Hybrid

[George Hatch]

Tmd answered that in his post and I've opinions on it for disclosure -where do you see that the inspector will be named or disclosed as having given significant appraisal assistance?

Disclosing that you used information from a 3rd party report doesn't necessarily amount to attributing those parties with having rendered appraisal assistance. A disclosure can also be a disclosure, similar to citing a public records or MLS listing as the source of info you're using.

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WRT what functions do and don't rise to the level of consisting of professional assistance, let me run this by you:

If you form an opinion of the property condition as a result of personally inspecting that property then you are the one performing that analysis and developing that conclusion.

If I write a report where I have formed my opinion of property condition and you use my opinion without forming one of your own then you are using my opinion. My analyses and opinions will have contributed to your conclusions

If I write a report where I have formed my opinion of property condition, but you use the information in my report to form an opinion of your own and you use that in your analysis then we both developed an opinion, but you only used your opinion in your analysis. You didn't use my opinion, even if it ended up being similar to your own.

I can WELL imagine appraisers using the info in these inspection reports to come to different conclusions about quality and condition than those of the inspector who wrote the report.

The obvious parallel is appraisal opinions developed by reviewers. If you're reviewing my appraisal and you agree with my conclusions then we have both developed our respective opinions, but you're only responsible for your own opinion; not mine. If you look at the factual info and pics I provide but come to a different opinion of something it will be your own opinion you are relying upon for your work, not mine. If there's a disagreement - as sometimes happens - my opinions and conclusions will not have contributed to your opinion of the subject's attributes.

 

[djd09]

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Looks like somebody has a foot in TAF door and the Hybrid door. Must be nice,

 

[J Grant]

I did not say that the inspection was unattributed, what I did say is that the appraiser did not sign off as the supervisor and nobody else signed off anything on the behalf of the property inspector, who in the case of one large lender is a trainee who is employed or engaged by that lender's captive AMC.

What does "captive AMC " mean...an AMC owned by the lender, and /or a division of lender run as an AMC to process orders?

I had a feeling the AMC;s would be the ones hiring trainees since so very few independent fee appraisers on res side are training..

 

[Junior Member]

Anyone have a case where an appraiser was fined, sanctioned, or sued due to a hybrid appraisal where (a) the inspector concealed facts or misrepresented what existed, (b) the appraiser, who never saw the property, did their level of due diligence as outlined in the SOW, and (c) while not always necessary (depending on how the SOW is written), assuming there is an EA in the report regarding property inspection, that EA was found to be improper?"

Denis, You've loaded that question up with a lot of requirements -- so, no, I have not seen that exact, specific case. But, we have seen cases where appraisers tried to write appropriate scopes of work, did not inspect the properties per the scope of work, used what appeared to be credible third party inspections, and got themselves sued because the inspections were erroneous. That's not really a new phenomenon in appraiser suits and occurred before the present "hybrid" appraisal term began to be used for marketing. It also occurs in both residential and commercial work. I really don't expect to see any marked difference between liability associated with "hybrid" products versus "regular" appraisals, except that I worry that a large number of appraisers doing hybrids may not create useful workfiles, will rely too heavily on software suggested results, and may not give sufficient scrutiny to the assignments. And, if a single appraiser is producing a very high volume of hybrids because of the quick process and those hybrids are used for actual loan origination, then obviously that particular appraiser's risk will be multiplied, if the market enters another downturn. An extraordinary assumption might help with the appraiser's defense, but at that point all the parties are already in court. -- Peter Christensen

 

[hastalavista]

Peter-

Thank you for posting. You are like the old EF Hutton Commercial: When you speak, people listen! (as I/we should!!!).

....You've loaded that question up with a lot of requirements -- so, no, I have not seen that exact, specific case.

Yes- I was very specific in the question because I wanted to frame it to the situation which specifically exists (as I see it): A hybrid product which is gaining ground in acceptance by lenders and which is being introduced into the lending decision-making process.
I certainly agree with you (my interpretation): An appraiser has been, can be, and will get sued regardless of what they do. That the suing party wins that suit is a different matter. That's why I say the key to these assignments is how the SOW is crafted and that the appraiser does what the appraiser says s/he does.

One nice thing (thanks to you!): In California, we now have a published appeals ruling which makes it clear regarding who can rely on a report that was specifically intended to be relied upon by a lender for a mortgage-finance transaction. That one happened to involve a purchase, so the buyers in that situation (in my mind) thought they had a basis to make some argument that they were injured (they were wrong, fortunately). That's one reason why I don't think these hybrids should be used for purchases.

These products remind me of the 2055s when they were becoming prevalent. At that time, I was very vocal about my opposition to them and said I wouldn't do them. And, I didn't....for a long time. Eventually, after they became more or less routine and I became more comfortable with the SOW and certification, I did them as well (I do them all the time for private party scenarios; but in those cases, I can craft my own SOW, use my own EAs, and specifically link what I did to the intended use and user). But my decision not to do them wasn't a USPAP-based decision (because we all know the USPAP allows that kind of SOW); it was more about liability and the concern that it wasn't appropriate for some loan transactions.

I see hybrids as being the same thing: There is no USPAP conflict. I do believe that a hybrid is inappropriate for many lending decisions. I don't see any additional risk (I see less risk than a traditional 1004) although I acknowledge that another appraiser can see higher risk. There are going to be some appraisers who never do these (which is the right choice for them). There are and will be some appraisers who do them (again, the right choice for them). And I suspect if the fees become attractive enough, there will be a larger group of appraisers who will be willing to do them.

 

[ucbruin]

Peter and Randall rock!!!!

 

[Meandering]

I see hybrids as being the same thing: There is no USPAP conflict. .

Then you miss the USPAP requirement for the appraiser to select the appropriate scope of the work, and not have the scope of the work dictated to them by a client.

Therein lies your USPAP conflict, and it has been in the USPAP for many years.

In previous years, the client could say they need an appraisal on a multi-million dollar resort and all you needed to know was what was the intended use? and you could look up the regulations to determine which scope of the work would be credible for that regulation, property type, and intended use.

There are no regulations that say, a desktop appraisal is appropriate for residential or commercial lending purposes.
There are no regulations that say a bi-f appraisal is appropriate for residential or commercial lending purposes.

If you want to limit the use of bi-f appraisals to homeowners considering if they should sell or not, there you go, there is the use for them.

But there is no regulation that allows any of this for any lending intended use, and do note that the credibility is judged by the intended use, not the intended user.

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[hastalavista]

... will rely too heavily on software suggested results, and may not give sufficient scrutiny to the assignments.

I want to highlight this point.
Interestingly enough, I was in a presentation a few years ago given by Jeff Bradford (Clickforms). His company produces one of those statistical tools (Redstone, I believe it is called). He strongly emphasized to everyone (this was a residential conference for residential appraisers) the real danger of appraisers relying too much on his or any other statistical tool. His point was that without the appraiser's judgment, they are no better than AVMs and that if appraisers start to default to the tools as a matter of habit, lenders will conclude that the appraiser adds little to the process and argue that the tool is good enough.

 

[hastalavista]

Then you miss the USPAP requirement for the appraiser to select the appropriate scope of the work, and not have the scope of the work dictated to them by a client.

You want to make that interpretation that the hybrid SOW is inadequate, as the appraiser, you are free to do so. Just as you are free to determine when a drive-by is not appropriate.
Likewise, you are free to determine that such a SOW is appropriate given the property type and intended use.
We make that decision all the time: Fannie Mae has a very specific SOW that it dictates and if we accept the assignment, we complete the assignment with the same responsibilities as we would have if we wrote the SOW ourselves. There are some assignments we refuse to do because we conclude that something about the assignment isn't appropriate given the intended use and scope of work.
The decision to complete an assignment using a specific SOW is always the appraiser's responsibility regardless where that SOW originates. So, like you say, nothing new here.

 

[Meandering]

I make no interpretation.

I just read the regulations.

If you want I'll post a few when I get back in.

But no where in any lending regulations does it say someone else can inspect, while the appraiser is not allowed inside the subject.l

That right there is a bias - against the appraiser collecting their own data, that they are reliant upon to formulate their opinion of value.

But if you want to opine and interpret.

Please feel free to start with the USPAP, all those parts that say "an appraiser must" are an excellent place for you to start interpreting.

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