Desktop Appraisals Becoming the New Normal

[glenn walker]

I have always maintained these products are more suited to staff and big box AMC/bank captive order divisions rather than lenders who order direct - and probably, along with a genuine need for turn time improvement is the reason they exist - whether the public trust or interests of investors ( tax payers ) who insure or fund these loans is well served is another matter.

Fannie/freddie use a false risk metric to justify it, saying these products have the same or in some cases a lower (by a sliver of a percent ) less "risk" of loan performance than traditional appraisals - since much of loan performance is about borrower defaults and very little, if any , has to do with the valuation ( unless an inflated value or other problem file ) - the appraisal serves as the decision tool on the front end, of loan decision) it is not made for the purpose of determining long term borrower default "risk" - so to use that as metric for it is disingenuous. Especially since the agencies participated in egregious loan practices in the past to extent they needed govt bailouts - their track record stinks around risk , - ironic since they now are using that for a rationale.

The GSEs have no risk as they are now essentially an-arm of the Treasury and Federal Reserve and risk is almost all on how the portfolio performs. They no longer answer to their shareholders or investors and for all practical purposes are a system designed to allow banks to transfer the risk onto them. The risk is all in the portfolio of pare they hold. As interest rates rise the value of their portfolio goes down so theoretically at 5% rates they could be bankrupt on paper. The modern appraisal is used for accounting purposes at to set a book value but it has almost no effect on accpet to make these agencies look legitimate.

 

[shrubberyvaluation]

There is a finite level of "quality " an appraisal is ever to achieve. It is what it is. The quality of the people doing appraisers, can vary tremendously, and much of that I blame on lowering the bar for entry as well as not having mandated reviews of work to ferret out the truly bad appraisers, as well as the greed system which sees clients tolerate sub standard work. I don't think an appraisal has to be perfect, or biblical length , but it should show reasoning, logic, good comp selection, narrative. Clients will not $3000 for an SRA demo level report . On the other hand the super tight turn times can affect adversely the work even for an experienced appraiser, the norm of 48 hours after inspection in much of residential end is impairing quality.

In the same vein, technology also hits a wall in the level of "quality" it can achieve, though quality is the wrong word it should be credibility and reliability, It has different limitations. If technology was the solution, human problems would have been solved by now, but since technology creates its own set of problems and potential for abuse, that is far from the case.

I would say it would have more to do with mortgage client expectations not being in line with a quality appraisal. For a mortgage loan most of the people in the transaction only care about quality insofar as it will pass underwriting with some exceptions. I'm not saying it is their fault for not wanting a quality appraisal.

I imagine Zillow had abundant resources for technology to assist them in their property buying investments.

 

[shrubberyvaluation]

Wouldn't it be so much easier for all appraisers to just say NO. We all just agree not to perform this product. Once you sign the report you take all the risk.
There is NOTHING protecting you the signing appraiser.

You are not going to convince skippies who see it as an opportunity to do less work with not verifying information.

 

[glenn walker]

You are not going to convince skippies who see it as an opportunity to do less work with not verifying information.

Well I wont say there all skippys lets face it if I was 25 or 30 years old I would set up another fee shop register it as an- AMC and have 25 guys and gals doing these all day long . Its business model fits well into staff appraisers and add some clerical help and could be a money machine. The handwriting on the wall is most appraisers are over 50 years old today and many in there sixties and seventies and so the business model had to change going forward. It will be waivers-desktops -drive byes etc. The traditional full appraisal will be used on rural and Complex only.

 

[ucbruin]

I think for some of you guys/gals....
The time may be coming for you folks to consider a different career path....

 

[glenn walker]

I think for some of you guys/gals....
The time may be coming for you folks to consider a different career path....

I agree but for many the market will make that decision for them in year 2022 or year 2023. Now BOB you are now an official form filling fool so adapt or get a real job : ) LMAO

 

[djd09]

I think for some of you guys/gals....
The time may be coming for you folks to consider a different career path....

what, no more together, ironic, eh?

 

[Overimprovement]

You don't have floor plans for a lot of your comps/listings in your MLS? I think at least half of the properties I flip through floor plans. It might be as high as 80% of listings.

<1% in my market.

 

[Overimprovement]

Wouldn't it be so much easier for all appraisers to just say NO. We all just agree not to perform this product. Once you sign the report you take all the risk.
There is NOTHING protecting you the signing appraiser.

I am a big advocate of "just say no" when applicable. Problem is, that is 1 down, 79,999 to go. How are you going to convince the 60/month form filler to not do these, when they can now spit out 90/month?

 

[J Grant]

I am a big advocate of "just say no" when applicable. Problem is, that is 1 down, 79,999 to go. How are you going to convince the 60/month form filler to not do these, when they can now spit out 90/month?

You can't. Let them spit out 90 a month, you do the ones you want to accept, and will still be plenty of regular inspect appraisals around to do - at least for a few years - by that time either these new products will become more dominant or if problematic , their use would be scaled back.