Let’s All Build the Gallows Together
Fannie Mae and Freddie Mac have issued a clarion call to all appraisers to pitch in and help build the gallows from which they will hang us all in 2025.
The mission is to “modernize” the appraisal profession into a skeleton crew of compliant zombies who will be rubber stamping appraisal reports for $25 each (Source: Voice of Appraisal) from the dark confines of their private offices.
“Grab some nails, get your hammer, pick up that saw and let’s build a new gallows… I mean model, that gives lenders everything they want and need to inflate the housing market into a giant, unaffordable bubble sure to explode in the faces of US taxpayers in the years ahead.”
“Now let’s see… if we have 40,000 active appraisers in the way and want to end up with say, 10,000 appraisers in 2026, we only need to kill off 15,000 appraisers a year and we already have a good start. Take a look:
https://sf.freddiemac.com/docs/pdf/report/appraiser_capacity.pdf”
“But how?”
“Let’s use appraisal waivers to steal about 50% or more of their business. We’ll even throw in floor plans and pictures to sweeten the deal for lenders. Then, we’ll obsolete the standard 1004 out of existence and replace it with Desktops and Hybrids at less than half the cost. This should kill off quite a number of parasitic AMC’s and appraisers but for those diehards, we’ll bombard them with unfounded charges of racial bias, meaningless complaints to state boards, and lots of requests for reconsideration. Just for fun, we’ll strike about 150 words from their vocabulary. That should drive them nuts! By the time we’re done with them, they’ll be leaving the appraisal business in hordes to flip burgers at McDonalds.”
“If we do this right, by the end of 2026, the computers will be in charge and the appraisal profession will be essentially gone. Brilliant! But what if we’re wrong? Will they send us all to jail? Hell no! We’ll blame it all on the algorithms!”
Dead on. PAREA will PAVE the way for $25/hr AMC Staff appraisers. Opteon and Clear capital already announced their own PAREA program. The AI was hoodwinked state boards into thinking they will be the major player in PAREA to get it approved. Once approved in all 50 states, the big AMC’s will roll out their own program of “do as instructed” staff appraisers for $25/hour.
From what I hear PAREA is on its deathbed. Another failure by the corrupt Appraisal foundation.
Agreed, with educators falling to wayside, coupled with the lack of demand from potential trainees from the obviousness of FNMA desire to push us out, why would anyone want to get it?
PAREA was always doomed on an individual level. Very few are willing and able to afford the fees for PAREA on top of pre-license course fees. However, PAREA can easily be revived by the large AMC’s for in-house “training” of newly minted staff appraisers. Per the Foundation’s site, the only requirements are to “cover” the material without too many spelling or mathematical errors.
So, you are saying that $25 and hour is ridiculous pay. Hmmm, pretty sure there are a lot of people out there who would like to work for that. Also, desktops are the future. I am handicapped and can no longer do full appraisals, so making $25 an hour sounds good to me. I have done thousands of desktop appraisals and find them enjoyable. I don’t have to drive 2 hours in traffic, waste gas, no wear and tear on my vehicle, don’t have to worry about meeting the agent or homeowner. Having somebody do the inspection for me is awesome. Quit whining and deal with it. This is the future of the appraisal industry.
25 an hour might work for you and other, but it is a joke for people with a minimum of 10+ years of experience, 3 degrees, etc. It’s people with your mindset that are willing to role over and accept the 25 per hour just because it sounds good to you. Shame on you for only thinking of your self and what is good enough for you and your situation. We have been operating in an industry were we can charge what we fell we are worth based on our quality. If you think you are only worth $25 per hour, then you can have that low end pay – with all due respect, clearly it represents what you feel you are worth. I do not share this sentiment in any way. I feel we offer a huge safe guard in the market space as a professional completing due diligence on each and every order by completing actual physical inspections and know what that house is like inside and out, with the use of extraordinary assumptions to the interior contents of any given subject. I feel I should be able dictate my own rate and not some agency that is in government conservatorship because it crapped the bed and created the big crash.
So, you are calling me, a crippled individual a loser, because I work for $25 an hour. I have a family to feed. Personally, I would not pay you $10 an hour based on your poor attitude. You need to find a new profession, this one isn’t for you. What a waste of 3 degrees. LMFAO I have worked this industry for 22 years, and you have to adjust, if you cant, get out.
Never called anyone a loser, nor made any comments regarding your physical limitations. I was speaking to FNMA wanting everything to do with getting ride of appraiser’s completing physical inspections. I said your mindset at 25 an hour is hurting the industry. I have a family to feed too and I like to have an income that consistent with the professional services that YOU and I provide. There is NO reason for you to take less just because you are physically limited. I’m not leaving this profession because you don’t agree with me that you are worth more and should charge accordingly. Do better!!
Thank you for your service by the way!!
No, you are implying it. Like I said, based on your poor attitude, you would be lucky to get $10 an hour. Your logic and reasoning are horrible, which is basic for being an appraiser. You obviously are slow and are not doing any work right now, so you are pissed off. I on the other hand am really busy. I don’t have time to whine. Good luck to you.
No I didn’t imply it, you wanted to force it into the conversation, but whatever. You hear what you want to here.
Oh my word. You really are going to compare what you are earning to what I’m earning? I have already posted what I earn in other blog spots and its far higher than 25 an hour. I’m not pissed at you, I”m pissed at your mindset that you are willing to settle for less just because. Why not charge more? Are you afraid to? Do you fear you wont have any more clients? Can you not reach out to new clients with higher fees?
I do have plenty of work right now, but would like more. Based on your response times, you are have as much as I do. Cheers.
***This comment was edited by AppraisersBlogs Team. Profanity is edited out because it’s inappropriate within the context of this blog.***
I fear nothing, especially *** like you.
Yeah you starting name calling and you wanted to speak about my attitude? Do better man.
Appraiser Mike, please be respectful to your fellow appraisers. Please do not attack someone for having an opinion that differs from your own; if you disagree with someone, please express yourself respectfully. Insults, snide or rude comments are not constructive and certainly not helpful. Thank you for your cooperation!
I finally found someone who’s been in an industry 22 years and enjoys making less money than a temporary Target employee.
I am going to take this in a little different direction. The whole point made by the GSEs for having PDCs and hybrid appraisals is so that the educated and experienced appraiser did not “waste” time driving to a subject property and then to take all the comp pics. It was believed that doing those portions of the process would be better performed by someone that was trained to gather data and for the “appraiser” to focus solely on the “appraisal” and thus it would be a more efficient/faster process.
Int that model, the appraiser at the desk should be being rewarded for their analysis capability and be paid more for their “time” 100% analyzing and completing appraisals than the person sitting in traffic listening to the radio between subject properties or comps.
Sadly, and predictably that is not what has transpired, or at least I don’t believe it has. Using Class Valuation as an example because I know their numbers, a PDC makes about $75 for an inspection + additional per mile fees for anything more than 15 miles away and the process for the PDC should take about 1hr for a typical 2000sf home. So lets say the property is 15 miles away, 25 +/- minutes with traffic and suburban streets, all told 1hr and 50 minutes for a job. Let’s round to 2hrs $75/2 = $37.50/hour. So Mike, I get it, I really do and I am very nearly in a similar situation as you for medical reasons and am becoming more and more challenged by doing fieldwork because of a medical condition I have. That said, I find it challenging to know that at $37.50/hr the non-appraiser in the hybrid model is making more per hour than the appraiser at $25/hr. We all do what we have to do, but just something to think about.
The appraisers left in the PDC age will not be qualified to competently complete the desk work anyways. Having been isolated in their basements without real world experience or knowledge regarding all the minute, and often major influences, which drive legitimate market value comparisons and adjustments. If all it took to be competent at valuation analysis was looking at real property photos on a computer, there would be no need for licensing in the first place. The desktop fans should flip another few hundred reports a year to purchase much larger general liability insurance policies. Really, the EO insurers should charge these people additional insurance fees, they’re stacking disproportionate risk into grouped umbrella policies for a literal fraction of the cost. Please, brag more about gaming the system and subjecting honest people to increased taxation without representation.
***This comment was edited by AppraisersBlogs Team. Profanity is edited out because it’s inappropriate within the context of this blog.***
I never said I enjoy making less than a Target employee, ***. ***. I do desktop appraisals because I am handicapped. I made over 80k last year doing desktops. Pretty sure *** like you hasn’t made that money ever. By the way, its part time to. I work 20 hours a week. Laughing all the way to the bank, thanks to *** who don’t want to do desktops. Thank you ***. By the way, real nice people work at Target.
Appraiser Mike,
We cannot keep cleaning up your profanity-filled comments. If this continues, we will unsubscribe you and block your commenting privileges.
If the lenders-because according to Fannie it’s okay- would allow trainees to do the inspections, appraisers would at their discretion hire trainees to help them with inspections. When the appraiser has no control or knowledge of who the PDC is and what their training has been, the data cannot be relied upon. If I have a trainee and I train them to be my eyes and ears, I know what to expect. I can talk with them if there is a question. With the hybrid/desktop PDC model that can’t be done. I’m not signing my name to a report that I can’t totally rely on the inspection report. DoorDash Dan is not truly interested in the outcome. He wants his $75.
Class AMC advertising for an upcoming Real Estate Event touting 1 day Appraisals. Good for lenders good for them…….HEY BORROWERS OUT THERE…..NOT GOOD FOR YOU. That is the sad part of all of this, the public has no clue what Rabbit Hole they are going to be going down. They will be the ones hurting, not the lenders, not the Realtors, not the AMC’s etc. I hope I am around long enough to see the catastophic failure take hold and remind them they could have STOPPED this insanity and did not. Plan to be long retired before the big collapse, which they of course want. Get the old, good Appraisers who will not play out of here. Bring in the “rubber stampers” who could care less about how they have killed the profession.
Like moths to a flame, they always come back. The last housing crash was less than two decades ago. How many times has the stock market been wiped out in your lifetime? Debt based financial systems drive consumer response from the top down. Now with CRT instruments built into the GSE policies!
Do not steal; The government hates competition.
Right on it! I wrote this book in 2010. Death of an Industry, Real Estate Appraisal. It should be obvious by now Fannie and Freddie have plans to take you down to the bare minimum just so they can keep the engine running with those pesky mandatory appraisal signatures. Eventually, consumers will pay the price and the GSEs and AMCs will blame in all on appraisers. The writing has been on the wall for years and years.
Singing to the choir. If appraiser’s had the balls not to play a role in this, it would be game over.
Appraisers have no power to stop this, no one does except Congress, and that’s not ever going to happen. The AI is a weak, money grabbing entity whose days are numbered just like us. If you want to still be doing appraisals after 2025 you have to transition over to the complex properties that the stupid data collectors have no clue about, and/or private, attorney/tax/divorce work. Read the book Who Moved My Cheese…were living it right now.
Lyle Rieke – FANNIE – He has the axe!
For statistical consumption only……
Waivers peaked in Sept 2021 for both FNMA/Freddie at 44% and 36% respectively, due obviously in large part to the pandemic. Current levels are at 11%/12% respectively
http://www.aei.org/wp-content/uploads/2024/02/GSE-Appraisal-Waiver-Infographic-December-2023-FINAL.pdf?x91208
So we have already been close to 50% as the article suggests, and thus having set a precedent, can easily get there again for “other” reasons.
As for state board complaints….. Ummm those don’t exist. A complaint would require in most states a signed and documented submission. Now, there are these things called “tips” and of course the individual States can address them however they deem appropriate.
I have to kind of disagree. We’ve been hanging ourselves slowly for decades. We think of ourselves as independent professionals so we’ve resisted any attempt to create a unified voice that could stand up to assaults on our livelihoods. We can’t rely on the professional organizations; residential appraisers are nothing more than a revenue stream to the Institute and other designating organizations. The Appraisal Foundation doesn’t believe our plight is their business nor does the ASC. I suppose that if every appraiser joined the union (Guild) we could expect some sort of unified representation but we’re too damned independent to do that.
What happened to mandatory independent valuations by qualified appraisers for Federal transactions above the deminimis? Certainly, appraisal waivers and in-house algorithms don’t meet that standard.
Good one Mark. Interestingly enough, and quite possibly related to several independent appraisers requests and meetings with enforcement agencies for TILA among other rules to be finally enforced. I present to you; The latest CFPB newsroom update. (click through for full document)
_____________________
https://www.consumerfinance.gov/about-us/newsroom/ffiec-issues-statement-on-examination-principles-related-to-valuation-discrimination-and-bias-in-residential-lending/
FFIEC Issues Statement on Examination Principles Related to Valuation Discrimination and Bias in Residential Lending
The statement of principles should not be interpreted as new guidance to supervised institutions nor an increased focus on supervised institutions’ appraisal practices. Instead, the statement of principles offers transparency into the examination process and supports risk-focused examination work.
___________________________
What peaked my attention in this doc, was the re iteration that third party companies like amc’s are under the purview, and their actions the responsibility of parent lender organizations. Talk to me about effective third party oversight of amc’s by lenders.
$100/hr – $1000/day minimum. And that is lower than 2021-2023.
I can at least agree more with this, however the concept or working per hour is BS. The job is priced out per job. There are some jobs that I make 250 per house and some job that I only make $50 per hour because there was something unforeseen in the initial research of the subject. That being said, that is far more reasonable than the dudes 25 and hour.
$800 per assignment with 2-3, or more per day, will easily trump the $1000 per day. This is why I feel per job is far better than the per hour mindset and just feels way to limiting.
Per hour should never be on the table, I agree.
I have a base fee that I use which is grounded in how long an average appraisal takes me to complete, some I do quicker, some I don’t. If some unforeseen issue causes it to take much longer than an average report that is my fault for not seeing it when I quoted the fee and I eat it. However, I research every assignment I am given before agreeing to the fee and turn time, and if I determine there are complexities that will cause the assignment to take longer then I increase the fee. I don’t do waterfront properties for the same fee as I do tract homes, I increase the fee accordingly. Time = money, if you increase your fee because something is going to take more time, then you are in fact basing your fees on time, whether that is per minute, per hour, per whatever, its all about time. So please don’t say working per hour is BS, unless of you charge the exact same for every property you appraise no exceptions, then I just worry about your sanity.
I don’t know about you all, but I consider desktops as unethical. Why I remember when USPAP outlawed the very mention of a market based range! Beep Beep where is the written report not to mention a loaded file – LOL! So Mike, I too have been around a long time before after USPAP. Desktops are a temporary unethical dumbing down of the industry and you are helping no matter what you make or the circumstances!!!!
Here, here!!
Sorry Dave, have to disagree with you. So long as a desktop appraisal can arrive at a credible analysis based on the facts/data available from a desktop perspective and allowing for extraordinary assumptions of conditions/state of the property being appraised as of the effective date, desktops are perfectly within USPAP guidelines and definitely not unethical.
If I am asked to perform a desktop appraisal, not even having a PDC or other data, and I am working in a High density suburban tract of homes with model match sales till the cows come home. There is no reason I cannot come to a reasonable/credible conclusion as to value with the EA of condition typical of the homes within that project. If the loan is 250k and model match properties in that project are selling in the $500k +/- range, there is almost zero risk to the lender for that 50% LTV. And yes, I would have all the documentation necessary to complete the desktop report in my file.
its all about defining a scope of work that will be appropriate for the assignment.
That’s the rub. In entire regions such methods as PDC and desktops are simply inadequate. In other higher density areas, especially cookie cutters, tract homes, mid rises, and various condo’s, not that big of a deal. The appraiser would however, still be unaware of the pervasive cat odors, the excessive wear tear, actual effective ages, possibilities of environmental factors, external obsolescence, changing land use, ongoing projects in the area, the general feel of the area to help legitimately carve out reasonable market research boundaries.
Where are desktop supporters at with ‘tele health’? Would you subscribe that for your personal health management? Or prefer to see a doctor in person? Peoples largest investment in their lives? One has to bend over backwards and give up their complete financial history for a ten dollar welfare check or a week of unemployment, but getting a taxpayer backed half million dollar federally regulated loan, not a problem, skip the full appraisal. Somewhere only a decade ago in FNMA guidance updates were firm rules with severe penalty warnings that appraisers whom did not personally inspect each and every property, or even trusting appraiser apprentices to complete this task, could result in immediate sanctioning and loss of license.
Boom! As usual, Baggins, you get to the heart of the matter while grasping the big picture. Other than cookie cutter assignments where an appraiser has already inspected the subdivision, neighborhood, and surrounding area, including recently constructed similar models, these type assignments are undermining basic appraisal due diligence and competent information gathering for credible results. By not requiring the appraiser to inspect the subject property, comps, and surrounding properties, appraisers are being set-up to be the fall-guy in the next bubble as the industry is being gutted by nonsense.
Thanks. Jeremy Bagott just pushed an article today detailing the same thing, just about. DEI may mean one thing in terms of ‘the movement for equality’ through general society. But put that capability to offer special financing and special terms into the hands of GSE people and lenders, what comes out the other side is simply a repeat of predatory lending practices, at an even larger scale, with even less oversight. Soon….
Black History Month Needs Story of Addie Polk
I emailed the admin here, requesting back publishing of more of his articles and to stay more current. Everyone should at least subscribe to Jeremy Bagotts article feed for appraisers. An important perspective to have. Thanks. It won’t be long now before the default managers will count their losses and realize that following the GSE’s model to remove full service appraisers and replace us with simplified desktops and pdc’s, was merely a front for front end fee generation, while stacking substantial default losses with the investors and back end servicers, the tax payers. But then again; What’s new? Every few years the financial predators come up with yet another scheme to offer some special incentive, defraud taxpayers, rake handling and origination fees. People whom take the money are just as much of a problem as the people whom dole it out. Who’s still buying this? Central planning never works.
So I predicted long ago that the “Big” AMC’s would be out of business by the end of the year.. They are attempting to hire soon retired Cert Gen and then figure out a way to reciprocal license him/her in 50 States and then over see “Signature” all sorts of appraisals under the “new” everybody approved compliance for 10 cents per appraisal. Sit back and watch, AMC’s will be history within 12 months because the only entity that thinks they are relevant are AMC’s. The rest of the financial services industry could not give a shit. Real licensed appraisers RULE!
***This comment was edited by AppraisersBlogs Team. Profanity is edited out because it’s inappropriate within the context of this blog.***
Do you know how many times I have heard this “high density tract homes” legit town explanation. Take a look at the geography in the USA – that is a 20 year old argument. Next you’ll be telling me you believe in the cost approach. I am just amazed with ignorance of those who are not in the trenches where real research counts!
Dave – Good sir, your curse language is not okay. You can rip someone, but be polite. Also, please expound on how you think the AMC’s will actually be gone in a years time. I can’t get there at the moment. I can’t see anyone really giving two hoots about the AMC model and stopping the cash flows it is creating for the elected officials in all said departments and governmental offices. They have all benefited at everyone’s expense from appraiser’s to the general consumer of appraisal products. Lest we forget these are the same people that benefited greatly during the last crash and lied to everyone face saying the USA liquidity was strong and the lending institution are stable. They do not care and are using the AMC’s model and FNMA to do it again.
Dave,
Just curious…. If you don’t believe in the cost approach,
How do you support your remaining economic life figure?
If you have to supply a land value for your clients or they require you to perform the cost approach and you cite extraction or as some call it abstraction, how do you “extract” the land value without calculating the depreciated value of the existing improvements, which requires a cost approach?
To that end, do you only use vacant land sales to support your lot size adjustments? or do you somehow divine the contributory value of the existing improvements to subtract from the sale price in order to determine the underlying land value?
Again, just curious.
As for the “high density tract homes” comment, Not exactly sure what you mean, but if that is not a characteristic of homes where you appraise, which is the case where I appraise, then AVM analysis is likely not something that is going to be very accurate. If you are suggesting that AVM analysis is not accurate in high density tract home areas, then I would suggest that you should wake up sleeping beauty, cuz the world and technology has changed and you should probably upgrade your camera from that polaroid instamatic you are using.
Question, how are they able to set the fees for the PDR assignments? Aren’t the appraisers suppose to set their customary and reasonable fee? Isn’t this a violation? What if, as a unit, the appraisers stand firm on $275-$325+/PDR depending on complexity, distance, inflation, etc?
They might send out the orders, but if we as a unit reply with a more reasonable fee that will assist in setting a standard to account for the loss in revenue on our end, then we can have more control over the product which might become a preference…who’s in?!
Call me a contrarian but I think the time has come to become recertified. Why?
1. I want to do one appraisal per year to remind myself how fortunate I was to escape early on.
2. I would like to compete for the title of “Last Appraiser Standing”.
You’ll never make it. Been too long.
Here is the neat part; Better luck next time.
Getting my 1 order per year is a breeze. Just bid $99 with an AMC. Getting recertified is even easier…my state just wants your money and proof that you were once an appraiser. No luck required.
Go for it. In fact; You should specialize in desktops which rely on pdc’s, so then you could charge even less.
https://www.appraisalinstitute.org/advocacy/washington-report-and-state-news/washington-report-and-state-news-recent/2023-12-regulators-struggle-to-address-gse-tips-on-appraisal-irregularities
Let’s examine current trends; Automatic complaint generations against appraisers is an ongoing event with GSE’s. What would make writing out more specific complaints which stick be possible? Desktop appraisals perhaps? Simpler work products?
Appraisers whom complete these things are practically begging to be turned into state boards, providing easier to examine work products which will lead to higher cases of penalties and repurchases, higher ratios of boards being willing to invest the time to clear or pursue the complaints.
If the market goes south, the billions of dollars investor people are not going to be satisfied with state boards excuses of inadequate manpower to investigate. They’ll turn the forensic review, switch back on an entire review industry whom looks at portfolios one at a time. Big contracts will incentivize the revamping of dozens of specialist forensic review companies digging into every single appraisal out there, just like what happened fifteen or so years ago. There will be rolling suspensions and revocations lists as investigators hand workable complaints to state boards to conveniently and swiftly process on a silver platter.
Like moths to a flame, the appraisers came back, despite the risks. Waivers… Desktops… Third party data fillers. Runners. Skippies. Robosigners. What’s new? All they’ve done is put a different descriptive label on inadequate working products which have already failed in the past to deliver as promised. Now with even less accountability and even more outsourcing!
Seriously, why are we so many of us taking the time to dignify the legitimacy of desktop appraising. We all know this is being imposed upon a profession by the financial services industry, who holds our profession with distain. The long and short of it is they need a license signature still without it they can’t pedal there crap. One of two things is going to happen. The AMC industries is going to run out of steam, for the same reasons that none of you are working; or, they are going to convinced some of you, who are near retirement to go to work for them, and allow your license to be reciprocated across the country and pay you next to nothing. I’d love another point of you if anybody has any thoughts!
In case people were not aware, one of the issues with the E appraise IT scandal which led to hvcc and the subsequent dodd frank reg z act, was that amc’s were altering appraisal reports without the appraisers permission, the re affixing the digital signature back in there. Sort of like XML files allow now as an industry requirement. That used to be a topic of concern.
The apparently better bright idea is to dilute the credibility of the data used behind the appraisal and legitimate signature, then send the appraiser down instead of allowing a defense for having identified purposeful manipulating the appraisers conclusions, forging the signature. What better way to circumvent this than to use unlicensed ‘inspectors’ hired by the same companies whom may seek to influence the appraisers conclusions. One could make a rather reliable prediction that ‘pdc inspectors’ whom are too thorough, probably won’t last long. Or nobody will be the wiser if managers of pdc persons omit relevant data. The difference between working with licensed individuals vs unlicensed.
https://appraisersforum.com/forums/threads/amc-asking-for-permission-to-use-my-signature.161439/
https://guide.freddiemac.com/app/guide/section/5606.3
https://www.hud.gov/sites/documents/DOC_36182.TXT
To Dave and those Baggin (pun intended) on desktop appraisals…. I have to question either your analytic ability or if you are just being belligerent trolls….
What you are saying is that you can perform a credible appraisal assignment from an exterior only perspective (2055) with the ability to see the front of the house, and maybe down 2 sides or if you are really lucky the rear because there is an alley but no cat smells and unless you can use Astral projection or have that cracker jack x-ray vision set of glasses have no data regarding the interior of the home. Yet, you somehow can’t complete a credible appraisal assignment with current photos of the entire exterior of the property, interior photos of all the rooms and some with multiple photos along with some commentary from a pizza delivery person who can’t discern the cat odor from the pepperoni embedded in his/her nostril? OH, and your liability is way less because you are relying on a 3rd party for which you are not responsible for their actions, unless of course the PDC is so bad that you should not have relied upon it in the first place which you have a right to do. AND of course the desktop appraiser needs to have geographic competence to know what external influences are potentially impacting the property.
to summarize this Paired Analysis of 2 assignments:
2055-exterior only SFR sit on the street, take pics of the front of the house rely on public records data regarding the size of the house and room count do my own research and drive each of the comparables taking a front pic. that may or may not look the same as when the property was sold because its 6 months old and the new owners have done “some work”
Yep, I can do a credible report with that
Desktop Appraisal
PDC report with exterior photos of all sides of the property
Interior photos of the property
Floorplan – that can be compared to public records data which is all you would have in a 2055
Sketch with dimensions and GLA calculation – again that you can compare to public records data
Some commentary regarding adverse/beneficial characteristics of the property that are confirmed with photographic evidence
Do your own research for comps and use MLS photos that best represent the sale when it sold.
Nope – I can’t perform a credible appraisal
Seriously? I get the whole fee structure thing, but to somehow suggest that desktop appraisals are not “Legitimate” is disingenuous at best, but more on the level of indignant narcissism. And if you tell me you don’t or wouldn’t accept “drive-by” appraisals, then the conversation is over because either you are lying or you have made a business decision not to do them which is your purview.
Desktops have never been anything remotely close to accurate or reliable as full service appraisals in the first place. In fact, desktops used to occupy the space which is now reserved for outright appraisal waivers. The notion that desktops make an adequate substitute for full service appraisals is an idea rooted in flawed logic.
For the pdc inspectors, good luck trusting that data, especially when the results are controlled by interested parties whom can omit, curate, or otherwise alter the inspection data before it comes to the appraisers desk, the appraiser would never be the wiser. If appraisers whom stall deals get blacklisted even to this day, what would one presume would happen to critical PDC inspectors?
Not being responsible for the actions of a third party is not the same as being held accountable for the reliability of signed conclusions, irregardless of the reliability or lack there of from various data providers. It remains the sole responsibility of the appraiser to be able to verify the accuracy of all data relied upon. As we say; qualify the data first.
Pdc’s, the ‘person’ performing the inspection, their names are omitted from the report, the appraiser does not get to know who they are, the appraiser does not get to instruct them in any way what so ever, ask any follow up questions, or instruct them on best methods. This is not best practices.
Many of us never performed desktops or drive by’s in the first place for the same reason. We were around to watch over a hundred thousand licensed appraisers wash out, having also gone through similar mental gymnastics to justify the downgrade of the profession and their own personal credibility. In the end, all the appraiser has is the integrity of their license and reliability of their conclusions.
The GSE’s are taxpayer backed entities. The appraisal is required for more reasons than just checking a box for compliance. Desktops were present in the working space specifically for the lowest risk compliance check box only requirement. For them to have shifted to substituting for actual verification of hundreds of thousands of dollars of loans…
Subscribing to the idea that removing checks and balances, as if no corruption is present or ever will be present, not the real world. It is the very presence of the full service detail (the check to the balance) which inhibits the fraud. Remove this check and balance, fraud and hucksters of every sort will flood into the space.
That’s just how it works and no argument about the validity of reduced checks and balances for convenience sake will ever stop this inevitable end point in any industry, much less lending, where some of the biggest commissions lay. That is the very reason such robust and redundant checks and balances systems are put in place, as a response to the predictable cyclical nature of crime and finances.
Predatory engagements are just around the corner at all times, so appraisers and appraisal systems managers as well, should be careful what they wish for. One day you may find yourself against the wall and will rue the day that all you were to the processors was a dollar sign on a conveyor belt, your approval or denial, rubber stamped. You guys do subscribe to tele health.
The other concerns that I have are the legal concerns, specifically with E&O insurance. I have contracted by E&O (a larger one) and they have stated based on state board comments they would NOT cover the new hybrid appraisals due to the lack of verification of data that we are signing off on. If my E&O insurance is not willing to cover me on any assignments related to hybrid work, then why would ever want to do them? The WA state boards have already stated at ACOW meetings they expect USPAP to be upheld on all reports regardless of the scope of work. This includes verification of data from third party sources. If we have to verify the size of the house, there is only one way to do that and the is a physical inspection. The state boards agreed and pointed out that the PDC’s information must be verified. If this data had been discovered to erroneous in a complaint and they are not verified, it is on the appraiser head. SOOO, there is not E&O that would cover me and the state boards would come after me – so they have stated. That being said, I don’t think the state boards have the resources to follow up with anything they have stated, but that isn’t the point.
To your comment
The WA state boards have already stated at ACOW meetings they expect USPAP to be upheld on all reports regardless of the scope of work. This includes verification of data from third party sources. If we have to verify the size of the house, there is only one way to do that and the is a physical inspection. The state boards agreed and pointed out that the PDC’s information must be verified.
The WA DOL has cited that PDCs are not “appraisals” and that their “analysis” does not rise to the level of “Analysis” that would be considered part of the “appraisal assignment”. Something I vehemently disagree with and that ACOW is trying to change through the legislative process. That said, there are ways to verify with reasonable credibility the accuracy of a PDCs sketch without having to physically go to the site. There are numerous tools through public sites that can be used to measure a property and see its perimeter in order to verify a PDC sketch/GLA calculation. If an appraiser is unable to independently verify the credibility of a PDCs data, then absolutely that order should be elevated to a higher scope of work requirement.
As for your E&O not covering you, I do believe that most now have a rider that can be added to an existing policy. Yes, it is more money and one must weight the benefits vs cost, but there is coverage out there. Not 100% on that, but its Pres Day so I can’t call my E&O to verify
I checked with my E&O provider and was told that they are covered.
State the insurers name specifically if you can. That would send a shock wave to the pro desktop advocates if they’re completing this work, and have that same insurer.
Has anyone to date requested the PDC inspectors professional liability insurance or general workers insurance and received a copy of that? Who’s insuring the property data collectors? Or is this just a default position that they’re basically insured by the appraiser and held harmless at all times?
Mr Ford was digging into this years ago. He posted multiple examples of the at the time quasi property data collectors re using images, not having accurate data, a host of issues with hybrid reports.
I’ve learned quite a bit about houses, construction principals, materials, environmental factors, appeal factors, value in use, improper alterations, how to totally save or destroy a home with a few simple changes, etc, etc. These are skills simply impossible to recreate from looking at photos from a desk. One does not need to be a math genius to be an effective appraiser, but they do need to be able to understand that a house is not just numbers on a piece of paper.
Desktops have never been anything remotely close to accurate or reliable as full service appraisals in the first place.
**Completely agree, never said they were as accurate.
For the pdc inspectors, good luck trusting that data,
**Again, agreed. However, if the PDC includes a sketch that has the same perimeter and similar dimensions as is available through public records or other sources, which I acknowledge not all municipalities have, then the appraiser has independently verified the validity of the PDCs sketch and GLA estimate
Baggins, sorry but this is a pet peeve of mine, you are an intelligent and well written person, please don’t use “irregardless”, it is not a word, in fact it is the opposite of your intended sentence. The “ir” is a negative which when placed in front of regardless makes the term “not-regardless”. The term is just “regardless” there should be no “ir” in front of it.
It remains the sole responsibility of the appraiser to be able to verify the accuracy of all data relied upon.
**Agreed, If the desktop appraiser cannot verify the accuracy of the data, then they need to reject the PDC and escalate to a higher level scope of work.
the appraiser does not get to instruct them in any way what so ever, ask any follow up questions, or instruct them on best methods
**Agreed, and if the data as presented is insufficient to achieve credible results, then reject the PDC and escalate to a higher scope of work.
Many of us never performed desktops or drive by’s in the first place for the same reason.
**Acknowledged, and I agree that in instances when a credible result cannot be achieved from a desk or drive-by perspective that the assignment should be rejected. Sadly, most appraisers don’t really know and have not been trained to ascertain what is an “acceptable” level of verifiable information to achieve credible results and subsequently accept anything offered to them.
The appraisal is required for more reasons than just checking a box for compliance.
**Yes, it is part of the risk matrix being performed by the lender and/or in accordance with the GSE protocols.
Note that in previous threads and discussions it has ALWAYS been my argument that appraisers are arguing the wrong point. It is not whether or not desktop appraisals, drive-by appraisals or Hybrids are USPAP compliant, because so long as a credible valuation can be arrived at with the available data, then they are USPAP compliant. What appraisers and the general public should be arguing is at what point is “less than” a full appraisal acceptable. Example: the result of the Lehman Bros debacle and the MBS revelation resulted in an average loss across the US of roughly 33% in property values. That is the largest decline in values in any of our lifetimes. I personally appraised areas that declined 50% in 6 months. That said, if a lender is making a loan on a property with a 50% CLTV, what is the reason for a “full” appraisal? Fed guidelines merely require “adequate documentation” for the compliance check box. If a AVM has a high enough confidence level and even if it had a 10% indicated margin of error, the risk of “loss” on the investment is near zero on the collateral part of the risk equation. You don’t need an appraisal of any kind. Sorry to burst anyone’s bubble of self importance, but what does a “Full appraisal” do in this scenario? Increase the risk level from zero to really really zero? What we as appraisers and society in general need to be concerned about is not that the GSEs use these products, but rather that they use these products at levels that are unbelievably scary. For Freddie
https://sf.freddiemac.com/tools-learning/loan-advisor/our-solutions/ace-eligibility-table
• No cash-out refi transactions with LTV/TLTV less than or equal to 90%
• Purchase transactions with LTV/TLTV less than or equal to 80%
Those numbers are wholly unacceptable in my opinion. I get that in the no cash out refi the money is already out there, but if its not already owned by the GSEs and was a portfolio loan to some other entity, there is no reason to take on that risk. Maybe 70% is acceptable across the board if the borrower had a credit score north of 750, but otherwise, these figures are what is going to be the downfall of this program.
Subscribing to the idea that removing checks and balances, as if no corruption is present or ever will be present, not the real world.
**Agreed. As a former fraud investigator for FNMA, I know all too well the Fraud perpetrated on FNMA. And before you roll your eyes, I am very outspoken about their current lending policies, including the use of PDCs that are not licensed appraisers. There is and always will be corruption, but so long as the data available can achieve a credible valuation result, then the checks and balances remain intact.
Predatory engagements are just around the corner at all times
** If you are saying they are at some point in the near future going to exist, then I disagree, however the point I believe you are saying is that they currently exist and could be the next order received, and to that I agree.
You guys do subscribe to tele health.
**Yes, but only for those “discreet” prescriptions
Again, my point has never been to argue that the use of these products is always acceptable. My argument has been that if done correctly by the desktop appraiser, they can be USPAP compliant and be performed with credible results. The challenge is that most desktop appraisers do not want to rock the boat and reject an assignment because it does not meet the “ability to verify data in the determination of credibility” because they become a troublemaker and will lose the pipeline.
Great points. I wrote something about this just the other day on the new thread. How the use of alternative products skews existing market data, which sends out the domino effect down the line.
https://appraisersblogs.com/the-sales-agents-derailed-this-deal/#comment-40343
The notion that it’s only 50% or whatever, of a million dollar loan… Even a hundred thousand… These relief policies would not exist if lenders were loaning their own money, were not able to offload losses back to the public coffers, were not operating on a fractional reserve basis.
The question what exactly would be wrong with full service appraisals being a fixed requirement for everything which costs more than, let’s say a vehicle? They run full service full fees for; (see the complete mortgage lending origination fee lists) for everything, over and over again, regardless of the loan amount. Somehow the appraisal is not as important anymore?
Here is the neat part; So they can get rich, not be held accountable for driving up housing nationwide to unaffordable levels, rake bigger commissions, and all the appraisers get fired. Got to save the borrowers ten dollars on an appraisal report. Never mind they’re paying 3x total multipliers on 6%+ agency commissions which are amortized over thirty years.
We all know how these things play out, the notion that appraisers can ‘upgrade’ the service order is not applicable with most originators. Especially not those whom use amc’s. They simply drop and replace the appraiser instead.
As evidenced by my own experience when 2 out of 5 orders I indicated a need for increased scope of work because the PDC data was insufficient. Since then crickets…
Note that most of my work from a desktop and PDC perspective is investigatory because of my position with certain organizations and having first hand knowledge of the process is paramount to crafting communication with regulatory parties. One has to balance what is USPAP compliant vs the Public Good. The GSEs are not the only ones that just want things to “go through” at the lowest possible cost and without barriers. Legislative bodies are all about “affordable housing” and lowering the costs of entry, which includes appraisals. We are fighting a freight train of populous opinion and if something is USPAP compliant, then what is the problem? The recent “clarification” on HB 1110 is a prime example of what the law says and how the AG will interpret it which are completely opposite of each other, yet the AGs “opinion” as to how the DOL should act is what makes res appraisers allowed to appraise properties zoned for “at least 6-units” which technically they should be anyway, that was never my argument, the argument was how the law was written that precluded res appraisers from performing that process. So while I agree with the AGs opinion, it is not what the law says as written. Everything possible is being thrown at appraisers right now, intentionally or not, that will have a lasting impact on our profession, and not in a good way.
Signing off for a couple days, Regards
Thanks for the question Todd. Depreciation is not a straight line calculation. Depreciation is accrued depreciation which considers more than physical condition. There is some question as to whether land value is land as if vacant or land value is as it contributes to the improved lot. For all of these reasons I wouldn’t waste my time to try to convince somebody that this is a reliable approach to valuation. Somehow, though, I suspect you already knew that.
Well, I finally made it all the way through a Baggin’s soliloquy. He said it much better than I could’ve despite being a little long-winded. Sometimes a little long-winded background, and Detail is good for the soul!! Well done Baggins!
Thanks. Every day I tell myself; Simple is better. Then the issues are so darn complicated. I’m giving it up soon anyways, the appraisal industry is cooked beyond recognition. GSE people purposefully mis manage everything appraisal related, because they would rather advocate for stake holders than for American citizens. As goes the appraiser, so goes the American consumers financial security in housing. Soon to be a distant memory. Just in time for the next big short too.
Have a good one.