Bifurcation Policy Adopted
- Federal Valuation Agency Impact on Appraisers & the Public - July 22, 2022
- Is Georgia Going Rogue? - June 13, 2022
- Bias in Automated Valuation Models - February 28, 2022
By no means are we promoting bifurcated appraisal products…
“Credible valuations of real property are critical to the health of the overall real estate industry; therefore the practice of bifurcated/hybrid appraisals must be regulated”
There has been lots of talk over the past few weeks about bifurcated appraisal products. First came the announcement form Working RE Magazine they were conducting a survey on bifurcated appraisal products. VaCAP recommends every appraiser complete the survey if you have not done so already. Next came rumors that Mark Calabria, Director of FHFA stopped all pilot programs which included bifurcated appraisals and appraisal waivers. Working RE Magazine published an article explaining what is really going on in their digital email copy. And finally the National Association of Realtors has adopted a policy on bifurcated/hybrid appraisals.
Now we know what you are thinking, they should have banned them all together, but take a look at what the Real Property Valuation Committee proposed and ultimately got passed by NAR’s Board of Directors. NAR has many appraiser members but let’s be honest, the bulk of their members are sales agents. Some of those sales agents may complete the property data collection piece of bifurcated appraisals, so keep in mind a happy median is a good policy for NAR.
The policy addresses training and liability of the property data collector and oversight of performance. There also must be transparency, meaning the consumer is informed of the bifurcation process; accuracy of the data and communication between the appraiser and the data collector. Geographical competency is also necessary, so no more appraisers sitting behind a desk three states away. Finally, USPAP compliance with the ability for the appraiser to control the form, the process and the work file. This was adopted by NAR on November 11, 2019 as an official NAR policy.
By no means are we promoting bifurcated appraisal products, however, this official policy addresses most of the concerns appraisers have with the bifurcated appraisal products. It also gives each state some talking points with their state legislators.
Not on my menu. Been before the state on a complaint. Thank goodness all the workfile was generated by me alone. Dismissed w no problem. I prefer to assume liability on my work only.
100% correct, Donna. I’ve been involved in close to a 100 real estate court room encounters all jury adjudicated; as witness, aide, you-name-it. on ANY bifurcated rpt your exposure is INFINITE….and you have no recourse. If you have to take a bifurcated rpt and defend it: you lose. Period.
Can’t buyers insist on a full appraisal? That would be the smart thing to do.
Donna Halfpenny – that would make sense. Until they realize they have to pay for that full appraisal. So you ask the consumer: Do you want to pay $800 for a full appraisal (fee + amc fee) or do you want to pay $350 for a desktop appraisal. They don’t know the difference. They only see the money.
The average consumer, doesn’t understand the appraisal process and doesn’t care. They only know they don’t want to pay for it.
Why would a buyer want a full appraisal? They just want in the house as fast with as little of road blocks as possible. The appraisal is not important to them at all. I’ve saved them thousands of dollars on purchase price over the years after they renegotiate the value after they offered too much. They have never once called me thanking me for saving them thousands of dollars on the original offer. We appraisers are in a thankless occupation.
Totally agree Dave. Due in part to my independent unbiased opinion of market value, and the often renegotiations that take place after, I’ve saved borrowers millions while protecting the public. I make no friends and don’t seek thank yous, but in 20+ years you’d think someone would make a mistake and accidentally send a thank you card intended for their agent and or broker (residential loan).
That being said, some years back and perhaps the highlight of my career, but when I represented entire condo conversion developments for property tax assessment appeals, the direct connection came with many thank yous.
Seek the truth.
Honestly think all of this Bifurcation BS is in the process of BLOWING UP.
Home prices are correcting downward. Interest rates on cash out refinances remain substantially lower than HELOC rates. I don’t see interest rates going higher during an upcoming election year either. No way Trump allows that to happen. HELOC volume has been plummeting and shows ZERO signs of increasing. Fintech Personal Loan originators are disrupting this entire space with their own products that can literally fund in under 48 hours. HELOCs can take weeks to fund.
Parasite Corelogic using their “forecasting wisdom” banked on the assumption that HELOC volume would explode higher in 2019 because interest rates would go higher. Too bad they have been DEAD WRONG. It’s just another confirmation they are complete FRAUDS and that they are complicit in the ultimate mission to cause another housing crisis.
Next time you do a purchase appraisal, ask the Realtor what a Bifurcated Appraisal is and you will most likely get a blank stare.
Just sitting back waiting for the next wave of foreclosures unless they use a bifurcated appraisal to cover up their mistakes with the original ones. Then we need to hook up with some lawyers and go after the persons performing this junk.
Favorite part is; The appraiser should be able to communicate with the property inspector as necessary. I’ve been calling for that for years under existing full service appraisal process. Anyone care to track asb multi state appraiser license instances and track the upcoming reduction? This is good news.
This is a step in the right direction, but a very small step. Now it is time for each of you to sit down with your legislators and use this as an intro to come up with some good laws.
Where’s the part about the appraiser actually does a credible and supportable report and gets paid accordingly? Silly me…
There is little difference between these and desktop appraisals. With DAs, you don’t leave home, information is via a 3rd party… the key is verification! Nothing has changed with appraisers having to VERIFY information, no matter the source. I keep seeing much ado about nothing. Charge your fee, do the desktop appraisal level work and research and there should be no issue.
Actually, this is much ado about a lot. With DA’s the client anticipates the use of assessment data predicated upon the Extraordinary Assumption it, and any other readily available verification data is accurate. I suspect you haven’t read the “canned” AMC “Bifur” forms that state you accept the 3rd party inspection as accurate (and try and alter the canned form, especially to USPAP Compliance). I’ve been doing DA’s since way before they were cool, and always got paid reasonably. Can’t remember the last time someone ordered a DA, especially with the advent of Bifur’s. I did “dip my toe” in the water last year to see what it was all about. It took 9 requests from one AMC (different properties) before I received an inspection report I’d put my signature to. “Charge your fee.”? Good luck with that. And for the few I did do, the revision requests and reconsiderations are more idiotic than those of a field report. I came; I saw; I left.
Fees most definitely are negotiable. And as I mentioned it has ALWAYS been the responsibility of the appraiser to verify verify verify no matter the source of that data. If desktops can be made compliant and I’ve never seen the property, so can these. I don’t see these going away, so I see charging what you feel it’s worth and being as compliant as possible.
Vaugn, “fees are negotiable” is patent nonsense. Get over it. One finds this sentence in AI, State regs, lawbooks, conversations, econ 101, and its complete bullshit, meant to stifle the mind. Fees emerge from custom, historical context, ‘feelings’ and are NEVER negotiated, only SET. Think about it.
Verify. OK. but here’s a better approach: if the report had to be defended in court (and a State Hearing is a court with the judge, jury, executioner all rolled up in one), could it? would you be able to defend it? This is what I tried to instill in my appraisers.
DA’s can be made compliant? NEVER. EVER. As I mentioned to Donna at the head of this column, don’t even try to bring a desktop to court; or its 2nd cousin, the Bifurcated BS Rpt. You will have just earned jail and no more insurance.
Hear Hear Merv,
Obviously, Vaughn has never attempted to negotiate a bif***ated report fee. I’ll save my breath (type) on that one.
“Verify, verify, verify”? To the extent allowable as well as anticipated in the extraordinary assumptions employed in the report. However, when you’re provided with an inspection report the client (at least AMC in their capacity as an engaging entity) anticipates you accept as verifiable (verified?) information, yet it’s blatantly inaccurate on its face as cited above, how do you “verify, verify, verify”? You going to inspect the subject even though it’s a desktop? Or simply go back to using public records like an “old school” DA (which obviously irks the AMC) or, as I do, decline the assignment after wasting significant time analyzing public records vs. the inspection report for no fee.
I disagree a DA can’ be made compliant, and I’d gladly go to court (kangaroo or otherwise) with a form and scope of work I’m in total control over. But I disagree to a degree again that a bif***ated report is a 2nd cousin. This is a red-headed stepchild that doesn’t deserve to see the light of day and the sooner E&O companies get it and won’t cover and/or charge appropriate premiums for those willing to take those risks, the better off our industry as a whole will be.
Your replies are from fear, fear, fear. You all have not had success and are speaking from fear and hypotheticals that may never come to pass. Every course I’ve taken, it appears that there is very little the appraiser gets right–from their workfile, to methodologies…just constant fear mongering of the state boards. Then when you research, you find very few actual complaints and sanctions of appraisers. If that’s how you wish to work it, then do. But I know You CAN negotiate fees. You CAN write as much as you need to to cover your but in your scope of work. You CAN include whatever additional certifications you need to include. At the end of the day, if you cannot successfully figure out how to make it compliant, then don’t do them. But they aren’t going away.
Fear is healthy. And I rarely, if ever speak hypothetically and, when doing so, make it perfectly clear up front. However, any and all comments I’ve ever made are based in reality and solely upon actual personal experience(s). If you “CAN” do all you say, you must be working for the only client and/or AMC that no one else on this board is aware of. Do tell as, in my personal and not hypothetical experience, they don’t exist. Maybe I’m just too old (or what I prefer to call experienced) to go chasing rainbows and unicorns.
Maybe they “aren’t going away”, but FNMA’s fumbling right now and they clearly aren’t “prime time” yet. Approximately 70% of your peers in a recent survey said they wouldn’t touch them and I’d bet my last dollar their response wasn’t solely grounded in “fear”. 24 hour or same day turns, even on weekends? Get a life! One of these “bif***ated” reports pays approximately 2% to 3% of the fee I’m receiving for the report I’m currently working on. It’s a complex report that also isn’t going away any time soon and will take approximately 4 to 5 days to complete. Using conservative numbers, I’d need to complete at least 35 bifurs per week to generate similar income and expose myself to, at minimum, at least 35 potential revision requests that never should have happened in the first place. Aside from my “fear, fear, fear” of this alone, there simply isn’t that kind of consistent volume in the predominantly rural areas I cover.
This is an obvious business decision everyone qualified can and should make and I chose to base mine on first-hand knowledge and not hearsay and/or someone else’s experience(s). In the end and, at least for the time being, I’ve chosen to, in the immortal words of Nancy Reagan, “Just Say No”.
Actually, as I think further about this, maybe my decision was based on fear. After a couple months of calculation on the fess earned for this type work based upon the volume of acceptable assignments across 3 AMC’s conducting this type work, it appeared I was on track to gross approximately $30k a year. I have a very healthy fear of not eating, so I digress. “Just Say Hell No!”
We each travel the road which works for us. I’ve made and will continue to make things ethically and compliantly work for me if possible. These are not the bulk of my work And likely will not become the bulk of anyone’s work but I do think it will have its place.
I’m not surprised 70% of our colleagues said they would not. Every week is a new doom and gloom article about our profession. I felt like that early on THEN I decided to see for myself. I’ve seen, I understand what needs to be done to be in compliance and I’m good with my decision. Good day
I have negotiated fees for four-plex’s, and other apartments based on the managers rental information, and condition v. occupants individual interviews. Many apartments are difficult to inspect during all hours, several lenders accept partial inspections or the managers judgement for conditions, repairs, occupancy. The agent, the apartment manager, the mortgage agent, the owner, and the buyer may all have different opinions. The appraisers also may have varied opinions, but with explanations.
Appears based upon where this post is located a little “Yuletide Cheer” may be involved. Regardless, I wish you the best for the Holidays!
As far as the matter at hand and, speaking solely from personal experience and with the sole exception of pre-foreclosure work, I’ve never completed a report on a 2-4 family dwelling where the client would accept anything short of the appraiser’s full inspection of each and every unit. I’m not quite sure what a “mortgage agent” is but, as you’ve stated, opinions vary and the sole opinion typically sought is that of the appraiser.
I can’t remotely fathom support for establishing a fee predicated upon rental information, condition and/or occupant (tenant) interviews and, as for me, I establish fees based upon my knowledge of the market and degree of complexity of the specific subject assignment.
I’m guessing this response is intended to relate to fee negotiation(s) in general, but it’s totally lost on bi****ated assignments.
A some time client is the paper buyer, the Trust Deed (note) buyer frequently has no access, and may not want the Vested owner to know that the paper is being sold. This note buyer wants the best he can have with some secrecy. There are all kinds of ways to verify info, the best is among principles facing one another, looking at utility connections, looking at MLS’s have limits.
Buying discount paper is a profitable enterprise. getting a 14-16% return on an older property, maybe 25% return on a questionable ownership beets bank rates. Experienced appraisers have the expertise.
You are correct most lenders want the most, private lenders, those who NEED timing, to make a deal may feel pressed. It is a basis for pricing or for extending the time to do the job. Independent contractors need all the levers.
Happy New year haven’t had any drink thus far but plan on it later
Happy New Year Don (and all else for that matter),
My response was basically predicated upon typical appraisals for lending purposes and how bi****cated appraisals relate to those. All bets are off when your client isn’t attempting to conform to GSE Guidelines. And I’d bet my last dollar you’ve never had a client not attempting to comport with GSE requirements specifically request you complete a “bi****cated appraisal”.
I’ve been buying and brokering paper since 1985. Lucrative would be an understatement. The industry has undergone dramatic changes over the past 3+ decades, and especially circa 2009+ where GSE’s realized it was more economically prudent to sell the paper as opposed to going through the foreclosure process. In my experience 100% of performing assets and 99% of non-performing assets purchases require only a drive-by appraisal. In all instances I’m aware of, and certainly in those where I’m the buyer, the appraiser is expected to conduct the inspection. The appraisal in these instances is more of a formality to ensure the collateral exists, given it’s primarily a financial decision and “guesstimated” condition is factored into anticipated ROI and yield.
I agree independent contractors need a metaphorical “Swiss Army Knife”. This doesn’t mean you shouldn’t specialize nor accept assignments you aren’t competent to complete, but it does open the door to higher paying assignments compared to “cookie cutter” work.
USPAP 2020-20201 Advisory Opinion 2 directly addresses this. Hybrids are indeed compliant-able. Hope this helps.
In theory they may be acceptable. The reality is many amcs have their own forms in which the appraise is unable to add to or change. That is where the USPAP issues lies. The other issue is quality of information and fees. Appraisers are in fact being disciplined by state boards for non USPAP compliance because of the lacking work files, and short cuts that are being taken.
The only way any type of bifurcated product works is when the inspector is under direct supervision of the appraiser as in a trainee or coworker in an office.
“Compliant-able” is the operative word. In my personal experience I’ve not found any of the AMC’s allowing the appraiser sufficient control over the on-line form to become, in my opinion, “compliant”.
I did see one specific company change their form verbiage to read, and I paraphrase: “We sent an inspector out to the property and provided the appraiser with that report. However, it’s the appraiser’s responsibility to verify any conclusions relied upon for purposes of this report”. Brilliant!
It was my determination they don’t pay enough for the time it takes to make the form USPAP Compliant, much less complete a credible and supportable appraisal. Unquestionably, these type reports aren’t going away anytime soon. This is a business decision and I don’t necessarily fault anyone who chooses to conduct this work if they firmly believe they’ve met all their professional responsibilities to include USPAP Compliance. As for me and my business, low pay and unrealistic expectations aside, I choose to forego the potential peril.
Alleged cost savings to the consumer notwithstanding, I just don’t see the expediency angle being supported by bifurcating the appraisal process.
I’ve personally dealt with these rather nominally, but I can tell what I experienced and why I won’t complete them relative to your post. First, the AMC’s doing this primarily have “staff inspectors” which, aside from an income generator, allows them to schedule inspections relatively quickly. However, there’s no licensure or certification requirements and, beyond that, any mention of initial training relative to how to conduct the inspection and report accordingly. Case in point: I had one request stating the entire basement was finished area, yet the photos displayed approximately 50% of this area was an unfinished mechanical(s) room, which may or may not go to point 2.
Most AMC’s offering this service do the “low fee blast” like many of the less scrupulous AMC’s. The fees they pay are ridiculously low were one to complete a USPAP compliant report that’s thorough and significantly supported. In fact, most use propriety software that doesn’t even allow you to add further support in the form of additional listings and/or sales. And none will explain (likely because they can’t) their software algorithm used to calculate the indicated value in their software. A little rambling, but the compilation of these factors means that, while the inspection goes rather quickly, placing the report assignment can take days, if not weeks and, especially in suburban and rural markets. And woe be it to the appraiser who accepts an assignment attesting the inspection information is reliable when, as is the case above, the photos obviously refute the narrative.
I can say that, in my brief stint of doing these, I saw a number of complex assignments that shouldn’t have been remotely requested in this format, or even as a drive by for that matter. In terms of expediency, I suspect these assignments never got accepted for the whopping $75 they wanted to pay. Just not worth the risk for a waitress’ pay with no tips, and it just goes downhill from there with the “stips”. In fact, I quit even attempting to do these when I realized I spent more time conducting research and declining assignments without pay than I remotely spent on accepting these type assignments that could be credibly (to the degree allowed) completed.
The above dialogues were interesting to read.
Ehhhh…. Could dig into it again but there is so much good content in the above link.
You can’t find ways to make an outright fraud, not a fraud. There are people whom flip those in volume. There are verified instances of fraudulent activity. There are verified examples of improperly assembled data.
State boards is just the half of it. What information that is lacking to make better informed decisions is how many do not use lists appraisers may be on, how many instances of claims are out there total, how much is paid out and how frequently, as well as attributable to any given individual appraiser, how many and whom specifically has been issued warnings or denial of service through fnma cu systems. If you pay more EO insurance than someone brand new signing up that same day, you’re on the wrong side of the coin.
FOIA for FNMA CU data! EO insurers have yet to react to the hybrid issue. The accountability train in this industry can take ten years or longer to finally roll around.
I’ve stated on more than one occasion that the most prudent way to “nip these in the bud” is enhanced insurance fees for the inherent risk(s). Not sure where that’s at but, like all shared risks, do I really want part of my E&O to cover reports of this nature? Rhetorical.
Amazing how time brings about a change. All those things that many said could not be made compliant, now ARE in the age of COVID… The future will be different…trust! Keep living…
Actually, what’s not so amazing is how what’s old is new again. The Bifur’s never got serious traction. However, now that GSE’s have agreed to accept desktop and drive-by reports, they’ve done so with the owness on the lender, as it always has been. Shazam! Interior orders through the roof.
They will incorporate this and change policy now that this forced trial run is happening. No need for a 3rd party when you can have owners submitting photos or using MLS pics…even old file pics…and all should be compliant if you follow the agency’s guidelines. They won’t call these hybrids or bifurers in the future…they will just be… acceptable, defensible reports. Watch. Change is inevitable.
So essentially, they took the hybrids many didn’t like, saw to keep the mortgage industry going and appraisers safe, they adopted the hybrid model as well as the desktop model and are now paying the same for them as a full 1004? You have GOT to love this profession!
I have no doubt the change is coming (for the GSE’s) with technological advances. And I’d certainly be much more comfortable completing a report based upon a video inspection I orchestrated with the borrower as opposed to an inspection by an untrained “property inspector”. Just saying it may not be as quick as you think given the 2008 to 2012 lender “buy backs” haven’t been totally erased from the lender’s minds.
Mark Z., “What old is whats new again” what a wonderful phrase. Wish it were true of me, I began as a trainee in 1961 and let my license go in 2018, 57 years.
Seen many changes, interest rates were changing upward to 6% from the mid 4%s, There had been a short depreciation form the booming 1950’s. The west coast didn’t have large money markets and the local’s had to go the Chicago or further for small shopping development. The farmers – sellers had to carry the local builders with all kinds of Notes, financing, the local banks, etc. went for sharesies with one another (until they realized final responsibility).
What will come, will government inter-venation diminish, will private lending come back, will tax gimmicks predominate??? Will WALL STREET dictate Real Estate finance or will local lenders come back.
Congratulations Jonathon Your mention in the WSJ must have enhanced your pricing list.
The HOME MORTGAGE LOAN MANUEL from the American Bankers Association published 1943 mentioned that the residential market began weakening in 1925-1926. This preceding the trend by 3 or 4 years.