Freddie Mac vs Appraiser Bias

[Tiffany Gibbons]

I've said before that my primary suspect for unreasonable outcomes in appraisals is appraisers not working to their capabilities. Not malice or racial bias. TO ME, that means the first logical step is for appraisers to put more effort into the problem identification phase of their assignments.

IMO and based on all of the examples I've seen so far, if the appraisers had written up a decent summary of the composition and pricing trends of the neighborhoods - inclusive of the entire range of residential properties therein - and a more detailed summary of their subject's market segment and its pricing trends, that combination would have made it a lot more difficult for a 2nd appraiser to get away with coming in and presenting less similar properties to "support" their higher valuation.

As as far as appraisers who are operating with personal bias are concerned, if they had provided that analysis it would have also made it harder for THEM to proceed with an unreasonable SC that directly contradicted their own neighborhood and market analyses. Either way there's nothing but upside to putting a little more time/effort into their problem identification phase.

Take the Marin City situation as an example. If an appraisal report had noted there were a limited number of SFRs in that area, about evenly split between the lower quality "pole houses" like the subject vs the superior quality/appeal conventional slab foundation homes; and if the report had noted the pricing trends for this neighborhood had always been lower than the neighborhoods within the city limits to the s/e and the unincorporated Mill Valley area to the n/w, then that would have made it very difficult for the 2nd appraiser to get away with ignoring those facts as a means of saying the superior quality/location sales were direct comparables for the subject without making the necessary adjustments.

Isn't it just too awfully bad that these 2 appraisals can't be made public for "teaching purposes"? How else will all of us appraisers ever learn? Maybe a much admired and highly qualified instructor type who is in favor of proving the GSE's idea of appraiser bias could someday be the steward of these two reports sometime after any final judgment is rendered if there are any appraisers left to be "taught", that is. Whatever the circumstances, I do hope the appraisal profession as a whole is able to gain access someday to these 2 different reports. I think most of us who have reviewed appraisals professionally would immediately know which is the better supported, more reliable value. However, as both went through AMCs, the cheapest appraisal bid was the winning bid in both cases, am I right? Not to mention the "additions and renovations" that happened within the months between the appraisals. Think of the changes we have seen just with the Fed raising rates recently. The market is not static. I am sick of this endless speculation. I am not familiar with the area at all but via GIS imagery and zoning, I can tell it would be a difficult assignment for any appraiser. I don't see how an unlicensed property inspector would help in this case. Am I the only one in my thinking?

 

[J Grant]

Isn't it just too awfully bad that these 2 appraisals can't be made public for "teaching purposes"? How else will all of us appraisers ever learn? Maybe a much admired and highly qualified instructor type who is in favor of proving the GSE's idea of appraiser bias could someday be the steward of these two reports sometime after any final judgment is rendered if there are any appraisers left to be "taught", that is. Whatever the circumstances, I do hope the appraisal profession as a whole is able to gain access someday to these 2 different reports. I think most of us who have reviewed appraisals professionally would immediately know which is the better supported, more reliable value. However, as both went through AMCs, the cheapest appraisal bid was the winning bid in both cases, am I right? Not to mention the "additions and renovations" that happened within the months between the appraisals. Think of the changes we have seen just with the Fed raising rates recently. The market is not static. I am sick of this endless speculation. I am not familiar with the area at all but via GIS imagery and zoning, I can tell it would be a difficult assignment for any appraiser. I don't see how an unlicensed property inspector would help in this case. Am I the only one in my thinking?

Idk if either of the two went through AMC's. The first so called "low appraisal", ( far as I understand ) was a lender order -whether direct or though AMC.

We don't know a thing about the second, subsequent "higher" appraisal (where the HO staged the house). Was it a private order with the appraiser selected and hired by the homeowner? Or was the second appraisal also ordered by a lender. or AMC?

 

[Tiffany Gibbons]

Idk if either of the two went through AMC's. The first so called "low appraisal", ( far as I understand ) was a lender order -whether direct or though AMC.

We don't know a thing about the second, subsequent "higher" appraisal (where the HO staged the house). Was it a private order with the appraiser selected and hired by the homeowner? Or was the second appraisal also ordered by a lender. or AMC?

Go to Mary Cummings blogspot and read to the end for latest on this.

 

[Carnivore]

From her Blog This below is spot on.
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"Appraisers need to be ready to counter this false and misleading series from ABC titled "Our America: Lowballed" coming in December by Julian Glover. Glover is the self proclaimed "race reporter" for ABC7. Read the pitch on this page linked below. It says white appraisers "lowball" and "rob" Blacks and Latinos. They say it's based on ABC's research but it's actually based on Andre Perry's false error filled non peer reviewed paper. People with less money buy less expensive homes! Blacks and Latinos have less money because of the income gap! Appraisers aren't lowballing the public! Fix the income gap!"

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She is correct, but It is not just the Income GAP! Why do I say that? Well it easy, there are poor/low income people of other race's. How do you explain that fact?

 

[Dale Floyd]

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.

Well George that’s the thing - None of us use just “any sources”. We use sources of data that have been vetted and who have some liability for the things they produce. I doubt you use opinion pieces in your reports when it comes to the data you proclaim to be reliable.

This piece of the puzzle involves the Grand Nagus of your appraisal, and you have no way of knowing it’s accuracy nor is there any real way to move the results of any inaccuracies away from our reputations.

 

[Dale Floyd]

From her Blog This below is spot on.
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"Appraisers need to be ready to counter this false and misleading series from ABC titled "Our America: Lowballed" coming in December by Julian Glover. Glover is the self proclaimed "race reporter" for ABC7. Read the pitch on this page linked below. It says white appraisers "lowball" and "rob" Blacks and Latinos. They say it's based on ABC's research but it's actually based on Andre Perry's false error filled non peer reviewed paper. People with less money buy less expensive homes! Blacks and Latinos have less money because of the income gap! Appraisers aren't lowballing the public! Fix the income gap!"

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She is correct, but It is not just the Income GAP! Why do I say that? Well it easy, there are poor/low income people of other race's. How do you explain that fact?

I saw this piece over the weekend. Puts a target on our foreheads, and I’m not sure what we can do without somebody sporting a bigger megaphone for our cause.

It’s hard for me to understand why all the national appraisal organizations, including the TAF, haven’t really pushed back when all this nonsense first raised its head. It‘s disappointing that the data gathering forces at FNMA and Freddie aren‘t defending us. Instead they use those bias conversations in their talking points to promote their desire of changing our profession.

 

[J Grant]

Well George that’s the thing - None of us use just “any sources”. We use sources of data that have been vetted and who have some liability for the things they produce. I doubt you use opinion pieces in your reports when it comes to the data you proclaim to be reliable.

This piece of the puzzle involves the Grand Nagus of your appraisal, and you have no way of knowing it’s accuracy nor is there any real way to move the results of any inaccuracies away from our reputations.

This stale argument is disingenuous. We try to vet and use reasonably reliable information from any source : moving on from there.

We use other data sources for comps, because we typically can not inspect interior of comps. Most concur an appraisal would be more reliable if we COULD inspect the interior of our comps. But that is not feasible. So we are forced to rely on third party data. In the case of a subject, we are typically allowed interior access, so the appraiser not using that advantage makes no sense.

In addition, we are not appraising the comps. Therefore if any information about any one comp turns out to be "off", it should not make the appraisal unreliable.
We are appraising the subject, so relying on incorrect information (combined with lack of a personal visit ) does have a higher probability of making the appraisal unreliable.

 

[Non Sequitur]

It’s hard for me to understand why all the national appraisal organizations, including the TAF, haven’t really pushed back when all this nonsense first raised its head. It‘s disappointing that the data gathering forces at FNMA and Freddie aren‘t defending us. Instead they use those bias conversations in their talking points to promote their desire of changing our profession.

Definitely disappointing but given past issues this is par for the course. The way it's playing out: Both have used the issue to cement in PAREA on the back of diversifying residential appraisers (still not a peep about the CG side). The orgs are counting their future PAREA course money and TAF is looking forward to controlling how the next generation of residential appraisers are trained.

 

[DTB]

If, and only if, Fannie/Freddie wanted to find out if there is a problem, the solution is straightforward. Form a study in conjunction with NAR to offer free (as in F/F still pays the appraiser) appraisals on houses that are about to be listed. Do a hybrid and a traditional appraisal on the same property. Repeat a few thousand times across the country and the answer would be clear.

I don't know what the outcome would be but suspect it would be a draw and end this nonsensical argument of bias. Likely, that is why such an extensive and accurate study will never happen.

 

[djd09]

the sow rule was probably written by some too white and too male chiefs. anyways, USPAP (junk) says the sow cannot be so limited to produce uncredible results and relevant physical characteristics may or may not exist depending on the elmo the craigslist inspector eyes