Hybrid Appraisals

[George Hatch]

I never tried to sell a fantasy, I did try to explain how and why things came about, so many blame the appraisers when we were facing forces that were insurmountable, though yes, of course, that segment of bad actors in appraisal share a portion of responsibility.

Imo, the biggest seller of fantasy was those appraisals insisting that going after private work was the answer. If that were a realistic alternative for res appraisers, everyone would do it. True, some are not good at marketing, but the reality is that there is no viable volume of private work enough to sustain most res licensed people. At best, it is a side niche that takes years of marketing to develop, and to get orders other than listing work, needs advanced education and specific high-level experience - who can starve for 10 years to get that small, elusive piece of the pie -

The SFR appraisers flooded their own market 15-20 years ago by chasing the short dollar without regard for the long term. That gross oversupply is what put them at the competitive disadvantage when the lenders were abruptly forced to direct engagement. That oversupply is what they get blamed for. It's also a mistake they didn't repeat this time around. They're losing business now because the 2025 demand is down, not because the supply is too high for the 2015 demand levels of the past.

The problem now is the rise of the machine, which was also eventually inevitable. It is the technology that enables loan origination to operate on a national scale instead of a local scale. It enables the no-personal contact business relationships, the blast solicitations, the portal engagement and transmissions, and the industrial economy of scale at the point of purchase. THAT evolution was also inevitable and inescapable regardless of anything the appraisers could have done to prevent it.

It is the technology that enables the waiver and the hybrid, and the migration of the easiest and most profitable assignments to the box. And that trend will not be limited to the SFR niche, either. The simplest and most profitable CG work is going to get gobbled up by the machine, too.

 

[Overimprovement]

More rambling since I no longer have appraisal reports to do on the weekend...I guess many appraisers don't either.

Real estate appraising still runs on the capitalistic system of supply and demand. That has not changed. What has changed are the playing conditions. Banks used to have direct appraiser rosters (the lender I work at still does this on the commercial side). For that matter, most lending was done by local banks. Both items have changed. Lending sources are very diverse now. And it seems precious few local banks are left which have their own panels. Banks are free to use whatever appraiser source they choose, and AMC's seem to be free to have staff appraisers that keep accepting positions they don't like instead of seeking out different work. They offer low fees that are ACCEPTED BY APPRAISERS to deliver a low quality product that nonetheless still meets their client's demands. The GSEs and state boards have continued to allow low quality work to pass muster, that is on them in my opinion, not the AMCs or lenders. I could argue it is on the appraisers too, who willingly violate USPAP, but again, with no enforcement, that won't change.

We can't blames horses for the buggy whip industry crashing when the car was invented. I don't blame Ben Franklin (as the inventor of electricity) for ice delivery businesses failing, nor the inventor of the in-home freezer. In a very real but cold way, it is just life moving ahead. Adapt, change, or starve. Life happens.

AMC's aren't to blame for what they are ALLOWED to do. I don't think they are legally allowed to do a lot of what they do, but I do not control the enforcement of regulations and laws. Neither banks nor AMC's should be blamed for maximizing their profit. That is the purpose of their existence. None of those entities owe appraisers a thing. Why should they altruistically be concerned with our livelihood?

If we don't like the game, we have to change the rules, cheat, or find a new game. I chose to find a new game because I don't cheat and I decided long ago supporting my family was more important to me than spending a lot of time trying to change the rules. I am in prime wage-earning years still, and need to do just that.

When you live in Kansas and see a tornado coming, that's a bad time to remember you never built that underground storm shelter. And since at that point it is too late to build one, the only remaining answer is....move quickly!

The knowledge and expertise you gain by doing this through the first half of your career becomes very valuable for the second half.

2nd half? In all honesty, do you see anyone making a good living appraising in 20 years? Careers are 30-50 years, so my question is fair.

 

[J Grant]

The SFR appraisers flooded their own market 15-20 years ago by chasing the short dollar without regard for the long term. That gross oversupply is what put them at the competitive disadvantage when the lenders were abruptly forced to direct engagement. That oversupply is what they get blamed for. It's also a mistake they didn't repeat this time around. They're losing business now because the 2025 demand is down, not because the supply is too high for the 2015 demand levels of the past.

The problem now is the rise of the machine, which was also eventually inevitable. It is the technology that enables loan origination to operate on a national scale instead of a local scale. It enables the no-personal contact business relationships, the blast solicitations, the portal engagement and transmissions, and the industrial economy of scale at the point of purchase. THAT evolution was also inevitable and inescapable regardless of anything the appraisers could have done to prevent it.

It is the technology that enables the waiver and the hybrid, and the migration of the easiest and most profitable assignments to the box. And that trend will not be limited to the SFR niche, either. The simplest and most profitable CG work is going to get gobbled up by the machine, too.

See this is where you go off the rails - it is s NOT appraisers flooding the market with oversupply, that caused fees to be cut in half overnight after HVCC.

The day before the HVCC, with the same appraiser supply existed in an area, and an appraiser got $600 in fee ordered directly from a lender The day after the HVCC, which prohibited loan office orders, the same appraiser lost the client to an AMC and got the same order for $300. with the same appraiser supply. It is the supply and demand imbalance caused by the narrow demand of a great volume ordered by AMC coupled with their incentive to drive down fees since the appraisal fee split compensates them.

It was the HVCC decision to prohibit direct orders that put the volume into the control of AMC 's, who could then use the extreme supply and demand imbalance to their advantage in fee shopping.

 

[glenn walker]

The dirty little secrete of private work is it changed dramatically in the last 8 years when we decided that just doing private in our last 8 years would be easy no hassle work.

We already had over 25 years with local CPAs ,attorneys and others who gave us work over the year's. Not a ton but enough to be a nice addition in golden years.

About year 2018 suddenly the CPAs were saying their clients paid so we had to be as competitive as possible and we took our fees down to about the same as we had been charging for GSEs type work which was $450 to $500 average.

Then by 2022 the Attorneys were also in the same positions as the CPAs their clients paid us not them and fees were going down. Finally the CPA and attorneys were mini bidding out to get lowest bids and one said the liability of directing clients to just two or three appraisers was to big for them and State Bars and CPA regulator's were advising that clients find their own appraisers and negotiated fee.

Fast forward with the Interwebs and Google and Yelp their clients often even the wealthy shop for appraisers like buying on Amaxon .

 

[Terrel L. Shields]

The simplest and most profitable CG work is going to get gobbled up by the machine, too.

Until the next financial crisis which is as certain as the depression itself. Then they realize they cannot blame machines only people and everyone will be to blame but ...

 

[J Grant]

The SFR appraisers flooded their own market 15-20 years ago by chasing the short dollar without regard for the long term. That gross oversupply is what put them at the competitive disadvantage when the lenders were abruptly forced to direct engagement. That oversupply is what they get blamed for. It's also a mistake they didn't repeat this time around. They're losing business now because the 2025 demand is down, not because the supply is too high for the 2015 demand levels of the past.

The problem now is the rise of the machine, which was also eventually inevitable. It is the technology that enables loan origination to operate on a national scale instead of a local scale. It enables the no-personal contact business relationships, the blast solicitations, the portal engagement and transmissions, and the industrial economy of scale at the point of purchase. THAT evolution was also inevitable and inescapable regardless of anything the appraisers could have done to prevent it.

It is the technology that enables the waiver and the hybrid, and the migration of the easiest and most profitable assignments to the box. And that trend will not be limited to the SFR niche, either. The simplest and most profitable CG work is going to get gobbled up by the machine, too.

It is the decision of the GSE's to allow WAIVERS and HYBRIDS. Technology is just an excuse; there is minimal high tech about a waiver or a hybrid. A hybrid merely cuts the assignment in half, with a non-appraiser inspecting. Explain the amazing tech that entails? A measuring app that produces a floor plan? The appraiser can use the same app to measure. It is a profit policy decision by GSEs to allow use of WAIVERS or HYBRiDS, and the AMC's benefit from it.

A hybrid is still an appraisal using the appraiser for the desk part and a PDC person to inspect.

A WAIVER simply allows the lender to put in the value or the SC to be the value as long as the value falls in an AVM range - there is noting high tech about that.

 

[Joe Flacco]

2nd half? In all honesty, do you see anyone making a good living appraising in 20 years? Careers are 30-50 years, so my question is fair.

I do. I am 19 years in. Business was bad the last couple of years but generally the long term trend in income has been increasing. Now I am starting to dip my toes in the water with consulting. There are more doors to open. I feel pretty good about the next 20 years.

 

[J Grant]

The dirty little secrete of private work is it changed dramatically in the last 8 years when we decided that just doing private in our last 8 years would be easy no hassle work.

We already had over 25 years with local CPAs ,attorneys and others who gave us work over the year's. Not a ton but enough to be a nice addition in golden years.

About year 2018 suddenly the CPAs were saying their clients paid so we had to be as competitive as possible and we took our fees down to about the same as we had been charging for GSEs type work which was $450 to $500 average.

Then by 2022 the Attorneys were also in the same positions as the CPAs their clients paid us not them and fees were going down. Finally the CPA and attorneys were mini bidding out to get lowest bids and one said the liability of directing clients to just two or three appraisers was to big for them and State Bars and CPA regulator's were advising that clients find their own appraisers and negotiated fee.

Fast forward with the Interwebs and Google and Yelp their clients often even the wealthy shop for appraisers like buying on Amaxon .

An honest summation of the reality, plus you have 25 years of experience and contacts to get even this diminishing supply of private work.

 

[George Hatch]

See this is where you go off the rails - it is s NOT appraisers flooding the market with oversupply, that caused fees to be cut in half overnight after HVCC.

The day before the HVCC, with the same appraiser supply existed in an area, and an appraiser got $600 in fee ordered directly from a lender The day after the HVCC, which prohibited loan office orders, the same appraiser lost the client to an AMC and got the same order for $300. with the same appraiser supply. It is the supply and demand imbalance caused by the narrow demand of a great volume ordered by AMC coupled with their incentive to drive down fees since the appraisal fee split compensates them.

It was the HVCC decision to prohibit direct orders that put the volume into the control of AMC 's, who could then use the extreme supply and demand imbalance to their advantage in fee shopping.

If the supply/demand had been in balance then you would have had the alternatives sources of work to tell them to pound sand when they approached with the substandard fee. If you lived in certain markets you would have had such leverage. Even today, you could move to a market that isn't so saturated.

Going back to the early 2000s, the CGs trade demonstrated the control group. Unlike the SFR appraisers the CGs refrained from significantly expanding their numbers so their leverage never declined to the same extent. They did have the alternatives it took to avoid most of the beating. The AMCs still don't have much leverage on our side of the business. The technology and other fundamentals are still present but the CGs aren't all sitting around with nothing to do so as to be forced to take whatever is left over.

A few years back the demand for SFR appraisal services greatly exceeded the supply for a few months. I know you remember what happened to appraiser fees - even from the AMCs - when the appraisers did have the leverage to pit the AMCs and lenders against each other.

It ain't that deep

When appraisers compete - lenders win​

When lenders compete - appraisers win​

​

And yes, when lenders move toward waivers and hybrids that is also a lender-driven factor over which the appraisers have no influence.

 

[djd09]

no influence...that was not discussed during the ivpi