Quality Threshold
The current price equilibrium for lender work is set by supply and demand. As long as appraisers are willing to produce reports at lower and lower prices to meet the demand, the price will keep sliding downward.
If an appraiser's productivity rises in a greater proportion to the decrease in price, revenues can be preserved. What price productivity? Streamlining the steps to increase productivity are limited. The Disto, dual monitors, Auto GPS, mapping software all contribute to saving time but these savings quickly run out the ability to produce more reports in less time.
Most appraisers have come to terms with USPAP and working through Scope of Work to do only what is necessary to meet lender requirements. The same is true for the Fannie Mae guidelines that only require the exterior dimensions for a sketch, for instance, where some appraisers labor through taking the time to sketch the interior.
What is left? There is such a low threshold of lender expectations, that a solution is not possible. Appraisers are rightfully asking how can the product I produce be worth so little? The answer is that there is no demand for the product produced by an appraiser attempting to produce a quality product.
In the last three reviews of appraisal reports I have completed, the request was the same. Furnish more comparables and more listings. Each of the three reports have commonality. Each used MLS pictures for comparables. Each had no discussion of current market conditions and one had no comments at all in the space provided for market conditions. None supported the land value other than as one said, "land value has been abstracted from the market." In no case were adjustments supported or explained. "A lick and a promise," my grandmother would say.
The last review was on a log house in a remote area. There were many adjustments, some very large. The opinion of value was $350,000 and gross adjustments were between $40,000 to $50,000. Yet there was no explanation or support for adjustment at all.
Here is the sum total of the summary of the sales comparison approach.
All three sales are considered in my final estimate of value. Based on my analysis and in my opinion Sale #2 is most influential and most like the subject. Sales #1 and #3 are also influential and in my opinion reflective of the upper and lower end of the market, as it relates to the subject
Ok. I got this to report to review it but the lender makes it clear they only want to come up with some comps and listings, the issue of quality is completely missed. I am sure the company will continue to use this appraiser.
There is no hope. The market for most residential appraisals is largely made up of lenders who neither recognize nor expect quality work. If appraisers are trying to meet the demand for a fully USPAP compliant and supported opinion of value, they are on the wrong supply curve. Appraisers keep blaming Skippy. Skippy is only producing the reports that meet the expectations of the market.
Comments in the reviews I do are taking the form of boiler plate.."MLS photographs used in this report are taken from MLS sources without attribution or explanation." I doubt anything I point out in a review is taken very seriously, however. That is the problem.
