Be the Driver, rather than just a passenger of your appraisal practice

[J Grant]

You seem to be operating under a fundamental misunderstanding, that some of the lenders uses their own money to pay for managing the appraisal process.

If you had ever worked on staff at a lender you would be knowledgeable about the fact that the borrower always pays, whether its up front and regardless of the loan decision going their way or it's amortized in the loan itself. There is no scenario where the lender isn't getting these services performed for free-to-them. There never has been.

I worked on staff for a commercial lender. I got paid a straight salary (which is still how most staff appraisers are paid). My compensation package amounted to a fraction (less than 50%) of the appraisal fees the bank was collecting from the borrowers. The rest of those fees went to cover the costs of managing the appraisers. The bank didn't pay me and the administrative assistants and my managers out of their end of the loan fees; they paid us all out of the fee they collected from the borrowers, which those borrowers paid up front whether the loan closed or not.

Matter of fact, when the volumes ran low and the bank wasn't collecting enough from the borrowers - i.e., the bank actually was paying the appraisal dept out of their end - that's when they laid most of their appraisers off. Once paying and managing us actually did become an expense to the bank - due to the lack of volume - that was no longer a sustainable mode of operation for them.

I don't' care about how Lenders make money off their staff appraisers wrt when I discuss AMC fees to independent fee appraisers.

Lenders make money off their staff appraisers in exchange for the appraiser getting a steady work flow, a base salary, paid benefits and internal guidance and QC of the product . Some appraisers like being part of a culture/group - though that is less so now with work from home. What you describe is similar for why companies hire staff in all businesses -

 

[George Hatch]

I very well understand the various roles of appraisal, credit, title etc so please stop making the condescending assumption I don't understand it . I've bought and sold my own properties and used to sell RE out of a loan company who who did both.

Again, the lender can make any risk decisions they want wrt UW, borrower credit etc. None of which concern the appraisal, which has the purpose of evaluating the property.

As to your last question: Why get an appraisal on a property that's obviously worth at least $500k when the LTV is below 50%? First of all, many waivers have LTV far higher than 50% down. But the reason for the appraisal, assuming a borrower puts 50% down is this : 1) the appraisal reveals other information about the property such as condition and neighborhood conformity etc that can influence a lending decision 2) making every property subject to an appraisal keeps a level of uniformity and prudence in the system that benefits borrowers - there is a reason they are keeping waivers to a segment and not all, because for decades, using an appraisal has anchored the loan system of FF to provide better mortgage rates, long repayment terms etc.
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Compare the rates and terms to FF loans where appraisals re still dominant, ( even with desktop or hybrid appraisals. Prevailing intreert rate, 15-30 years repayment,. Compare that to private money lenders, who often do not use an appraisal for the very reason you state - they reqwuire a hefty amount down -(LTV ratio 50%. ) - wow big whoop they do not use appraisals, borrower saved $500 upfront ! But those private money lenders also charge above prevailing interest rate, and demand a balloon payment in full in 5 years. ( as an example )

Condescending? I actually think you don't know what you're talking about WRT the lender's perspective. You certainly haven't demonstrated such an understanding.

Yes, a personal inspection by an appraiser does add to what the lender can see about the property's condition, but these lenders DO have experience in playing the odds on these factors. They do have experience with the use of these other valuation alternatives and they do have the data to compare to the performance of these alternatives to the performance of the appraisers. And that's the point you shouldn't be trivializing.

These lenders KNOW how good/bad the appraisals are just as they know the good/bad of the AVMS. It should be obvious that they have been using that info to choose the AVM over the appraisals for certain situations. Think about what that says about the actual performance of the appraisers. These lenders are demonstrating that they don't think the appraisers are adding enough to these outcomes to justify the expense.

And while we're at what the lenders know about appraisals, they also KNOW the good/bad of the appraisals they're taking in from the AMCs vs their direct engagement appraisals, AND they know the good/bad of the more expensive vs less expensive appraisal fees. Regardless of anything they're saying in public, these lenders are demonstrating both their perspectives on these appraisals and their own priorities by the decisions they're making every day.

 

[Tiffany Gibbons]

It was you that asserted that the alternatives were more risky. I just asked if you had data to back that up. Pretty simple.

"More risky" as compared to what? Do you think traditional appraisals are perfect?

When alternatives to traditional appraisals are considered for potential adoption that is only done after extensive testing. One of the major hurdles a new method has to get over is that it must provide risk management that is at least as good (preferably better) as the current process. That analysis is not done anecdotally; it is done with data and math.

It is called risk management, not risk elimination, for a reason. No matter how good the controls are, some loans go bad. That is part of lending.

It's my opinion based on what I've seen, what is being pushed, and the available public data where I work. That is all.

 

[George Hatch]

I don't' care about how Lenders make money off their staff appraisers wrt when I discuss AMC fees to independent fee appraisers.

Lenders make money off their staff appraisers in exchange for the appraiser getting a steady work flow, a base salary, paid benefits and internal guidance and QC of the product . Some appraisers like being part of a culture/group - though that is less so now with work from home. What you describe is similar for why companies hire staff in all businesses -

That's the whole point of this discussion - you don't care what the lenders think and you don't care what the lenders want. That's why you think they should be operating differently than they do. (not just you, but most fee appraisers).

We can say that the lenders are making bad choices and taking unnecessary risks, and maybe that's exactly the case. But even if we're right about that from the objective perspective it doesn't alter the fact that they are the buyers and we are the sellers. We are not co-equal partners to their decision making and (from their perspective) what we think doesn't count.

 

[J Grant]

That's the whole point of this discussion - you don't care what the lenders think and you don't care what the lenders want. That's why you think they should be operating differently than they do. (not just you, but most fee appraisers).

Regardless of the perspective you make in posts, I have far more direct experience I bet wrt lenders, AMC's and mortgage lending - since doing appraisals for mortgage lending is 98% of my business for close to 3 decades - whereas you per your own admission do very little conventional /FHA/FF backed mortgage lending appraisals.

The lenders have their business priorities and can do as they want. I write about things from the appraiser's perspective here

Though since you want to defend their needs and wants, the banks and lenders' appalling history of predatory and exotic loans going belly up, pressuring values when they can, toxic loans bundling , needing bailouts by the govt and cases of fraudulent practice is not exactly serve as a poster child for how well they manage risk ( it does show how slick they are in off loading it )

I say this in general terms because, I have worked with certain lenders who are ethical and do care - but they have to compete with the sharks and cheaters out there too.

 

[George Hatch]

Regardless of the perspective you make in posts, I have far more direct experience I bet wrt lenders, AMC's and mortgage lending - since that is 98% of my business for close to 3 decades now, whereas you per your own admission do very little conventional /FHA/FF backed lending.

The lenders on their end have their priortities and can do as they want. I write about it from the appraisrer's persective. Though the crappy history of toxi loans and bailouts by the govt and fradulant or high risk lending practices impacting markets is not exactly a poster child for how well they handle risk ( more about how slick they are in off loading it )

I say that in general terms, I have worked with some lenders who are ethical and care - but they have to compete with the sharks and cheaters, as we all do.

Actually, you don't write from the appraiser's perspective because the fee appraisal business isn't the only legitimate form of appraisal practice. So no, you DON'T speak for all SFR appraisers, let alone "appraisers" as an entire group. Me neither.

As it turns out, I have far more exposure to the entire cross section of appraisers as a group. Thousands of hours directly interacting with them and engaged in shop talk the entire time. Appraisers employed by govt, by the lenders, by accounting firms, by AMCs as well as fee appraisers across the entire spectrum of appraisal practice, from SFR-only to CGs who specialize in certain specific property types like churches or motels or gas stations.

Stop whining about me not being the one-trick pony. You should also consider backing away from that tunnel vision you've got going.,

 

[Mark K]

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[George Hatch]

I'm going to start another thread about what you guys think the appraisal business will look like in 5 years. After all, it's never too soon to plan ahead.

 

[J Grant]

Actually, you don't write from the appraiser's perspective because the fee appraisal business isn't the only legitimate form of appraisal practice. So no, you DON'T speak for all SFR appraisers, let alone "appraisers" as an entire group. Me neither.

As it turns out, I have far more exposure to the entire cross section of appraisers as a group. Thousands of hours directly interacting with them and engaged in shop talk the entire time. Appraisers employed by govt, by the lenders, by accounting firms, by AMCs as well as fee appraisers across the entire spectrum of appraisal practice, from SFR-only to CGs who specialize in certain specific property types like churches or motels or gas stations.

Stop whining about me not being the one-trick pony. You should also consider backing away from that tunnel vision you've got going.,

I never said I speak for all appraisers. I said I write about this topic from the appraiser's perspective

What you call tunnel vision is direct decades of experience about the topic I am writing about. The content of your posts are mainly representing the AMC or lender perspective. I am aware they have their priorities ,but those two power groups do not need more advocates for their interests -

 

[J Grant]

That's the whole point of this discussion - you don't care what the lenders think and you don't care what the lenders want. That's why you think they should be operating differently than they do. (not just you, but most fee appraisers).

We can say that the lenders are making bad choices and taking unnecessary risks, and maybe that's exactly the case. But even if we're right about that from the objective perspective it doesn't alter the fact that they are the buyers and we are the sellers. We are not co-equal partners to their decision making and (from their perspective) what we think doesn't count.

I agree with this. But how'd that work out the last time? ( the 2008 housing crash when they ignored the appraiser petition and years of imploring wrt value pressure )

The achilles heel of lenders not caring what we think is they are using and abusing tax payer backed programs in this. If it were 100% their money, the appraisers would have every expectation to be ignored. I am a realist and understand that even though they use tax payer money and bailouts, many of them still ignore us since we impede their profit gravy train. But though I realize it, I can still post about the ramifications -