April 29 Newsweek & AVM's

[Bryan (OK)]

While sitting in the medical waiting room, I came across this article. I was so surprised by the ignorant perspective of the author and the stated perception of appraisers by the public, that I ripped out the article to post here at AF.

Nevermind that appraisers theoretically keep the process in check, providing a unbiased independent perspective of the transaction to avoid banking failures, etc.

Let the flaming begin :!: Comments :?:

Reprinted from April 29, 2002 Newsweek about companies changing traditional business models (emphasis added):

Appraise This: A Faster Way to Buy a Home

Greenpoint Mortgage Funding, LLC
Novato, CA
Founded: 1995
Employees: 2,400
Size: $26 billion in mortgages in 2001
Tech innovation: Computerized property appraisals that speed loan decisions

You know the drill. You’re in the middle of buying or selling a home, and it’s time to schedule the appraisal. Suddenly, your stress meter, already humming, starts peaking. Appraisers, after all, can undermine a deal by scaring away lenders if they decide that the home you so desperately want to buy or sell is overpriced. It’s a privilege for which you can pay $300 or more. In a busy market, even getting an appraiser to show up can take weeks, adding to the anxiety.

Now a new computer tool is quickly gaining popularity in the real-estate business that lets you worry less about appraisals and more about ripping down that ugly wallpaper. It’s called automated valuation modeling (AVM), and basically does for homes what credit scoring has done for people: it reduces them to a number that lenders can use to made snap judgements. Banks have spent years building databases of old appraisals and comparable sale prices in different neighborhoods and regions, and can now apply complex formulas to all that data to determine in minutes whether a property is priced right. No appraisers needed. Time saved. Money saved.

Greenpoint Mortgage is among the early adopters of AVM. It loaned out a record $26 billion in mortgages last year, and has raised its share of the mortgage market in two years from 0.8 percent to 1.3 percent, thanks in part to the appeal of computer tools like AVM, which lowers the cost of an appraisal to $50 and can be done in a day. “This is a really competitive market, and it makes a huge difference to be able to process more loans quickly,” says company president S.A. Ibrahim. He expects that in two to five years his company will be able to give near-instant answers on mortgages to some borrowers. Mortgage heavyweights Freddie Mac and Fannie Mae started using AVM a few years ago with tentative steps. They’ve been using it to approve less risky loans, such as refinancings, small second mortgages and loans to borrowers who boast enviable credit ratings and are planning to plunk down hefty down payments. “The models have gotten better and better,” says peter Maselli, a senior vice president at Freddie Mac. Now if only somebody could invent a computer program that will help pack and unpack all those moving boxes. Linda Stern

Enron was highly acclaimed too :!: :!:

Bryan

 

[Pamela Crowley (Florida)]

I remember reading that article. Made me feel that trying to tell the truth is like butting my head against a brick wall. We are already on the slippery slope.

 

[Karl]

Call Greenpoint Mortgage & try getting a Mortgage & check out the Intrest Rate

 

[slacker]

In a busy market, even getting an appraiser to show up can take weeks, adding to the anxiety.

<span style='color:blue'>They have a point with this statement though. Like it or not, it usually is the appraiser that holds up the process. Regardless if the numbers are hit or not.

If I can buy or sell a home in less time for less money why wouldn't I?

I know quite a few appraisers who have a "I'll get to it when it's good for me" attitude. Appraising is about the only industry I can think of that can get away with it. I don't even know a plumber that would make someone wait two weeks.

It's obviously a problem and some folks out there in computer land are just looking for a solution.</span>

http://www.appraiseillinois.com

 

[Rick Hess]

With most closings I've seen 4-6 weeks out, if the mortgage brokers ordered an appraisal the same day the individual applies, there would be a lot less last minute frantic calls for a need it yesterday appraisal. We get the blame in a lot of instances to keep the lazy mortgage broker out of the frying pan.

 

[Doug in NC]

All I have to say is, I hope Greenpoint gets exactly what it's paying for! When their homes go into foreclosure, I wonder if their investors will be willing to pay for real appraisals then?

 

[Ross (CO)]

O.K., so Greenpoint did $26 Billion in mortgages last year. That is an impressive number. Are they holding all that paper ? Do those loans reside in their portfolio, being cared for, nurtured and overseen every day ? Probably not. What do they do when one, or seven, or eighty-three of the loans within that $26 Billion go errantly astray ?, ....and an AVM supported the transaction ? Does Greenpoint sue the employee who generated and provided the AVM for the file ? Of course not. There will be no appraiser to hang, so do they hang their own ? Doubt it. Mr. and Mrs. Taxpayer will be there to help out once again. The reason they justify complaining about the appraiser being late, or slow, is because he or she was the very last thing sought in their process of wrapping up the deal. Any time I hear that sense of urgency and the need for a can-you-do-it-yesterday order I will always ask why they waited so long to secure the appraisal ?......why the need for something so important to de done so quickly ?........and I shut up, and listen closely to the reply. Usually it's chock-full of excuses, and when it can be done, soon, c.o.d. is the only way to put it all in perspective for them. Then again, another run of an AVM is bound to print out the number they need and it can be done in 15 minutes, right ?

 

[TEL2002]

Here's a couple of questions for the Greenpoints of the world.

What is the turn around time on a home inspector, on a septic inspection, on a pest inspection, on a foundation inspection, etc?

How much of the waiting for apprasier time is not the appraisers fault?
I currently have one job I have been trying to schedule since 15 April...it is constantly being put off by the owner.
I currently have 2 real estate agents that have not returned my calls. Frequently real estate agents take 2-3 days to return my calls to arrange an appointment to see the home (yes, I leave them messages everyday.)

How many homeowners will not promptly return your calls? It seems like 60% of them wait for me to keep calling back until I finally find them at home.

Any bets that I am the one that will be blamed for the delay on these jobs. Out of self defense I put every attempted contact on a sticky note on the front of the job folder....just in case someone says I am making the attempt to contact them.

And do I ever hate some of the stupid, idiotic, moronic, infantile, time wasting answering machine messages that people think are cute or clever.

 

[J in Florida]

In a busy market, even getting an appraiser to show up can take weeks, adding to the anxiety.

<span style='color:blue'>They have a point with this statement though. Like it or not, it usually is the appraiser that holds up the process. Regardless if the numbers are hit or not.

If I can buy or sell a home in less time for less money why wouldn't I?

I know quite a few appraisers who have a "I'll get to it when it's good for me" attitude. Appraising is about the only industry I can think of that can get away with it. I don't even know a plumber that would make someone wait two weeks.

It's obviously a problem and some folks out there in computer land are just looking for a solution.</span>



Slacker dude-- you're joking, right? just checking.
I know my turnaround time is 3-4 weeks and if I don't feel like doing that appraisal today, you know what? I just blow it off. And these clients keep coming back over and over and over again. What a country :wink:

 

[Bryan (OK)]

Interesting thoughts. I think many delays are built in by the lender not ordering the appraisal in a timely manner. If the appraiser of choice is that busy, go on to appraiser #2, #3, etc. The market should level itself with supply and demand in the long run. Many industries can have shortened lead times for a fee. I wouldn't suggest that to a good client in a jam, but if they made a habit of it, upcharges would break them of it.

The real issue here becomes one of liability and who will pay the tab. I believe the AVM trend will continue and strengthen due to the instant answers available. But when it goes bad, John Q Public will be forced to pick up the tab on the bailout. The pendulum will eventually come back to the middle. The only question is how long will it take?

If we put ourselves in the lenders position where instant answers are available, no liability is incurred, the cost is less, why would I not choose this option :?: I thought the $50 AVM version had to be supplemented with a $200 or so fee to avoid the liability?

Please fasten your seat belts, I see turbulence on the horizon 8O