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Appraisal Waivers: The Future is Here

IVCA

Senior Member
Joined
Jun 27, 2017
Professional Status
Certified General Appraiser
State
California
Rates go up, work slows down, and waivers go well over 50%. A prolonged period with that formula could easily force out a large number of us. I am not sure if they would pull back on waiver use to keep a % of us alive, or just let the lending side sunset? I guess it depends on the politics of the day when it happens.

A lot of older people are refinancing loans that have already been paid off to a large extent so, appraisals are not needed in many cases. And, there are other situations where waivers make sense. I don't know why appraisers should be concerned about waivers.

When it comes to residential appraisal, homes are getting more complex and more expensive. Accurate valuation is becoming more of a problem. More and better quality data has to be obtained and more advanced analytical methods. What appraisers have to be worried about is keeping up with the technology, improving their knowledge of statistics (the right kind), computer programming and so on. Everything is almost always changing. .... Now lumber prices are skyrocket high.
 

djd09

Elite Member
Joined
May 20, 2009
Professional Status
Licensed Appraiser
State
Ohio
The end is nigh - again and again! And yet again. There’s been nothing but an endless loop of imminent doomsday predictions on this forum since its beginning over 20 years ago.

Yet here we remain, living (and even thriving, in many cases) dinosaurs.

‘Splain that!

ummmm. got an order the other day, research, called borrower, then the client urgently emails and calls me to say it has been waived. they just took food off my table. but but but the waiver is the appraisers friend. :rof: :rof: :rof:
 

IVCA

Senior Member
Joined
Jun 27, 2017
Professional Status
Certified General Appraiser
State
California
ummmm. got an order the other day, research, called borrower, then the client urgently emails and calls me to say it has been waived. they just took food off my table. but but but the waiver is the appraisers friend. :rof: :rof: :rof:

But, what were the reasons?

Anyway, I don't want to do appraisals if they don't serve any real purpose. There are other ways to make money.
 

GWISC

Member
Joined
Dec 3, 2014
Professional Status
Certified Residential Appraiser
State
Wisconsin
I find it hard to believe that 45% or more loans are so safe that a waiver will suffice in place of an appraisal. From what I have read, waivers are a bit more conservative in valuations than what is produced by an actual appraiser. An appraiser is just as guilty of lack of due diligence in undervaluing as overvaluing for purposes of meeting someone else's objective. Using waivers for their conservative valuations cheats the consumer. But I am sure their proprietary AVM software will allow most sale prices to go through unscathed.
 

GWISC

Member
Joined
Dec 3, 2014
Professional Status
Certified Residential Appraiser
State
Wisconsin
I imagine a future when there truly is a severe shortage of appraisers resulting in no alternative after an AVM spits out a lower than expected value. The borrower's ire will be on full display to the banker when being told that the AVM had no idea you just remodeled your kitchen, bathrooms and added a finished basement with a wet bar. The AVM number fits nicely with all the other comps which did not have updates.

I call agents on nearly all of my comps (some never get back to me). About 10% have some undisclosed concession or reason for a reduction in price. I have had sales in which the seller paid for half of a new septic after the closing which was not disclosed in the MLS (yes that really happened and the concession was only known after talking to the agent). I also had sellers pay for half of a major repair such as a roof or new siding that was damaged. Some concessions the price is elevated to accommodate the kickback to the borrower, some are not. Also, an AVM is not able to research if each sale is arms-length or if the prices are deemed to be at market level.

Also, I have had some comps where the interior MLS photos show a nice interior that is well maintained and even had newer carpeting, but a price that seems low. After calling the agent, I found out the sellers were smokers and the newer carpeting had to be removed by the buyers as it could not be aired out. I just found that comp last week (It sold about $10,000 lower than other similar properties). It is also not the first time that I have found a comp like that. That sale is potentially being used by AVM's. Sellers who are smokers are not rare. Yellowing walls and odor are not easily remedied for showings. AVM's cannot smell or see the subtle discoloration of the drywall.

Mold is also a somewhat common occurrence that an AVM won't address. Waterfront or water access, or PUDs with significant amenities are also not easily quantified when there is a lack of sales due to a lack of turnover or a slowdown. I can't stay in business just waiting around for those few assignments where an AVM could not spit out a number to the satisfaction of the banker or borrower.

I guess what I am saying is that I find that nearly all houses have some oddity or uniqueness that is not easily quantified by an AVM that the general buying public will take into consideration when tendering an offer. Interviewing an agent can reveal how much more or less a buyer paid for specific elements. Many of those quirks are significant, many are not. Also, interviewing agents keeps you on top of the trends that moves pricing. You lose that when trying to operate with an value engineer from a few states away. AVM's are a bit sanitized.

I will stop my ranting for a while. Sorry about that.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
The dirty little truth is what "waivers" initially were being used for may have no been turned into a Hybrid-Waiver Model " Meaning a two fold purpose-#1 to speed up the loan process and eliminate having to deal with appraisers and #2 looking at how to factor in so called Systemic Racism into their statistical models. If they think its 1% then factor that in and now a model in which borrowers of color or gender issues cannot make accusations against Lenders because no appraiser was used. All it takes is a few large class action lawsuits under Civil Rights Laws and banks could sustain very high losses and the "waivers" take that portion of risk out of their business model. Obviously I have no inside information and this is all hypothetical but we have already seen Politicians on lender and bank over site committees talking about-how Social Equity should be part of housing policies. And appraisers in general are White As Rice and not very diversified and not too many people of color entering the profession.

The part many do not understand is the CU and UAD were designed to eventionally have almost every property that has a conforming loan placed into its system and data base. The current refinance and sales boom is adding millions per month into the data base and of course many others are already in the system. The goal was probably a 10 year time frame to get 75% of all Fannie-Freddie-FHA type loans into these data bases which will allow almost all future refinances to use waivers.

FHA and VA already have no appraisal Stream-Lined refinances . So outside of rural or complex properties-there will be no need to have appraisals done. The waiver program already has a Borrowers-Choice to get an-appraisal if the property has been highly updated or remodeled and the waiver tells the borrower the amount that can be loaned on its findings -SO IF it's lower then the borrower or buyer thinks they will order a full appraisal and hope its a higher number-than the waivers. So all bases are covered and the "risk" is nothing but a statistical-based analysis the wonks and bean counters determine. In reality on a massive Trillion Dollar Portfolio its probably lower than boot on the ground appraisers analysis because many things today adding value are temporary and will depreciate or get dated anyways. In a Full Blower-Down market like 2008 to 2015 proved that appraisals were virtually worthless anyway. Everyone in 2006 had 750 FICO scores but by 2014 almost all those folks were in the 500 to 600 range. In SO CA the original appraised values were anywhere between 20% o 45% below what their appraised values had been .

Just like today -most 2.5% to 3% purchases and refinances the borrowers have high FICO scores -good jobs etc.
IF and when the economy takes a Head-Shot we could expect to see those same folks FICO scores dropping and depending on when and how much they paid in less than 24 months from the top we could virtually wipe out any equity on loans that LTVs were less than 80%. Of course they say this time is different and so the question really is have they done any real stress Test's ? I have my doubts because Fannie & Freddie are political tools used by politicians who believe its their hob to manage who gets into a house and as F & F get more "woke" we may even see appraisals be declared to be Biased tools used by whites to keep people of color out of housing .

The "waiver" removes any potential civil rights lawsuits and if someone complains about their value a "Machine like the AVM- can be programed to account for what percentage of racism the Govt thinks is in White Appraisers- Systemic Blood and DNA. Maybe it's 1% or 3% but it can be factored into the AVM and regression and it eliminates any Person or Persons from claiming the appraiser low balled them because of their Race or Gender.
The "wokesters" and extreme progressive types may be the ones who force F & F to eliminate the traditional 1004 type of inspections and then Appraisals "V" Waivers will be a political policy and not a value or risk policy.
 

Mejappz

Senior Member
Joined
Dec 16, 2005
Professional Status
Certified Residential Appraiser
State
Florida
ummmm. got an order the other day, research, called borrower, then the client urgently emails and calls me to say it has been waived. they just took food off my table. but but but the waiver is the appraisers friend. :rof: :rof: :rof:

Remember, it's for your own good. Buy several boxes of Alpo at the local grocery store if it continues. :rof:
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
**
Remember, it's for your own good. Buy several boxes of Alpo at the local grocery store if it continues. :rof:
Funny you mentioned Pet Food my stores shelf's were almost empty last week end on cat food -I wonder if people are buying the Friskies Pate -I tasted it and not to bad in a life or death situation : )
 

Mejappz

Senior Member
Joined
Dec 16, 2005
Professional Status
Certified Residential Appraiser
State
Florida
I always wanted to get a taste of Kibbles & Bits when I was a kid- they looked so chewy and smelled good as well-I never could bring myself to try one.
 

glenn walker

Elite Member
Joined
Oct 11, 2006
Professional Status
Certified Residential Appraiser
State
California
We
I always wanted to get a taste of Kibbles & Bits when I was a kid- they looked so chewy and smelled good as well-I never could bring myself to try one.
We used to feed them to my little Cousin we called Mikey -Now he is 55 years old and wears blue dresses and attends pride parades, I always wondered if our abuse and pet food sent him over the edge : )
 
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