Desktop Appraisals Becoming the New Normal

[ucbruin]

Then, at the dawn of the '90s....
I forget the year that appraisal licensing took effect....
I do remember hearing a couple of older appraisers, probably in their 50's/60's, "complaining" that after 20-30 years in the business now they have to be licensed....
They said they would retire rather than take the test....
I thought that seemed extreme but I was in my early/mid 30's and only been an appraiser since '87....

Now, at the dawn of the Desktop appraisals....
For those of us AF members who continually post comments regarding Desktops....
And who have been in the business for 20-30 years and are in our 50's-70's....

Here's my question to you....
If licensing hadn't taken place ~30 years ago....
But was taking place in April 2022....
Would you welcome licensing or would you be like the "get off my lawn" 1990's appraisers who complained and said that they would retire rather than take the test....

 

[alebrewer]

Is that why Clario has been advertising a $10k signing bonus, because theres just so much money to be made in desktops as a staffer and they’re just sharing the wealth?

There is no doubt the staff model is profitable for AMC's - else they wouldn't do it, right?

 

[Non Sequitur]

There is no doubt the staff model is profitable for AMC's - else they wouldn't do it, right?

While they aren't losing money it isn't as profitable as some indie appraisers think. The main driver behind hiring staff is control. It's waaaaaaay easier to pound on staff for better turn times, better communication, etc. and most of all staff will have no choice regarding desktops/hybrids/remote inspections and the clunky software involved.

And the signing bonus from Clario, from what has been posted on FB it's payable over 5 years. Do the math, that's coffee money at best.

 

[alebrewer]

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.

Right now AV technology hits a wall - specifically the wall of not being able to handle market reactions to physical, functional, and external. Once they've solved for that, I'd submit that AV will be as credible (to use the word you prefer) as any appraisal. And many human problems have been solved by technology. Black plague ring a bell?

 

[alebrewer]

While they aren't losing money it isn't as profitable as some indie appraisers think. The main driver behind hiring staff is control. It's waaaaaaay easier to pound on staff for better turn times, better communication, etc. and most of all staff will have no choice regarding desktops/hybrids/remote inspections and the clunky software involved.

And the signing bonus from Clario, from what has been posted on FB it's payable over 5 years. Do the math, that's coffee money at best.

I don't know. Not sure if these numbers are valid any longer, as I haven't been in the AMC world for quite some time now, but... let's say a staffer's quota is 30 a month. AMC is charging client $550. That's $198k annually. Now, let's say that said appraiser can make $100k via some combination of base + bonus. Now lets say that the overhead for having that employee is 20% (FICA, shared insurance premium, equipment, unemployment insurance, etc.). There's another $40k in expenses by the AMC. That's leaves a net margin of 29% for the AMC. Change the scenario slightly - appraiser is now a 1099 contractor. Same numbers for comparison's sake: 30 a month @ $550. AMC takes a $125 average margin (about average for today's market). Net to appraiser is $425 per file, or ~ $153k annualized, leaving the AMC with $45k, or ~ 23%. Back in the day when I was at an AMC, we crunched the numbers and decided it would, in fact, be more profitable to have staff appraisers. We ultimately decided not to, as it's more challenging to add employees when demand is high, and lay off employees when demand is low, than to just send fewer (or more) orders to a contractor.

Now, another (historic) problem with having staff is geographic footprint - IOW, as an AMC, you can't just look at your volume and say, "I need X amount of staff appraisers based on volume." Some percentage of an AMC's volume is always going to be in areas where they don't have enough volume to sustain a staff appraiser. This is what, IMO, may be driving the sudden move toward beefing up staff. If the appraiser doesn't physically have to be 'in that market', but only has to demonstrate geographic competence, the AMC has solved for this dilemma, and now can sustain a staff appraiser that might serve a geographic area much larger than if he/she were having to do the actual physical inspections.

At least that's the way I see it. Again - speculation on my part.

 

[djd09]

Permanent desktop appraisals are a win for everyone – here’s why​

Desktop appraisals help ensure objectivity and mitigate the risk of prejudices in the appraisal process

Permanent desktop appraisals are a win for everyone – here's why

HW Media CEO Clayton Collins recently spoke with Accurate Group CEO Paul Doman about the FHFA's recent announcement on permanent desktop appraisals.

www.housingwire.com

look , the AMC loves you, they are concerned you may be a closet racist. they will fix it, while controlling your clients, and providing you dozens of appraisals a day. just sit at your desk and get the rubber stamp ready.

 

[J Grant]

Right now AV technology hits a wall - specifically the wall of not being able to handle market reactions to physical, functional, and external. Once they've solved for that, I'd submit that AV will be as credible (to use the word you prefer) as any appraisal. And many human problems have been solved by technology. Black plague ring a bell?

How will an AVM, understand /account for the market reaction to physical/funct/external AND reconcile the different price reaction for buyer motivations and analyze other elements of the market ? With all the billions spent and great software minds working it should have happened by now. Zillow, in a rare moment of corporate honesty, admitted their algorithms/AVM was a flop at predicting prices and they lost several hundred million and are shutting down their buy/sell division which relied on it. .

Maybe in 20 years, or a decade, or never...it will happen.

Meanwhile many human problems have been solved by technology, but many have not, and it has introduced new problems - hacking, large scale financial fraud and ransom holding systems hostage, spreading disinformation and falsehoods over social media . More nations have turned authoritarian - and people are still starving and killing each other -tech has not solved fundamental human problems-maybe one fine day in the future - or not...

 

[J Grant]

I don't know. Not sure if these numbers are valid any longer, as I haven't been in the AMC world for quite some time now, but... let's say a staffer's quota is 30 a month. AMC is charging client $550. That's $198k annually. Now, let's say that said appraiser can make $100k via some combination of base + bonus. Now lets say that the overhead for having that employee is 20% (FICA, shared insurance premium, equipment, unemployment insurance, etc.). There's another $40k in expenses by the AMC. That's leaves a net margin of 29% for the AMC. Change the scenario slightly - appraiser is now a 1099 contractor. Same numbers for comparison's sake: 30 a month @ $550. AMC takes a $125 average margin (about average for today's market). Net to appraiser is $425 per file, or ~ $153k annualized, leaving the AMC with $45k, or ~ 23%. Back in the day when I was at an AMC, we crunched the numbers and decided it would, in fact, be more profitable to have staff appraisers. We ultimately decided not to, as it's more challenging to add employees when demand is high, and lay off employees when demand is low, than to just send fewer (or more) orders to a contractor.

Now, another (historic) problem with having staff is geographic footprint - IOW, as an AMC, you can't just look at your volume and say, "I need X amount of staff appraisers based on volume." Some percentage of an AMC's volume is always going to be in areas where they don't have enough volume to sustain a staff appraiser. This is what, IMO, may be driving the sudden move toward beefing up staff. If the appraiser doesn't physically have to be 'in that market', but only has to demonstrate geographic competence, the AMC has solved for this dilemma, and now can sustain a staff appraiser that might serve a geographic area much larger than if he/she were having to do the actual physical inspections.

At least that's the way I see it. Again - speculation on my part.

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.

 

[djd09]

Lenders should rest assured that desktop appraisals still need to go through the Uniform Collateral Data Portal (UCDP), so they’ll still be subject to the Collateral Underwriter® risk score, so the quality will be assessed. If the risk score isn’t low enough, the appraiser may have to make a trip to the property after all, which could incur a trip fee.

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triservllc.com

i cant stop laughing

 

[bluechip]

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.