Stupid Appraiser Scenarios
- 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
A business appraiser is asked to value a company, but the appraiser may not inspect the audited financial statements of the company. Instead, the company provides the appraiser with a summary of the company’s financial condition that was prepared by their in-house bookkeeper.
An appraiser of timber is asked to value a 100-acre tract of woodland, but the appraiser is instructed not enter the woodland to conduct any quantity surveys or maturity tests of the stand. Instead, the appraiser is given an undated aerial photograph of the property.
An appraiser who is a member of the Gemological Institute of America is asked to value a 3-carat diamond, but the appraiser is told that the subject diamond may not be inspected. Instead, the appraiser is given a grading report (from an unknown laboratory) that has no mention of any occlusions in the stone.
An appraiser of antique furniture is asked to value a mahogany wood chest, but the appraiser may not open any of the drawers or doors of the chest. An auctioneer tells the appraiser that the chest is an authentic Chippendale.
An appraiser of clocks and watches is asked to value a collection for an estate, but the appraiser is told not to examine any of the timepieces. Instead, the appraiser is given a list of the make, model, and serial number of each item by the executor of the estate and is told to assume that all of the clocks and watches are in good running order.
An appraiser of petroleum reserves is asked to value an oil field. The appraiser is provided with a report from an unknown geologist that has no mention of the sulfur content of the oil.
An appraiser of precious minerals is asked to value a gold ingot, but the appraiser may not weigh the ingot or test it for its carat rating. Instead, the appraiser is given a sheet of paper prepared by an unknown person that lists the characteristics of the ingot along with a photograph.
An appraiser of industrial equipment is asked to value six different milling machines, but the appraiser is not permitted to visit the factory to examine the machines. Instead, an equipment salesman provides the appraiser with the make, model, age, and condition of each of the machines along with a photograph of each.
An appraiser of automobiles is asked to value an antique car, but the appraiser may not start the car or take a ride in the car. Instead, a mechanic tells the appraiser that the car is in good condition.
NOW do you think that hybrid bifurcated real estate appraisal reports are a good idea?
The above was sent to VaCAP by one of our supporters the day the Appraisal Buzz article hit everyone’s inbox. We thought it was quite creative and telling of the other side of things.
I’m not in favor of hybrid appraisals however each of these issues and all the examples can easily be defeated with one simple point – appraiser do, and have for decades, performed both drive-by and desktop appraisals using the condition or descriptions provided by others. This is barking up the wrong tree for why hybrids are wrong.
The most important reason licensed/certified real estate appraisers exist is not because we are necessarily the most skilled at describing the condition of a property (we defer to home inspectors and engineers all the time) – but that we are bound by law to be UNBIASED third parties and sign a statement, with our livelihood on the line, that we have no interest in what happens with the transaction. THAT is the why appraisers are valuable and necessary – as a check and balance to keep the transaction honest – not as “writers of more accurate condition descriptions”. THAT is what we need to keep pushing to legislators and the public. It’s easy to find technology solutions to better describe property. Appraisers will eventually lose that argument. But the technology- or the people operating it – that works for a lender and can be manipulated to a certain conclusion- can’t replace the UNBIASED appraiser in the middle that will say “NO” when needed.
NOPE….the solution is very easy. Just say no to bifurcated reports. If appraisers can collectively come together and JUST SAY NO it would make our lives that much better.
David, that’s a good sentiment but can you name me one thing in the history of real estate appraisal where appraisers have come together as a whole and rejected? It’s not going to happen and we need to be realistic. At the very least lenders will turn to staff appraisers that have licenses to complete the hybrids if they need to. We need to defeat the argument at its core and prove the value of appraisers. Stopping our feet and using nonsensical arguments like the ones in the article are not going to get us anywhere.
And lenders have not turned to staff appraisers. And if AMCs had turned them all to their staff, they would not be on every appraiser venue of the internet, telling you it is okay to do them.
But with the given technology, the caveats to USPAP, all an AMC needs is a chief appraiser to do qualitative analysis of the comps the computer picked, against the inspection by the inspector, opine a value, and write the reconciliation with caveats, after the foreign secretary types it all in. Heck robo-signers completed 1,000s of mortgages with only a few people.
Nobody needs an appraiser, except to have someone take the fall.
But as rates drop, and financial stocks drop, there is less money to be made writing loans, so, more incentive to write higher priced mortgages, which, 12 CFR 1026.35 requires THE appraiser to inspect the property.
But hey Lemmings will follow the leader, and even 10,000 years of evolution has not been able to change that.
Sorry but that’s just not true. There is a large Metropolitan County in my coverage area where a significant amount of work goes to staff appraisers employed by the lender or AMC for several of the top lenders in that county. The only thing that gets sent to the contract appraiser are the unusual or difficult assignments. Ask any appraiser that has worked with RELS, now CoreLogic how that works.
MKS, I guess you didn’t hear about Corelogic laying off their staff appraisers and offering them the opportunity to stay on as independent contractors.
Wonderful. That one company. It still does not prove the point. Go look at the statistics of how many appraisers who have licenses are independent fee appraisers and how many are not it’s not a small number that are not independent.
I was just responding to your statement “Ask any appraiser that has worked with RELS, now CoreLogic how that works.” Corelogic staff appraisers are no longer…
MKS – Where do you find such stats?
Each of the various appraisal organizations has published statistics like this from time to time. There have also been various surveys published in appraisal trade magazines.
I don’t remember seeing any stats in trade magazines of how many licensed appraisers are independent appraisers vs staff appraisers. Please do share those stats. Thanks
According to the fnma white paper regarding quality differences in a cooked up biased study about amc vs non amc work quality, about a year back, we did get a few important non biased facts.
Roughly half of all 80,000 licensed appraisers nationally are not seen in the FNMA CU roles. Of the 40,000 half that are known to have submitted XML reports through the CU system, roughly half of those (20,000) do not appear as having submitted anything through an amc.
The take away is this.
When lenders use an amc, they lose out on 75% of potential appraisers out there. (60,000 out of 80,000 licensed appraisers do not work for amc’s that submit through the CU system). At a bare minimum, if a whopping 50% of all appraisers total (40,000) refused mortgage lending out of principal (which we know is not the case), an amc captures a mere 50% of all available vendors out there whom do submit through the CU system. (So half are not submitting through CU, 40,000 not seen, and of the remaining 40,000, only 20,000 are known to have submitted through the CU system in a way which involved an amc.) How’s that for ‘vendor management’? The amc’s are so awful and unfair, deceptive and incompetent, even half of the backstop bottom half of appraisers who can’t escape mortgage lending still will not work for them. Hows that for bragging rights?
If more lenders would move away from amc’s, and stop suppressing fees, there would be roughly 60,000 more appraisers available for mortgage lending work. Amc’s and lenders whom work with amc’s, have caused irreparable harm for the appraisal community. They’ve hijacked work flow, driven volume down, and created unrealistically low fee standards.
This is the ‘shortage of appraisers’ argument in a nutshell.
Before the advent of CU and amc’s proliferating in 2008, does anyone know a proportion of all licensed appraises whom submitted through GSE’s?
Speaking of trade publications. In mid 2019, WorkingRE magazine published both an inspectors mag and an appraisers mag. In the inspectors mag, the headline; Don’t be a bottom surfer! In the appraisers mag; an amc solicitation every other damned page. What a joke, this industry does not have publications anymore, it has a loose assortment of self interested shills, and sometimes a decent article on this website. That’s what makes this website different, it’s not another self promoting rag, although appraisers whom write here often mistake it for such.
Care to like pay an extra technology fee or a records check fee? What’s your fee and turn time? We allow appraisers to enter their own fee so they too can participate in defrauding home owners when cost savings from reduced appraisal costs are not returned to borrowing consumers. Appraisers whom work for amc’s need to stop talking about ethics, because ethical application is not just about making a dollar, it’s about right and wrong. Something almost all amc’s and almost all appraisers whom work for them seem to be having a very difficult time understanding.
And one large metropolitan area does not make a country.
What’s your point? You don’t keep up with financial news?
So you don’t believe that there are staff appraisers anywhere else in the country who a lender might tap to do this? I’m quite certain my market was not unique. How do I know? Because I once WAS a staff appraiser for a regional, multistate bank (we all have those type of jobs when young). But you’re right. We’ll all come together as appraisers and “just say no”, the banks will have no choice and all will be right with the world.
it just doesn’t pay to have staff appraisers, it’s cheaper to go to subcontractor route, when will these companies learn.
MKS, I agree with you. Non staff Appraisers can just say no.
Not sure ANY of this Bifurcation BULLSH*T is going to matter if Interest rates go NEGATIVE. And there is strong possibility they will.
30 Year Treasury Bond hit an all time low today.
How do financial institutions make any profits lending money when interest rates go negative?
How do corrupt Fannie and Freddie possibly survive?
AMC loving/Appraiser hating – Mortgage Companies better enjoy their “record Q2 profits” while they last. …
They are ALL about to have their asses handed to them.
Sure the BS will matter.
Because when it crashes, the lemmings will be called to the carpet for producing desktop appraisals, when full 1004s were required. Oh, but the AMCs, will just change names and keep it moving. Corporations never hold liability, beyond a slap on the wrist. The lemmings will take down the reputation of the industry.
I like this one the best:
A Real Property appraiser is required to estimate the value of a property that he has never even seen. The value will be based on photos that were taken by a person who the week prior worked at Burger King. If the appraiser makes a mistake in his report he will be called before the all mighty state board. Even if the appraiser covers all of the bases, when the loan goes into default, the appraiser will personally be held responsible for it. If 2 complaints are filed against the appraiser the all mighty state board will revoke his license. This former appraiser will now be able to take photos of homes for the few remaining appraisers for a fee of $15.00 each.
Of course the appraiser will be at fault. You don’t think the board with AMC employees on it, will find an AMC at fault do you?
Too bad we don’t “estimate” value. Since about USPAP 1997 or so we provide OPINIONS OF VALUE.
AVMs estimate value. You can certify to it.
Wordsmithing is by and large a waste of time and something best reserved for hot dog lawyers.
Appraisers estimate an opinion of value. It’s not rocket science, newspeak is for the birds.
Don’t worry about that scenario, CJK, an amc representative will be there in any given state to defend the process.
It all depends on what the client’s needs. We appraiser can really do almost anything we want, as long as we explain it in the report. I’ve been told by many USPAP instructors we can do about anything as long as it is not misleading or fraudulent. Do I like what is going on in the current market place, hell no. I personally don’t do any of those alternative valuation crap. But there is a market for it if you want to do it for those low fees. My guess is we appraisers will all suffer function obsolescence soon! Just my two cents!
If I were an AMC Dave, your two cents would only be worth one cent (fee split).
Seek the truth.
you can do anything you like, and back it up with a USPAP instructor, until you are trying to do something for a lender which is already covered by requirements, regulations and/or laws. Then you can’t do anything you want, even if it meets the minimum USPAP requirements, because you have to produce the report for the intended use. When an AMC and hence a lender is involved, all of those “intended uses” are covered by appraisal requirements for development and reporting, that no AMC can give you a pass for not doing.
So yes, it is misleading to produce a report for lending that the intended user is a GSE, if the report does not follow the printed GSE appraisal requirements. You could do anything you want for a lender that is not going to resell to a GSE, well, unless it is a regulated lender, then no, you have to follow the IAEG. But, if it is an unregulated lender with no intention of selling to the secondary market, heck yeah, you can do anything you want within USPAP, oh but, there won’t be any AMC involved either.
Funny how that appraiser independence thing really works.
That argument only holds up for so long. Government for sale regulations. But first comes the acclimating message.
GSE’s, made possible by the FDIC with their less than 1.4% capital reserve requirement of insured funds, courtesy of the taxpayer. Are you trying to start a fight with defense of ethical process via GSE documentation? That’s sadly what’s going on these days.
Ethics is not about what’s technically allowable or not, it’s about right or wrong. It’s up to each of us individually.
What’s the ‘value’ of completely restructuring the appraisal industry to redirect all possible cash flow to tech companies? Value to whom? Probably more than an antique watch, fancy amoir, even a rich vein of gold on the side of that thar mountain. Perhaps Lady Liberty will peek and put an end to this coordinated charade where decision makers are biased in favor of those benefiting?
The cumulative societal price paid in order to roll with automated valuation, avm’s, evals, waivers, hybrids, all clearly much much higher than their actual value. If appraisers could tell laymen readers one thing, I think it would be that price is not the same as value, which is why we clearly recognize automated appraisal value products as being ultimately negative return items, despite their ‘low prices’. It’s going to be a lender free for all, all over again. What’s new?
Can you name anyone effectively regulating the tech industry as of this very moment in time?
Always Bill. I’m would love for attorneys to have to go through an attorney management company to get business. Must be fast and cheapest to get the job! Or a surgeon. We want to hire the fastest and cheapest surgeon to do our open heart surgery! Everyone would want to hire the cheapest available!!!