The Death of the Residential Appraiser
- The Death of the Residential Appraiser - May 9, 2016
- Haven’t We Learned Our Lesson? - May 2, 2016
Those that know me on a personal level and that have worked with me over the years have had to hear me talk endlessly about the pending death of the residential appraiser. The other day I eluded to it at the end of another long post. I figured it’s time to share the thoughts with everyone.
First off, I come from a long career in corporate America and spend 20 years working in everything from manufacturing, order administration, marketing, sales, and engineering. One thing always held true no matter what function I had was the need for standardized data. By having standardized data it allowed deep analytics to be run. It just never works well with non-standardized data since there were too many variables.
When I first started appraising in 2003 one thing was very clear. Every appraiser said things in a different way and every way could be interpreted in a different way. I always called this the grey area of appraising since some did this to actually not say much but meet the requirement of saying something. Much like the form filling appraisers with canned comments that are the same in all reports they write.
I know, I know, there has been talk for decades of getting rid of appraisers. The talk came and went, nothing changed, and we are still here. But that was before UAD and standardized data.
UAD came about a few years ago and caused all residential appraisers working for lenders to report the majority of aspects of all homes in a certain format. It didn’t matter where you were, the format was the same. That meant all reports must look the same now. Now there is standardized data. This is good for them but bad for us.
Since they rolled out UAD they also rolled out CU. CU compares your data to other appraisers data and when it finds disconnects it warns the lender and the lender might talk to the appraiser. They are using this data to not just double-check us, but to scrub this data and to also to run, re-run, and fine-tune AVM’s that are far more powerful than they have ever been.
Standardized data is the key.
While the rules are to now use an appraiser for most lending transactions there is overwhelming evidence that we, as a profession, are not very good at what we do. There are still far too many that rubber stamp contracts, stretch walls, use sales from better markets to prop up value, or simply make stuff up. Happens every day. We have done little to improve the profession as a whole and they know this. We add time and cost to the process. We are human after all.
I project that in the next 5 years they will have very good data on the majority of homes across the country. They will also be fine tuning their AVM’s to build somewhat credible “on the fly” valuations. The data will be there. The system is being built. The wheels are in motion. Once the next collapse happens they will say “see, appraisers are still not helping. Why do we need them?”. Once we start to come out of the decline our very own CU data will be fully used to replace us. For homes that don’t have data on, they will hire someone, maybe even an appraiser, to verify particulars on the homes so their systems can project value. I guess some of us will be “runners” so to speak.
There will still be a need for private appraisals for the time being. Eventually though that will be replaced as well. Just the natural course to take.
Of course you say that the computers can’t always get it right and don’t understand the nuances of some local markets. You are absolutely correct. But then again, some appraisers don’t know those either so they are not much better. In the end we are removed, no more waiting a week for a value, no more costs for us. It’s just how I see things being down the road.
Anyway, my thoughts on the profession.
This is true in so many businesses now, humans are going to automate themselves into irrelevance
This is so very very true! I have been saying this since the start of UAD. The next step will be (since many MLS are owned by such as Corelogic) they will require formatted entry on MLS to correspond with UAD. Then – no appraiser needed – JUST a photo taker! MMMMMM. And hell with rubber stampers everywhere WTF…..why not.
Do you really think the investors of these loans will accept an AVM or a realtor enhanced BPO?
That’s like using H & R Block to do your corporate taxes.
They will try, just to gain a short term micro profit, nothing new with that
Of course they will – it will be backed by Fannie Mae, Freddie Mac, and FHA…….
You asked do I think that investors of these loans will accept an AVM and the anwer is absolutely. How many times has the market tanked with appraisers at the helm? Everyone of them. We are not some sacred cow or protected class. We perform a function that most are required to use but we can be replaced. Would it be perfect? Doubt it, but it can’t be worse than what they get now. We had money and time to the process. Any smart business model does what it can to reduce both of those and with UAD it’s possible.
Investors don’t care, take a good look @ what happened in 08, they’ll invest in a pile of dung if they can make money. Give me a break!
Indeed this has been the refrain for all of my 43 years in appraising. Truthfully we are kept around so they can blame us. Remember politicians are loathe to take responsibility for anything bad and so is corporate America and the banks especially. We are once again on the cusp of a freefall market in hosing as the same old practices are here again. We all see it and know it is bad news. Nothing down, 110% loans, wall street packaging mortgages again and so it goes. as long as they are going to roll the dice with our lives, the public, they will keep us around to blame.
oh by the way if true start working on your general certification NOW!
That’s the last thing I would do, eventually They’ll get around to commercial appraiser’s too.
I’m happy to see that I’m not the only Dr. Doom in the appraisal community.
Appraisers could learn a thing or two from Prince (yes the musician). While thousands of professional entertainers sat on their duffs getting screwed by record companies he went to the extreme to protest his unfair contract. Going so far as to appear in public with the word “SLAVE” on his face to embarrass his record company. Appraisers refuse to boycott because of the temporary pain it will cause them. Can you imagine them appearing on a homeowner’s door step with the words “AMC Slave” on their shirt or face? Too hard…too much effort.
When his record company copy righted his name and refused to give up rights to this masters he changed his name to an unpronounceable symbol as a means of distributing his work.
When he saw that the internet was ruining musician’s by paying them beans for their work he decided to give away his music to those attending his concerts. He also decided to distribute one album (CD) free in every newspaper in England. In short, once HE TOOK CONTROL OF HIS DISTRIBUTION CHANNEL AND EVENTUALLY REGAINED RIGHTS TO HIS MASTERS.
There are probably a handful of appraisers out there today who have applied some honest effort towards finding a way to reclaim their profession. For the most part however we’ve come to realize that this “profession” consists of spineless single cell organisms that are incapable of critical thinking or taking meaningful action.
I wrote this article and have to agree with what you are saying. There are no real leaders in this profession and it’s disturbing. When someone like myself calls things out for what they are they are looked down on. I learned a few years ago that lender work is not the work to be in since they and the AMC’s try to control you and really don’t care about the real value. I switched my companies work to private work and if another lender never hired me I would be happy. The private clients want an honest appraisal and an honest analysis. They also want someone to shoot straight with them. They do not want to be screwed and most that hire me and my company called because they don’t trust the lenders and sadly many appraisers.
AVM is the future? probably for standarized neighborhoods, where prices are the same, and house design and quality is the same, but what about properties with waterfront, oversized lot with guesthouses, hangars, barns, bohemian and cultural areas with antique restored properties, homes designed for veterans, flat condominiums with amazing panoramic views, and what about new constructions? where no data is available online? and u need to get information from agents and realtors? this kind of appr are my everyday…. and I think AVMs are far from becoming a reliable replacemtne on these cases..
But at the same time, that explains why we are getting more complicated appraisals everyday..
Where the simple ones? AVM perhaps?
In time they will have data on these structures. In time they will have data on nearly all structures. So yes, initially there might be pocket areas where that might apply but the second you do a UAD report they have the data they need.
The stage was set long ago for confrontation and opposition in the appraisal industry. There are those who will always feel like they are “THE AUTHORITY”and everyone else is inferior. There are many others who couldn’t make it in the competitive venues of the trade, so they turned into “STATES EVIDENCE” to wield their superior knowledge and jurisdiction as authorities on USPAP for the courts and state boards disciplinary jurisdictions. Then there are those who have perfected the “ART OF the DEAL”, and, like Donald Trump, they manipulate their classes, presentations, etc., to get the best return on their investment. The majority of the professionals quietly go about their business, trying to do their best at completing an honest, professional report that best represents the current market conditions and their professional opinion that meets the scope of work prescribed for that order. This is a short synopsis of my experience of my career for 43+ years and over 10,000 reports out of my office in SE Idaho.
thanks to appraisers, accurate big data will last only a few years till the data starts changing with houses being completely rehabbed or GLA additions made, and nobody is there to enter the new data. rely on realtors to enter the data? LOL! they are too lazy and/or capable of entering reliable data now and NAR wont let their members get manipulated into doing any more work than they have to.
banks getting rid of the the only trustworthy part of the real estate transaction – brilliant idea! and everyone is always concerned whether or not APPRAISERS are dishonest? yeah, RIGHT.
the bleeding continues . . . . .
When data needs to be refeshed they can hire anyone to take some new pictures and give them new information. Doesn’t need to be the expensive appraiser.
i agree that pictures can be taken by anyone, but that isnt all appraisers do is it? computers cant analyze pictures for instance. someone will be needed to take the time to see and analyze that information. all banks/realtors want to see now is “the number”, so they wont be taking the time to do it. no computer will ever be able to analyze from pics Q1-5 or C1-5. who is going to be trained to do that now? realtors? realtors want to sell houses and make real money, not do that nickel/dime nonsense.
so who gathers the new needed data in the next 3-5 years? realtors? bank employees? no bias or potential for fraud there, right?
i agree, appraisers are expensive, but considering everything they do, they still arent expensive enough, and without that one and only reliable and honest circuit breaker in the entire transaction, its going to be a damn scary world.
the bleeding continues . . . . .
Standardized is a good term to mention and how do you standardize is a better question? In the real estate world, things are not very standard as many would like to believe or wish to benefit their business.
And, the government has much more control than private business. After all, the government should have more control when they are guaranteeing loans and banks. So, don’t count your chickens before they hatch. The government may but private business better not.
Fraud is just one of many many factors that makes real estate an unstandardized item. Real estate is unstandarizable for many reasons and government guarantees and government insurance are a major factor why appraisers are still around. There are many reasons. Do not look for government to get out. To the contrary, as long as they are guaranteeing and insuring things, I only look for appraisers to still exist and grow in importance.
For all private business wishing to get rid of government. Our Nation as we know it would have disappeared a few years ago without government.
They need more money on the appraisal side. They will get it eventually.
More money and great leadership. That is all they need.
Only those with faith that technology is god, dare to presume technology can replace god. God is a frequency within you, tune in. The computer will never be as capable as a person, and don’t believe the hype. I’d have to trust computers and the programmers behind them, in order to trust the programs laid out which utilize that data. Fools rush in.
You have received a secured message from Bite*his*s@476…Log on using your secured password ASAP!
Three days have passed and you have not logged on to the secure website. Please do so within 8 hours or the appraisal will be reassigned….
Okey Dokey then…have a great day! What happened to my spy decoder ring? What the hell ever happened to someone just calling, faxing or emailing an appraisal order? I am not James Bond and will not play such silly games. Thank goodness there are some in our clown crowd that will put up with this type of foolishness!
On second thought… No, only an idiot would put up with this type of crap!
Loved your final comment. It’s precisely what I’ve been saying all along. It appears that there are still tens of thousands of idiots out there though with an extremely high tolerance for pain…or else.
Hmmm…maybe AMCs have resorted to mailing out free packets of percocet each month just so appraisers can endure working with them.
That’s a tough call for me…. I get the developing tools; but physically being in a house is important. Here in the Philadelphia Real Estate market our mls is populated from public records. The issue is that public records is often wrong. Many Philadelphia homes for sale have add-ons and build-outs to the house that was never documented in public records so square footage is often incorrect. Some one need to be in the house to properly value it.
Those are tough ones Joe. Adams county in Colorado has that w/ bi levels. Typically credited as all agla, if the garden level is a few inches lower, suddenly it’s noted on county as basement. Obviously that huge old bi level is not a ranch. FNMA guidance suggests streamlining the data for congruency. Now with Corelogic MLS which solidifies data inconsistency because now realty agents just import and list, 2 seconds flat. Garbage in, garbage out. For additions, it’s a random event based on the individual county if the building department communicates well with the assessment department. From the appraisers position it’s always wise to call both departments because assessment data alone is not enough to know for certain if you’re dealing with an unpermitted addition. And that’s a fun one to explain to clients, which FNMA CU is certainly not equipped to handle. Explaining why although assessment does not indicate the addition, it’s still a permitted addition none the less. Tag on FNMA unpermitted addition rule with hard stops and xml correlative big data review, chaos ensues. / Hey retired appraiser; Still beats punching in and answering to the same old boss. I get hired, I get fired. I make phone calls and land new gigs. Happens every week or month, and has been that way for a decade now. I say abandon the notion of proprietary client relationships and use the principals of substitution in the same way distributors do regarding engagement choice. If appraisers would get around the block more, they’d find more suitable landing places. Based on this article, I have a new quip; Mathematicians and pencil pushers now dominate this industry. The validity of logic based appraisal and detailed construction practice knowledge is routinely overlooked. Show me a mathematician whom can quantify the adjustable influence of tacky vs pro finish, minute locational differences, variety sizing despite congruent agla indicators, name the material components in detail, and so on and so forth. Logic is necessary in the appraisal process and that’s where I hang my hat. Extracted and paired is just a clever way of seeking a measurement to back the logic, and then presenting that as the final word. Causing defensible yet illogical results if applied as standard algorithmic adjustment extraction in developmental practice. If the logic is sound the extraction or pair is present some where some how, even if the appraiser never actually picks that from the data. Big data, big joke, but I’m riding in the barrel trying to not get shouldered out, whitewater looming in the distance. Surfs up, ride the wave.
This just in the mail; The disappearing appraiser. / Dang. Say it ain’t so. If I disappear, what then will occupy the space where my physical matter previously resided? Will I be displaced, will there be a vacuum?
I agree 100% with your thoughts… UAD, CU… We definitely are on our way out the door. Too bad our professional groups like AI, AF, some of the others didn’t have the vision, foresight and the power and backing to prevent this. The writing is on the wall.