Blind Squirrel and Acorns

[ucbruin]

ucbruin -

I disagree with your comment. Realtors are in the market day in and day out. Good ones know their market. Good appraisers familiar with a market know which are the good realtors. If I only got one opinion, then the validity of the adjustment would be more questionable, which I why I asked a few. Like I said, usually, the realtors were pretty close in their opinions, which lent more credence to the adjustment I made.

If you have a different method, and you disclose that to the reader, then you are far ahead of what I see. Most of the time, the reports I read provide no evidence as to how the adjustment was quantified.

NLC

What steps do you take to vet real estate agents to determine the "Good ones" vs the bad ones?

 

[Lost Cause]

So, So Wrong!

It is already happening on the non-origination side of the business, where BPOs are used much more often than appraisals in default servicing. The VP of Claim Management at my company insists that BPO's are much more useful than appraisals for his purposes based on his 30 years of claims/default servicing experience in the industry. He told me that his former company used to use both appraisals and BPO's to value properties on defaulted loans until they determined that BPO's were more accurate than appraisals in estimating what the eventual sale price of a REO would be when sold by the lender/servicer. His conclusion is why obtain and appraisal when you can order three BPO's for less than the cost of a REO appraisal and those BPO's are more likely to accurately predict the eventual sale price of the REO when sold by the lender/servicer (which directly affects the amount that we may have to pay in a claim made under our MI policy). Even though I am an appraiser and reflexively favor appraisals over BPOs, I have no evidence that my claim management VP's conclusion is incorrrect

I have evidence that your claim management VP's conclusion is wrong. Like his former company, ours uses BPOs to value properties on defaulted loans. Some of these have been on the books like this for a long time and have had multiple BPOs done on them. Guess what? In cases where these BPOs have been done by different individuals (on the same property) over the years they differ substantially on the property description. These include such things as one broker says it's a one-story residence and the other says it's a two-story; one describes the house as 3 BR, 2 bath and the other as 2 BR 1 bath; etc, etc, etc... The lack of accurate information about what is being valued is breathtaking! I don't find a shred of credibility in these, and neither could anyone else who's paying attention.

 

[DTB]

"What's to argue at that point, the buyer will need to fund the shortfall "l....that's exactly the way it is now, if an appraised value is lower than the CS price, the buyer can fund the shortfall. But they often won't or don't, so why would that change with an AVM choosing the point value?

Will lenders tweak the outcome of a this auto program results if it is not delivering the results they want, aka too many "low " values with not enough deals made?

You missed the point, everyone will have all the information upfront and then can make an informed decision.

The seller can price it overvalue and wait for a fish with more cash.

The buyer will know what the loan amount will be, want to pay more or move on to another property.

 

[timd354]

I have evidence that your claim management VP's conclusion is wrong. Like his former company, ours uses BPOs to value properties on defaulted loans. Some of these have been on the books like this for a long time and have had multiple BPOs done on them. Guess what? In cases where these BPOs have been done by different individuals (on the same property) over the years they differ substantially on the property description. These include such things as one broker says it's a one-story residence and the other says it's a two-story; one describes the house as 3 BR, 2 bath and the other as 2 BR 1 bath; etc, etc, etc... The lack of accurate information about what is being valued is breathtaking! I don't find a shred of credibility in these, and neither could anyone else who's paying attention.

You cite some examples where obviously some of the BPO's in a file had an incorrect property description. That happens with multiple appraisals on the same property too. We can all cite examples of crap BPO's and crap Appraisals but anecdotal evidence is really of no value to me. The only thing that interests me is which works better on the default side at a portfolio level for more accurately estimating the eventual sale price of a REO that we may have to pay a claim on. Nothing that has been presented in this thread is actual, credible evidence that the VP of Loss Mitigation (a very smart guy with 30 years experience) at my company is incorrect when he tells me that BPO's generally work better than apprisals for this purpose. His conclusion is based not only based on his experience but actual studies that showed this to be the case.

 

[Lost Cause]

You cite some examples where obviously some of the BPO's in a file had an incorrect property description. That happens with multiple appraisals on the same property too. We can all cite examples of crap BPO's and crap Appraisals but anecdotal evidence is really of no value to me. The only thing that interests me is which works better on the default side at a portfolio level for more accurately estimating the eventual sale price of a REO that we may have to pay a claim on. Nothing that has been presented in this thread is actual, credible evidence that the VP of Loss Mitigation (a very smart guy with 30 years experience) at my company is incorrect when he tells me that BPO's generally work better than apprisals for this purpose. His conclusion is based not only based on his experience but actual studies that showed this to be the case.

"Some Examples", eh? This is true for virtually every case where more than one BPO is done on any property. I've been reviewing appraisals for well over 20 years and while there (of course) have been errors, I have never seen anything like with the BPOs. Sorry, that sorry lot simply doesn't even know what property they are evaluating. How lame is that? How reliable is that?

Your VP's results sound like a case of "Which came first, the chicken or the egg?". His conclusion is likely based on his selling properties at BPO "values".

Finally, there are no credible studies with such results.

 

[Scott Kibler]

"Some Examples", eh? This is true for virtually every case where more than one BPO is done on any property. I've been reviewing appraisals for well over 20 years and while there (of course) have been errors, I have never seen anything like with the BPOs. Sorry, that sorry lot simply doesn't even know what property they are evaluating. How lame is that? How reliable is that?

Your VP's results sound like a case of "Which came first, the chicken or the egg?". His conclusion is likely based on his selling properties at BPO "values".

Finally, there are no credible studies with such results.

I can't speak to BPOs but around here REO listings very commonly contain inaccurate data. Unsurprising as the biggest volume REO brokers rarely enter the property. Garbage in garbage out.

 

[Renee Healion]

If agents are doing BPOs knowing they will not get the listing, as TimD says above, then they are breaking CT law.

 

[Tim Hicks (Texas)]

The "blind squirrel" adage was in full force on today's review. It really was a difficult assignment for the appraiser, but they decided to take the easy route. It was a 12 year old 40 x 48 metal workshop building with 1,035 sf of living area inside on one acre in a rural setting. It looks like a rectangular metal shop from the outside. The appraiser used an 83 year old home, a 14 year old home, a 29 year old home, a manufactured home listing and a 67 year old lake front home listing for comparison. I guess the lender wasn't happy, so the appraiser added a commercial building sale on the highway as an additional sale and called the 1400 sf office area living area. The appraiser adjusted for age on the 83 and 47 year old house, but not the 67 year old house or any of the others. The cost approach stated the one acre was worth $80,000. I had two one acre lots within a mile in the past year for $35,000 and $39,000. Yet, the lot size adjustments were made at $2,000 per acre for sale #1, but only $1,000 per acre for sale #3. Then there was the $4,000 across the board adjustment for traditional design for all the sales but the commercial building. The subject was C4 condition, but sales #2 and #4 were C3 with a $2,000 adjustment for one and a $4,000 adjustment for the other with no explanation. Parking was incorrect on just about every sale. GLA was adjusted at $12 per foot. A full bath is worth only $1,000 and a bedroom count adjustment is $200. There were two pages of canned comments, but no detailed explanation of any of the adjustments. But it did state that the sales presented were similar and interchangeable with the subject property. All would be considered by the same type purchasers? Not a single one was a metal building with partial living area. Well, the commercial building was metal. I did read three or four times that the appraiser was not a home inspector and the cost approach was not for insurance purposes. Sale #2 was weighted 80%, sales #1 and #3 20%.

I spent about 30 minutes of MLS search, expanded to ten miles and found three metal building with interior living area sales. Two within the year and one within 14 months of the effective date. So, I had to drive, analyze six worthless sales, add three review sales and make numerous market based corrected adjustments for lot size, age, etc for the appraisal sales before gridding my more relevant sales. Their opinion of value was $99,000. My opinion of value was $90,000. They did not do anything correct, but were not that far off due to the large plus and minus errors offsetting each other. I still haven't figured out how a lake front listing is comparable to a rural metal building or how the 50+ year old normal homes were the most similar sales, but they worked a lot less harder on the value than I did.

When I see appraisals like this, I wonder how lenders have any faith in appraisers at all. If you just make $1,000 per acre adjustments and $12 per foot GLA adjustments so none of your adjustments exceed guidelines it flies right through the check list reviews.

 

[Elliott]

timd said, "Nothing that has been presented in this thread is actual, credible evidence that the VP of Loss Mitigation (a very smart guy with 30 years experience) at my company is incorrect when he tells me that BPO's generally work better than apprisals for this purpose. His conclusion is based not only based on his experience but actual studies that showed this to be the case."

In my market there is the 'go to girl' for BPO work, she sells them fast, puts everything at a 30% discount, and guess what?, they do sell fast. I don't see that is evidence of obtaining "market value" or "distressed value".

Just because BPOs (which are connected with a listing agent, who has a self interest in turning them over quickly, and the seller's interest is subordinated to the selling agents') is seen as 'better' doesn't mean a standard, full appraisal isn't an appropriate basis for the original financing of the loan.

 

[Eli]

timd said, "Nothing that has been presented in this thread is actual, credible evidence that the VP of Loss Mitigation (a very smart guy with 30 years experience) at my company is incorrect when he tells me that BPO's generally work better than apprisals for this purpose. His conclusion is based not only based on his experience but actual studies that showed this to be the case."

In my market there is the 'go to girl' for BPO work, she sells them fast, puts everything at a 30% discount, and guess what?, they do sell fast. I don't see that is evidence of obtaining "market value" or "distressed value".

Just because BPOs (which are connected with a listing agent, who has a self interest in turning them over quickly, and the seller's interest is subordinated to the selling agents') is seen as 'better' doesn't mean a standard, full appraisal isn't an appropriate basis for the original financing of the loan.

Fannie has proven through data analysis that appraisals performed by appraisers on REO properties are much closer to the eventual sales price/exposure time of the REO than the BPO's they obtain on the same properties time and time again (based on a client imposed estimate of marketing time/exposure time..(e.g. 90-120 days). Duh, like experienced, educated, and competent appraisers who have devoted a great deal of their life to appraisal practice, methodology, and education requirements would not have known that based on experience. After all, we hear RE agents' opinions on value quite frequently and an appraiser with many years of experience has received a lot of opinions of value. (..and based on what?)

However imo, most successful realtors who have devoted many years of their life to selling houses, would smoke most appraisers in selling houses if the appraisers have minimal experience and education related to selling houses in comparison to those same realtors.