Freddie Mac vs Appraiser Bias

[Zoe]

It gets ugly with me. I'm sorry. It reminds me of Joan constantly degrading appraisers. Okay, why was Joan trying to find the fastest and cheapest appraisers and moreover, why is a GSE still using appraisers where they think they are not qualified?

 

[J Grant]

Not exactly, and you touched on it yourself in another post you made. The appraiser-qualified inspector is operating in isolation from any comparable sales data that will be used in the valuation. They have no comps to reconcile and no contract price to support or not support. They're not even looking for comparables. They're just walking into the subject cold and doing their observations.

How does this make their inspections less biased ? The inspection itself has nothing to do with reconciliation, contract price, or comps selected

 

[J Grant]

Could it be that for certain appraisers the fact that someone else saw the property and knows its condition the C rating is more accurate? Or could it be an education issue? More to the point, how was the condition of the subject viewed in relationship to the comparables? The ability to suss out superior, inferior or similar to comparables is just as, if not more important.

Could it be it is agenda driven spin to claim condition rating an appraiser gives is more accurate if a third party inspects?

 

[J Grant]

It's common for a Q4 structure to be upgraded with a Q3 kitchen/bath interior buildout.

That is why for me, the dwelling construction itself is dominant in deciding a Q rating and then the upgrades should be appropriate to the construction quality.

It is very common now to see Q4 structures upgraded kitchen with a stock quality granite counter, moderate price stainless steel appliances and mid range wood cabinets. such a kitchen might cost 15k -20 k. 12k if they can do it themselves.

But if an owner of a Q4 structure puts in a 75 k kitchen with custom cabinets , high end quartz counters and Viking appliances, it would be a super adequacy /over improvement (typically).

 

[J Grant]

Whether an appraiser snaps the photo or a third party does, a picture of a house is the same. Ditto for notes and measurements barring gross error .

The reason for the appraiser to inspect is not because it yields better rote data collection. The weak link is that by not personally inspecting the subject/ site and neighborhood ,the appraiser loses crucial first hand observation which can give a different perspective on the property then viewing third party data.

When they did not inspect, If their value or opinions are challenged, the appraiser is in a weak position to defend because they never set foot in the subject. The appraiser is now less informed than the standard for a typically well informed buyer, who will if possible personally inspect a house they want to buy.

 

[residentialguy]

Good point. I would say since they instituted the UAD. The whole point of the rating system is to develop an automated valuation. So a consistent application is going to improve the AVM.

DW: “…the data clearly shows that that is a contributor to improving our results and getting less bias in those condition ratings.”

I read “our results” as the results of the AVM.

The more they improve the AVM, the less they rely on appraisers, the faster lenders can make loans. The biggest challenge in AVM reliability has to be quantifying obsolescence. Enter the PDR and Value Verify products which assist in that.

Hmmm. Sounds like the forced UAD is the bias portion. I could call it Q2 or Q5 or Q99... and the similar comps still come up at the same value.

The correct way to determine value: The comps are either superior, inferior, or similar. No one is offended because you didn't label it how they see it. But of course they can't steal our data if we do the correct way.

 

[Carnivore]

If the appraiser's SOW is a desktop appraisal then they already aren't responsible for anything the inspector did or didn't do. We're only responsible for what WE do.

In the event we have reason to suspect the accuracy of a data source then that would be a reason to decline to use it. But in lieu of information to the contrary it is not unreasonable to assume the info is sufficient for our use. Especially given the point that we already include that as being a standard assumption,

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Some beliefs are universal and objective , but no belief is certain. Some beliefs have so much evidence for them that we should be able to say that they are probably true and that they serve as a practical basis for action.

What makes a source reliable and credible?

A credible source is free from bias and backed up with evidence. It is written by a trustworthy author or organization. There are a lot of sources out there, and it can be hard to tell what's credible and what isn't at first glance.

So in a Desktop/bifurcated assignment the inspector says one thing, but the provided Photos say something else. The Appraiser decides what to believe.

So is Harry the Aluminum Can Collector part time Home Inspector reliable? Well if he is trained by a GSE and has a Collateral Vendor ID then I can presume Harry is reliable. If Harry is just Harry, What bases do I have to think he is reliable? Well I could look at the photo's he provided and if they portray what he has written. Then I can safely presume the inspection report is reliable. Especially if I have other data that closely aligns with his data.

So I have three scenarios: If Harry was trained by the GSE would you trust that more. Yes! OK Three Scenarios in all three cases Harry was trained by the GSE

Question: Which one would you trust the most? Remember I said Harry is trained by the GSE

A. Harry is an employee. He is paid hourly by a the company i,e, In this case a GSE with all benefits.
B. Harry is a SE Self Employed paid for each inspection he receives from the GSE and has no benefits and no guarantee of Volume
C. Harry is Self Employed and paid for Each Inspection. He receives his inspection request from AMC Phone Monkey Dot Com

Which situation will most likely be the most credible, believable and reliable?

A , B or C

 

[J Grant]

To link bias to a condition rating or quality rating is the most inane argument yet in the quest to justify why not having the appraiser inspect is a good idea.

 

[Zoe]

The idea has Joan written all over it. Remember what a GSE is. It is comical when you look at all the mortgage fraud that occurred and come back and say appraiser is to blame for a faulty inspection. However, I loved that appraiser then. I still use that appraiser frequently.

 

[CGinMN]

If the objective is to collect data consistently for an AVM, eliminate “friction” and “pain points” caused by the traditional appraisal process, shorten the loan life cycle to 10 days, and get the appraiser and reviewer to come to the same conclusions about condition/quality, just use third party data collectors and ensure the appraiser doesn’t see, smell, or hear anything the reviewer can’t.

If the objective is to get the most credible appraisal report, the person opining a value should view the subject, neighborhood, and comps. That shouldn’t be controversial. The GSEs have been saying it for years, and they still believe it otherwise they’d offer hybrids on everything. If you went to court and one appraiser viewed the home, while the other viewed a third party inspection report, which appraisal is going to be more credible?