which is good. There is a certain element of our job that is and will always be analog, boots on the ground, in the trenches, etc. The reason we look at a property is because it is directly related to our own opinion of value of a property. The lending industry want to do away with residential appraisers for the uniformed typical cookie cutter properties and use a one size fits all approach. Oh sure, they will need an appraiser for the atypical, complex assignments that they can’t make sense of but that’s it.
Make no mistake the only thing they can’t get around is our federally mandated license which means they need an appraiser to sign the report with an opinion of value. HEADS UP !!! for those not reading between the lines. When the music stops (and it will) the only name on the report is your name. Oh and by the way, they know this.
Mat so true they need that signature. Also, a picture may be worth a thousand words, but us physically being there is worth a million.
Lending fraud is really reaching a breathtaking pace with all this hybrid fraud nonsense.
It’s no coincidence that the amc’s promote it, the gse’s allow it, and the lenders try to not mention it.
Because it’s lending fraud. On purpose.
Mat, Your right! I’m working in Illinois and per Brian Weaver the Real Estate Appraisal Coordinator we can take these bifurcated appraisals but if there is a problem on either end inspection/reporting your still just as responsible. That’s my understanding to this point anyway. Unless there is a real liability waiver I don’t think I will ever be interested in this. It’s hard to understand anyone signing up for this. Let them do waivers if they want but don’t ask me to open myself up for more liability for ridiculously low fees. If it comes to it long term I’ll just specialize further on the harder stuff and charge accordingly. Another thought, if they could just get rid of us and still do their business they already would have.
Yes, my point exactly. When the music stops someone will have to take the hit. As the lender/investor industry knows the best one to do that is the residential appraiser. Why, because they are all on an island by themselves, unorganized, and have no real voice that is willing to stand up for them on a policy changing scale…the perfect patsy. Case in point after 2008 who went to prison……that’s right, no one.
Just in case there are any of you out there that is not aware of how this whole thing can go south for you really quick here is a flow chart.
Appraisal to Lender/Investor….Borrower defaults (lost there job,etc.) to default Servicing to Private Mortgage Insurance (PMI)….PMI Company now performs a forensic review of the loan to find any and everything they can wrong with the loan; why? they will now be filing a claim with the E&O insurers to reclaim their loss……finally, to make their claim iron clad they will turn everyone (e.g. Appraisers, Mortgage Brokers, Realtors, Inspectors, etc. etc.) in the their state boards because this helps their case to file on the E&O providers. It’s all about money and who is at the top and who is at the bottom. By the way, the filing to state boards has nothing to do with what they find in their forensic review, maybe they find something and maybe they don’t, however, they do know the state board for each profession will almost for certain find something which they can use for their claim to recoup some of their loss. The majority of appraisers who found themselves at their state board were there not from the lender they performed the appraisal for but from PMI companies who turn them in to their state insurance board who then referred the complaint to the state appraisal board. So if a lender or bank tells you “oh don’t worry, we are keeping all of these in house and it’s no big deal” you better think twice because if it goes south they will turn those defaulted loans in for PMI claims (assuming they have PMI on the loan of course).
Excellent points Matt. Many appraisers already have their numbers punched, they just don’t know it yet. The appraiser is responsible for all report conclusions, and whom they choose to rely on, if any. The originators may work on a fractional reserve basis, often only shelling out a portion of what the actual loan amount is, so they have no skin in the game.
In this wild west lending system which has obviously been corrupted by regulatory capture, where policy makers and business heads face no real consequences, it’s better to be safe than sorry.
You’d have to be a damned fool to just trust an amc to have your best interests in mind. None of them ever are held liable or go to jail either so expect the worst as a rule of thumb.
It’s imperative that EO insurers start charging a higher rate for appraisers whom perform hybrids and volume and start asking more detailed questions. It’s always been unfair, this umbrella policy, where appraisers whom do 5 a month pay the same as a volume appraiser whom does a 100, or even a 1,000 if they’re completing hybrids. The insurers questions about value of property determining the insurance rate are beyond outdated, they need to start asking detailed questions about how many appraisals are being completed, if appraisers use risky outsourced services, have runners, have help, use typing services, complete hybrids, all of that. Logically, an appraiser whom does hybrids and also uses unlicensed help should be paying at least 20x more the yearly rate than traditional full service one many show appraisers whom are doing only 2 to 5 a week. They need to ask these questions of amc companies as well.
I’m reminded of a quote from a very wealthy man. All appraisers should heed this warning.
“The less prudence with which others conduct their affairs, the greater the prudence with which we must conduct our own affairs.” – Warren Buffett
Remember 2008!….The reason this stuff is around is because no one went to prison. When people made millions of dollars and companies made billions and only paid millions in fines and no one goes to prison…well, why not do it again. The problem they are having and trying find a workaround is most appraisers are pushing back and not playing the game this time. Again, “most”.
I’m guessing most appraisers who survived the 2008 fallout either were or know someone who found themselves at their state board after 2008. I do, and from what I have heard it is not a fun experience and also very costly. One or two lost their license on seven and eight year old appraisals that they had no recall knowledge of or work file to defend themselves (5 year retention USPAP). One even claimed some parts of his appraisal was changed but had no way to prove it. Later articles came out regarding EVN uploaded appraisals being changed or altered; he said, that his appraisal was an EVN uploaded report (I’m taking his word on that). Just to be clear, bad appraisals and appraiser should be gone but not the good ones who get caught in something simply because they have a bad day or week or have no way to defend themselves for whatever reason. Who knows, this all makes no sense or logic after what happened in 2008.
Aka, the rolling suspension and revocation threads on the AF.
Appraisers whom think they’re all that with quick turns and reduced prices whom were not around 10 years ago should take a few days to read through those old lists. I think it was Kennedy whom like subscribed to all state data nationally so he could assemble one big spreadsheet on suspensions and revocations. Reading that is why I’m still so focused on detailed research and manual report development today. If including apprenticeship, I”m like 14 years without a single complaint. Some appraisers need to be more careful what they wish for and who they work with. Because yeah, report manipulation really did happen. That one appraiser lady who caught them red handed ended up on some witness protection program for life. Closed source and locked pdf was a much better privacy protection than open source xml data scraping. FNMA CU basically caused appraisers to have to have workfile retention, for life, no exceptions. What a mess.
Great commentary, this blog is really happening lately.
Great point. This is why I made my stance. If we are ultimately liable, then we are the ones who should be responsible for the inspection. Understandably, there are many who are more comfortable doing that personally. But if an appraiser wants to have another person, trainee or other, to do an inspection then he/she should be allowed to train their inspector within their firm. If so, the inspection could also be requested without an appraisal in cases when the client only wants physical information without a value. If we know the inspection was done per our strict standards, either by us or by those we’ve trained, then doing an appraisal as of that inspection date isn’t so difficult to figure out. Today, that isn’t allowed under certifications and engagements, but if the appraiser is liable – then their risks should be theirs to make. Neither FNMA, AMC’s, Lenders, or anybody else should try to bankrupt the profession because they have other agendas.
Time to make a stand, and this one seems logical to me.
Glen, I agree, great point of view and well said.
Floyd, in case you missed the multitude of articles which have come out sometimes daily on this blog, it may be an interesting use of time to backtrack some of the inspection and hybrid articles over the past 1 year. We’ve posted screen shots of actual inspector services pages and such.
They really are intending to use $6 inspection services and sourcing workers off craigslist. The employee reviews are beyond entertaining, they really have no clue what they’re into or who they’re actually working with, but also frightening to think these irresponsible companies are really promoting hybrids and seeking to permanently change labor patterns this way. One great comment someone made that captures the essence, is something about 4th and 5th party outsourcing. Yes, it’s true, the outsourcers are outsourcing, and again. It’s beyond stupid and many of these people promoting and defending these practices should lose their licenses as a minimum, if not having to face issues of actual fraud charges with jail time. This is racketeering right under everybody’s noses and the amc industry is well overdue for both monopoly break up and rico investigations.
I am no uspap expert byt I was told by the talcb that anything you incorporate into your report the appraiser is liable for. This includes any kind of inspection such as in today’s world structural, roofing, plumbing, etc. I have always refused to incorporate things I am not good at or can’t beyond a reasonable doubt confirm!
1,000,000 A+, Randa
Any appraiser who even has the thought flitting through their mind, of acceding/consenting to permitting ANY aspect of the physical inspection to an entity outside their office is in fact liable to be arrested on the grounds of simple stupidity. I’m speaking now as an RE Broker. We know the fundamental importance of that ‘walk-through’ and the subsequent Broker summary of condition.
That physical inspection is FUNDAMENTAL to the analysis, let alone the report. As a Broker, I would never, never, ever leave the physical inspection to anyone else. And as an appraisal office owner, I was worried sick constantly when my guys inspected. Personally, Randa, I consider the inspection the most daunting task we must perform. To find these con artists attempting to separate out, then commoditize, then monetize this function to be the apex of dissembling.
Right on, So shall we do it. NO! Let the people that state “this is the future of Appraising” race to the bottom. My future is not this.
All this great commentary and disclosure. I don’t understand why lawyers have not taken sight on these lenders the way they’re so willingly taking sight towards individual appraisers. One then supposes it really could be true, lenders are above the law, like completely.
This is complicated, but not that complicated.