1065 Form

[Ted Martin]

This has probably been talked to death.

I just got a fax from First American Appraisal (aka eAppraiseIT), telling be about a new product that they are expecting the lenders to order a lot of, the form 1065 Desktop Appraisal. The order is to come over pre-populated with AVM data from the clients data sources which the appraiser can either keep or replace. The 1065 does not require a physical inspection of the subject or the comparables (no driveby). The data for the subject and the comparable is suppose to come from where ever you can find it. After analizing the available public or MLS data you give them a dollar value for the subject, which you have never seen.

You also get to attach you digital signature, which they will happily scan in for the you at no charge.

The "Report" that you are signing has limiting conditions which disclose the fact that you've never seen the subject or any of the comparable sales. You also get to certify that "this appraisal process is not so limited that the results of the assignment are not longer credible".

Another certification is that "There are no significant descrepancies between the public record information or other data sources and the existing site or improvement". How would you know since you didn't look at it?

There is also a certification that "No one provided significant professional assistance to the person signing this report", keep in mind that the order came over prepopulated with sales?

No mention of the fee but I'll bet it's going to be very generous.

I guess I'm cutting my nose off, but I don't think I'll be doing any of these.

 

[Joe Birrell (NY)]

Why do they persist with this stuff ? Why not just give them the money ? I havn't seen or done one of these things and don't plan on it either. Sounds like they just need your signature to validate another easy-quick loan scheme.

 

[Blue1]

Let me see.......You, the appraiser, are going to sign your name to a report in which you didn't inspect the subject property, didn't personally reasearch the comparables, and are stating so in the report? NOT!

Sounds like you would need to do a "drive-by" at the very least in order to CYA. Wanna bet the fee will not be requisite with a "drive-by" report?

I think you'd be cutting your nose off (as well as the noses of other appraisers) if you accepted this type of assignment.

 

[Pamela Crowley (Florida)]

Think about this. SOMEONE wants an APPRAISER to sign off on this crap. So far, their AVM is total bullshi* with no easy way for the investors to come back on it if it's wrong.

The Appraiser is the Mortgage Insurance through your E&O!!!

I probably don't need to tell anyone here that I will not be doing these. As to the fee, it's likely that new thing we started hearing about a couple of months ago for $40. Appraiser assisted or 'verified' AVM. Liability is totally on the appraiser. Please tell any appraiser willing to do these that I have a bridge in Brooklyn for sale.

 

[TC]

I personally would not consider this kind of work, but I am sure there are plenty of "appraisers" signed up and ready to go.

tc

 

[Ted Martin]

The real threat from the 1065 form is that it's FNMA driven.

If it was just some management companies marketing idea then power to them if they can make it work. FNMA and the lenders are the ones pushing this stupid form.

Don't count on the litigation threat to come from the lenders though. The real threat is from the borrower when the appraised value doesn't let them do the deal.

On the lender side if you don't let them do enough deals they take the work and go to someone else. If they forclose on the loan, so what. Their losses aren't that great.

My idea of an example:

Lender makes loan on a $100,000 property (Actual FMV)
95% LTV
Borrower makes payments for three years. (All interest)
Borrower trashes house on way out door, $25,000 in damage.
Three years of appreciation, say 3% annual rate.

$100,000 beginning value
$ 6,280 appreciation
$106,280 value of property in average condition at time of forclosure
$ 95,000 Beginning loan amount

Assume borrower trashes property $25,000 +/-

$ 81,280 As Is sale price of subject after forclosure
$ 13,720 Lenders actual loss

Assume borrwer doesn't trash subject. Cosmetics only.

$100,000 quick sale price in a $106,000 market
$ 5,000 lenders profit after foreclosure

(Although they don't call it profit because they would have to give it back to the borrower. They will apply it to the legal fees and processing of the foreclosure.)

Borrower is on the hook for the legal fees, and has made two years of interest payments. Throught the magic of accounting it's all a paper loss, it was real cash flow while the payments were made. Cash flow is the name of the game, if you can move enough money around you don't have to skim much off to be profitable.

Even if the lenders foreclosure rate goes above 25% they're still making money. That's why the lenders could care less if they have an accurate appraisal.

Yes there are pockets where the losses will be greater because the local real estate market crashed, and there will be some 100% and 100%+ deals that will generate big losses. But over all the lenders just aren't risking that much, and probably won't chase the appraiser's to cover their losses. You can't get blood out of a turnip.

 

[Ruth Langkawel]

Actually - I will do these. No problem!

My fee? Same as a 1004, minus $25 for the reduced time required. Yep, that's what I charge for the 2055. After all, the functions are all identical except the 15 minutes spent inside the typical home, the 3 minutes measuring, and 10 minutes less typing.

The only way to develop a reliable opinion of value, is to perform the complete appraisal process, with at least a drive by inspection. If they want my signature on a value conclusion that is represented as being reliable - That's my fee. I don't care which form they want it typed on.


8)

 

[Oregon Doug]

Hey KS, wanna keep your license?

Oregon Doug

 

[Ted Martin]

Hey Oregon, what's your point?

My posts were simply observations of the direction the business is going.

KS

 

[Ray Ohler]

the stuff that's being foreclosed on THESE days wasn't worth $100,000 to begin with. It was "probably", "may have", "allegedly", "could have been" only worth $70,000-$75,000. I'm seeing A TON of properties go into foreclosure in as little as THREE to EIGHT months, not three years. Oh, then the "borrower" files for bankruptcy and ties it up ANOTHER 8-10 months (or more with the backlog) with NO PAYMENTS. Doesn't take a rocket scientist to realize that eventually, SOMEONE will pay for it. Just WHO do you think that MAY be? That is why the secondary lenders are opening offices ALL over, in the hopes that a higher percentage of the loans make it past the three year "threshold".