Adapt or Die?

[PropertyEconomics]

Unfortunately the history of the appraisal profession shows that the value of a good appraisal gets a lot more recognition after these users of appraisals get hosed. The last banking bust brought about appraiser licensing, but left the loan originators untouched. That's why the loan originators and bankers are getting all the scrutiny now.

It doesn't take very many $100,000 losses to fully justify the time and costs involved with obtaining reasonable appraisals. By the time all the losses from the excesses of the market have been fully realized, cheap and fast won't be the priorities for appraisal reports. At least, not until next time.

Mr Hatch .. at last report the only true thing that has occurred from Sandys post has been fast. With losses now in the several billions .. I dont think we can say the experience has been cheap.
The true lesson in all this is perhaps Fast and VERY EXPENSIVE ......

 

[George Ellerman]

Here's an opinion that's sure to be unpopular...

The real problem here is that too many residential appraisers let in too many trainees and now the residential market is completely saturated. There is a gross oversupply of appraisers, which basically makes the residential appraisal business a buyers market. That means the buyers (your clients) can get pit you guys against each other to get the lowest prices and the fastest turn times and the most cooperation with stupid stips. When you compete, lenders win.

Remember this the next time business turns around. Stop thinking in terms of making hay while the sun shines. Take the longer view. It doesn't matter how much money you make when times are good if in doing so you contribute to your own demise when times get tough. When you take on a trainee that person will be with us for the next 20+ years, and they eventually WILL become your competition. If you've already trained 2 appraisers you've already passed your career quota for trainees.

There are far too many trainees.

 

[The Warrior Monk]

Six years ago I adopted a bump logic program for localized reviews- essentially I gave the appraisal report to a trusted local appraiser (yes- there ARE those of us who still believe) and just told them to take it as far as necessary to get me the truth. Start at your desk- if you need to go out there to drive by just do it. If you need interior access, call me and I'll arrange it. What happened? It got cancelled. It got cancelled because the folks who approved it found that they did not trust our trusted folks to not elevate every assignment to the full highest fee scope of work.

There are issues particular to reviews for lenders, basically summed up as follows:

1. The expectation of getting a review and appraisal for less than the price of an appraisal; and
2. The cost of liability.

I have no problem with reviewing an appraisal, nor doing the review and performing a second appraisal. However, I expect to be compensated for my time and effort. Lenders, on the whole, simply don't pay realistic fees when it comes to that, unless the situation is egregious.

I also could just never wrap my mind around the reason why a lender would require an appraisal with and interior inspection initially, then after the report is determined to be not credible, accept the reviewer's opinion based on a no inspection, or a driveby inspection, assignment.

Regarding #2, it appears that lenders, and many appraisers, simply toss the concept of liability right out the window. If an appraiser performs an appraisal, their license is on the hook. That is not the case with an AVM/BPO. As such, those valuations should always be cheaper. Interesting with many nonlending assignments clients will not even consider an AVM/BPO, and will pay fees that would make the typical lender gasp.

So our OP does have this right. Appraisers must adapt to varying scopes of work or perish. And I think it far far better to embrace the change and find ways to honorably earn a living than to just cave in to the demands of some broker who cares nothing at all about anything but his commission.

You'll get no argument from me here. But, IMHO and experience, reviewing for lenders in not worth the compensation received for the time and effort. Appraisers can adapt, and can make much more money elsewhere providing custom reports.

 

[JSmith43]

I'm trying to make up my mind...if I were looking to buy property in FL or some other place where I had no intimate market knowledge, nor the time to develop same, would I rather read one appraisal report emailed to me or 3-5 BPO's from separate sources in the general area of the subject?

I think I'd only go with the appraisal report if, for example, I could order it from someone on the forum that I held in high regard. If I had to pick from a license list or a phone book like a typical out of state broker, I don't think I'd be paying $350 for the appraisal.

Heck, I could get about 7 low cost BPO's and 3-4 deluxe BPO's and sort out the $h%$.

How would you all handle it if put in that situation?

 

[The Warrior Monk]

I think I'd only go with the appraisal report if, for example, I could order it from someone on the forum that I held in high regard. If I had to pick from a license list or a phone book like a typical out of state broker, I don't think I'd be paying $350 for the appraisal.

Heck, I could get about 7 low cost BPO's and 3-4 deluxe BPO's and sort out the $h%$.

How would you all handle it if put in that situation?

I think the BPOs will help set the upper limit of value; that's about it.

As far as the appraisal goes, it's only as good as the appraiser.

 

[ddnma]

I'm trying to make up my mind...if I were looking to buy property in FL or some other place where I had no intimate market knowledge, nor the time to develop same, would I rather read one appraisal report emailed to me or 3-5 BPO's from separate sources in the general area of the subject?

I think I'd only go with the appraisal report if, for example, I could order it from someone on the forum that I held in high regard. If I had to pick from a license list or a phone book like a typical out of state broker, I don't think I'd be paying $350 for the appraisal.

Heck, I could get about 7 low cost BPO's and 3-4 deluxe BPO's and sort out the $h%$.

How would you all handle it if put in that situation?

Exactly! A vast number of users will order 2 BPO's and let the "expert" figure it all out.

 

[PropertyEconomics]

I'm trying to make up my mind...if I were looking to buy property in FL or some other place where I had no intimate market knowledge, nor the time to develop same, would I rather read one appraisal report emailed to me or 3-5 BPO's from separate sources in the general area of the subject?

I think I'd only go with the appraisal report if, for example, I could order it from someone on the forum that I held in high regard. If I had to pick from a license list or a phone book like a typical out of state broker, I don't think I'd be paying $350 for the appraisal.

Heck, I could get about 7 low cost BPO's and 3-4 deluxe BPO's and sort out the $h%$.

How would you all handle it if put in that situation?

Roger .. what is a deluxe BPO?

 

[Mr Rex]

Roger .. what is a deluxe BPO?

Comes with fries and a drink.

 

[PropertyEconomics]

Comes with fries and a drink.

I was thinking lettuce and tomato .. so I was close.

 

[SANDY]

Mentor-Think about this--- to a lender, an appraisal is only good for a value(their use) as of a specific date or at best what 3 months depending upon market conditions. But for most lenders what we produce is only good for a one time use then its sold off to some other entity. So if these other entities don't require the poundage version products as collateral, the natural tendancy for these users is to get as fast and as cheap of product as possible that they can still sell off.

But because of the way we are regulated and the fact that if things go wrong even well down the road(years later) we are still on the hook even though the effective date of value theoretically is what our work product says we are providing. So on the one hand the users of our products see the value of what we provide in a very narrow short term way and thus the price they expect or are willing to pay is quite different from the exposure we have. The two are diametrically opposed to each other and is why our services are seen by our clients differently than we see it to be.
Now I know that in theory and to some extent in practice these lenders could get these loans thrown back in their laps when the shat hits the fan but how often does and has that happened in terms of the big scale of the total numbers of loans they close and the fees they earn by churning volume. They have evaluated the risk of those loans coming back on them and they have determined that even if that happens they still have the appraiser to blame. And if there is a downturn in the market they also know that there will likely be some sort of bailout forthcoming.

So I guess what I am trying to say is that things have changed dramatically since the good ole days when apraisers and lenders were all local and loans were made locally-the value of an appraisers' services or appraisal products with the poundage behind them is no longer as marketable as it once was. Yes, I hope like heck that things will change but if was ever going to change it better be now and it will ost likely be never.