Freddie Mac vs Appraiser Bias

[Dale Floyd]

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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For those of us who are truly trying to do our profession proud, and who want the data we use to be solid, it matters to us about this.

Seriously George, when you tell me that you have used ”reliable sources that I believe to be true and correct” and you don’t know anything about the inspector or inspection of your subject data, how are you going to defend yourself when something goes sideways?

I think it’s a little bigger than a statement saying I’m not accepting liability or responsibility when that part is probably the most influencing piece of the valuation puzzle. Believe it or not, somebody out there really believes the appraiser is doing his or her job correctly.

Broken record - Again - I‘ve no problem with somebody I know to be reliable, doing my inspections. (My trainees or a relationship I’ve developed with somebody I know and trust). I don’t know any GSEs, AMCs, or lender who should decide which third party source I should rely upon and certify as a reliable source since they aren’t taking the same liability I am. (Unless they are going to license, certify, and vet these third party inspectors which would probably end up costing them more than the status quo.) They know this.

 

[George Hatch]

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

You caught the distinction I previously made before about "mischaracterizations" being motivated for the purposes of expediency vs being motivated if favor of/against any of the people involved, right?

If (for example) 40% of the mischaracterizations of the subject property are being made for the sole purpose of expediency - to enable the appraiser to skip all the extra time/effort it takes to reconcile the inconvenient truths of the property with their value conclusion - then at a bare minimum the use of outside inspectors can contribute to a reduction of those "errors".

The problem for an "expedience-motivated" appraiser is they have no discretion WRT the negatives in an inspection report that was completed and which stands independent of their assignment. The lender has access to that 3rd party report so they'll be able to see if the appraiser attempted to work around it in order to submit a "clean" SC grid that didn't require a lot of adjustments. Now they have to show their work.

As for "mischaracterizations" being motivated by personal bias by the inspector, it may be true that the inspectors aren't any less biased than appraisers. But one thing they aren't subject to is pressure to support a contract price.

 

[J Grant]

For those of us who are truly trying to do our profession proud, and who want the data we use to be solid, it matters to us about this.

Seriously George, when you tell me that you have used ”reliable sources that I believe to be true and correct” and you don’t know anything about the inspector or inspection of your subject data, how are you going to defend yourself when something goes sideways?

I think it’s a little bigger than a statement saying I’m not accepting liability or responsibility when that part is probably the most influencing piece of the valuation puzzle. Believe it or not, somebody out there really believes the appraiser is doing his or her job correctly.

Broken record - Again - I‘ve no problem with somebody I know to be reliable, doing my inspections. (My trainees or a relationship I’ve developed with somebody I know and trust). I don’t know any GSEs, AMCs, or lender who should decide which third party source I should rely upon and certify as a reliable source since they aren’t taking the same liability I am. (Unless they are going to license, certify, and vet these third party inspectors which would probably end up costing them more than the status quo.) They know this.

Agree

They won't license and certify these third party "inspectors", because that would defeat the whole purpose of hiring for cheap, If by some pressure to "license" them will be a dopey training course they pass to get some laminated tag, rather than a real state license and their name/identity on the report.

I personally do not blame these third party people , whoever they are. They are just trying to make a living. And most will try to do a good job. But they have nothing at stake and if they are wrong or in error there are no repercussions for them ( other than if they are wrong a lot getting fired?). Their name is not on the report, they get paid per gig just like an UBER delivery. They will want to vistit each property for as short a time as possible to maximize earnings.

Whether or not they did a decent job, the real issue is the appraiser did not inspect which has all kinds of ramifications. The appraiser does not even talk to this anonymous "inspector". I can not think of any other profession where the licensed professional is matched with an unknown not licensed person to provide critical part of the process .

A dentist works with a licensed, personally known trained dental assistant. They are not expected to work with whoever shows up that day,, an unknown stranger who took a fast dental assistance course. ( as an example )

 

[glenn walker]

You caught the distinction I previously made before about "mischaracterizations" being motivated for the purposes of expediency vs being motivated if favor of/against any of the people involved, right?

If (for example) 40% of the mischaracterizations of the subject property are being made for the sole purpose of expediency - to enable the appraiser to skip all the extra time/effort it takes to reconcile the inconvenient truths of the property with their value conclusion - then at a bare minimum the use of outside inspectors can contribute to a reduction of those "errors".

The problem for an "expedience-motivated" appraiser is they have no discretion WRT the negatives in an inspection report that was completed and which stands independent of their assignment. The lender has access to that 3rd party report so they'll be able to see if the appraiser attempted to work around it in order to submit a "clean" SC grid that didn't require a lot of adjustments. Now they have to show their work.

As for "mischaracterizations" being motivated by personal bias by the inspector, it may be true that the inspectors aren't any less biased than appraisers. But one thing they aren't subject to is pressure to support a contract price.

Thats your job LOL

 

[George Hatch]

For those of us who are truly trying to do our profession proud, and who want the data we use to be solid, it matters to us about this.

Seriously George, when you tell me that you have used ”reliable sources that I believe to be true and correct” and you don’t know anything about the inspector or inspection of your subject data, how are you going to defend yourself when something goes sideways?

The same way I'd defend my use of data from any of the other sources I routinely use?

I don't have any data source that I consider to be error free, and if we're all honest with ourselves that would include data we've personally developed on our own. So I don't see the logic in attempting to impose an expectation on these inspection reports that's any higher than what we expect from any of our other data sources.

IRL if I come across info that looks wrong in a public records database or MLS database or other brokerage listing info in other sources it's going to cause me to either put more effort into verification or otherwise not give that datapoint any weight. To the point of not using it at all. Which that's what I'm supposed to do.

Same with these 3rd party inspection reports. If you have REASON to suspect the factual accuracy on one of these then that's one thing; but if you don't have reason to suspect the accuracy on this datapoint then "just say no" amounts to rejecting this assignment condition altogether. Which is certainly your prerogative. However and by the same token, that's not going to be a limitation you can unilaterally impose on your clients. IRL they know that if you won't do it they'll have no trouble finding another appraiser who will. And whose compliance with our professional standards will be outside of what you will be able to criticize.

After all is said and done, this is a take-it-or-leave-it situation; and your clients only need maybe 10% -15% of the appraisers to take it.

 

[J Grant]

You caught the distinction I previously made before about "mischaracterizations" being motivated for the purposes of expediency vs being motivated if favor of/against any of the people involved, right?

If (for example) 40% of the mischaracterizations of the subject property are being made for the sole purpose of expediency - to enable the appraiser to skip all the extra time/effort it takes to reconcile the inconvenient truths of the property with their value conclusion - then at a bare minimum the use of outside inspectors can contribute to a reduction of those "errors".

The problem for an "expedience-motivated" appraiser is they have no discretion WRT the negatives in an inspection report that was completed and which stands independent of their assignment. The lender has access to that 3rd party report so they'll be able to see if the appraiser attempted to work around it in order to submit a "clean" SC grid that didn't require a lot of adjustments. Now they have to show their work.

As for "mischaracterizations" being motivated by personal bias by the inspector, it may be true that the inspectors aren't any less biased than appraisers. But one thing they aren't subject to is pressure to support a contract price.

This is a word salad which has no meaning I can figure out -the first assumption was inane about bias and and a property inspection having a link.

Having reviewed many appraisals, mischaracterization of the subject was not the issue 98% of the time. The issue was lousy, often cherry picked comp selection and bad adjustments/other issues with the appraisal itself. The field inspection /other data usually did not reveal anything markedly different.

A few cases were memorable such as where an appraiser failed to mention an office building next door to subject/impact on value.

If appraisers are out there mis characterizing a subject on a regular basis, then those appraisers should be ferreted out and dropped form the agency or client use lists. A rotten apple appraiser will do that one way or another whether or not a third party inspected.

The problem is if there are too many rotten apple appraisers working ( which I can not know ). If there are, it is a symptom of a corrupt engagement system, which can not be fixed by having a third party do the inspection.

 

[George Hatch]

As far as appraiser bias is concerned, I'm still not seeing any quantification on that. Nobody knows exactly how common or rare these examples are in the appraisal profession as a whole; whether or not it's more common in some locales than others or what the group characteristics are of the offenders (does that subset consist of a higher percentage of males or whites or older or younger or more-vs-less experienced).

And we *especially* don't know if that subset includes a higher-than-average percentage of AMC involvement and/or substandard fees - you pulled that (prejudicial) allegation straight out of thin air.

We know the number of offenses and offenders is not zero but so far that's all we know. So we really haven't even defined the problem pursuant to developing a solution that will more specifically target that problem. All they can do is say "even a little misconduct is wholly unacceptable so that therefore justifies taking the more extreme position as an abundance of caution."

 

[George Hatch]

Agree

They won't license and certify these third party "inspectors", because that would defeat the whole purpose of hiring for cheap, If by some pressure to "license" them will be a dopey training course they pass to get some laminated tag, rather than a real state license and their name/identity on the report.

Maybe, maybe not. Over time I would expect there to be some standards laid out for that service, instruction on how to meet those standards, and some qualifications established to distinguish the haves from the have nots. After all, mortgage lending is a highly regulated business. It's just a matter of time before some concern arises about the wisdom of sending into people's homes a legion of "inspectors" whose criminal history has never been vetted.

One thing I do know is that if some "PDRs-R-Us" school was set up down at the local mall to offer a 40-hr QE instructional course on how to inspect a home and document their SOW and their findings in a report that would probably be 37 more hours of formal instruction on that topic than most appraisers have ever taken. Myself included.

In terms of pure conjecture on my part it's possible that:

a 40hr QE course + maybe 50 inspections could potentially yield a more technically proficient PDR than most appraisers could produce. ​

​

Moreover, if a gasbag like me who is just spitballing on an internet forum can come up with such conjecture then you had best trust and believe the same has previously occurred to other parties at the GSEs and lenders before me. And if it somehow hasn't already occurred to them then it's just a matter of time until they do get to it.

 

[George Hatch]

In that same vein as above, it seems to me that if a fee appraiser really enjoys being out in the field then really getting into the inspection business might be the better alternative for them than getting assimilated into the Hybrid Borg. Take the time and make the effort to develop the additional competency and add that additional qualification to their business. Maybe spend Tuesdays and Thursdays doing PDRs and the rest of the week doing conventional 1004s.

I think it's a safe bet to assume that some appraisers will be better at inspecting than they are at appraising; and vice versa.

 

[J Grant]

Maybe, maybe not. Over time I would expect there to be some standards laid out for that service, instruction on how to meet those standards, and some qualifications established to distinguish the haves from the have nots. After all, mortgage lending is a highly regulated business. It's just a matter of time before some concern arises about the wisdom of sending into people's homes a legion of "inspectors" whose criminal history has never been vetted.

One thing I do know is that if some "PDRs-R-Us" school was set up down at the local mall to offer a 40-hr QE instructional course on how to inspect a home and document their SOW and their findings in a report that would probably be 37 more hours of formal instruction on that topic than most appraisers have ever taken. Myself included.

In terms of pure conjecture on my part it's possible that:

a 40hr QE course + maybe 50 inspections could potentially yield a more technically proficient PDR than most appraisers could produce. ​

​

Moreover, if a gasbag like me who is just spitballing on an internet forum can come up with such conjecture then you had best trust and believe the same has previously occurred to other parties at the GSEs and lenders before me. And if it somehow hasn't already occurred to them then it's just a matter of time until they do get to it.

Just ridiculous

Appraisers spent two years with a supervisor going on inspections to receive training. Though only a part of the training is the rote aspect how to take a photo or measure a house.

If the third party folks get regulated it might help, but it would not eliminate the fundamental disconnect that the appraiser never set foot on the subject property. To head off a tiresome rebuttal, we are aware USPAP does not require an inspection.