FHFA Request opinions from Lenders & others on what the new version of an appraisal will be.

[Joe Flacco]

We are appraisers so it is natural that we are very defensive in the use of appraisals. But looking at the real estate market overall, the only goal is streamlining the mortgage lending and trading process. There is too much money and influence steering real estate transactions towards something that resembles auto sales and lending.

 

[Joe Flacco]

All the talk about testing and making decisions based on data is phony. It is a dog and pony show. The only real data that is meaningful with regards to risk management is going to be loan performance whenever prices decline 10% or so. It doesn't take a genius to understand that loans will be performing well as long as prices are increasing.

 

[Joe Flacco]

If it was up to me the decision on what valuation tool to use, if any is needed at all, would be made manually at the lending institution and would not be automated. A staff appraiser at the lending institution would do research and make a decision. It would probably result in many more staff appraisers at banks, fewer independent appraisers, and fewer total number of appraisers overall.

 

[J Grant]

If they use AVM's for purchase mortgages, that means that buyers could be certain exactly how much they can borrow on a house before they make an offer. From a consumer process point of view that is how it should be. It would eliminate a lot of frustration with appraisals and the mortgage process in general. The fact that the appraisal comes last in the process just puts us in a unfavorable position.

That is not necessary, because borrowers know how much they can borrow on a house before they make an offer, borrowers get PRE QUALIFIED according to their income and down payment for the amount of a loan they can get - regardless of purchase price-borrower knows exactly the top end of price , all they need do is add up the max loan they are qualified for and their down payment for that price.

Buying a house is an expensive investment and the right or wrong house at a right or wrong price can make or break a person financially. It is a bit difficult and frustrating because it is a complex investment and entails a long term commitment and is tied to a location. A cash buyer has it easer but most appraisals are for financed loans .

 

[J Grant]

Sounds like you sell or want to sell automated appraisals, correct?

Did he change his screen name ? Because he is touting the MARS product again....

 

[Joe Flacco]

That is not necessary, because borrowers know how much they can borrow on a house before they make an offer, borrowers get PRE QUALIFIED according to their income and down payment for the amount of a loan they can get - regardless of purchase price-borrower knows exactly the top end of price , all they need do is add up the max loan they are qualified for and their down payment for that price.

Buying a house is an expensive investment and the right or wrong house at a right or wrong price can make or break a person financially. It is a bit difficult and frustrating because it is a complex investment and entails a long term commitment and is tied to a location. A cash buyer has it easer but most appraisals are for financed loans .

Being pre-qualified with a max loan amount based on credit profile is not the same thing as knowing the max loan amount for a specific property which requires knowing the market value of the property up front.

 

[J Grant]

We are appraisers so it is natural that we are very defensive in the use of appraisals. But looking at the real estate market overall, the only goal is streamlining the mortgage lending and trading process. There is too much money and influence steering real estate transactions towards something that resembles auto sales and lending.

That is what they are trying to do.

Difference is, the American tax payer is not backing auto loans. And autos, mass produced and not tied to location, can be mass valued and rote valued using Kelly Blue Book and similar. The loan amounts are much smaller for autos and repayment is 4-6 years, not 15- 30 years as with a mortgage. A borrower stops paying their car loan, company sends a late notice, still no payment lender sends a REPO man out and takes back the vehicle. But if a borrower stops making loan payments, on a house, it results in a protected and expensive legal morass for the lender.

The agencies trying to streamline a home purchase or refinance loan into a click and close Amazon transaction or car loan...idk..
An inflated value or false condition or other problem not disclosed might green light a loan that should not have been made-. but other than that, what does a valuation , whether the valuation be appraisal, AVM or other, what influence can it have on loan performance?

 

[J Grant]

Being pre-qualified with a max loan amount based on credit profile is not the same thing as knowing the max loan amount for a specific property which requires knowing the market value of the property up front.

It is essentially the same financial consideration for a borrower, which is why they get pre qualified for a loan. There is a max amount they can borrow with putting X $ down. .

However, remember the appraisal is for a client, not the borrower. A borrower has plenty of options wrt planning . The client/lender's concern is the property as collateral, what is it worth as a OMV.

Buyers applying for financing do risk getting turned down. or the property not appraising or evaluating to the $ amount they want . There is no constitutional right to get a loan...

 

[Terrel L. Shields]

They don't have acceptable interior floor plans.

I am sure a lot of homeowners incorporate laser 3D house measuring when they look at a property.

Accurate floorplans that can be used to analyze functional utility problems [ which abound ].

But can you quantify them? Especially in rural areas, unique properties, etc. The answer is no. False accuracy is still false at 3 decimal place "precision".

If a computer can do all this then the appraiser is pointless. Hire a quant. It's the appraisers judgment that counts. CAC - all this invites is a Computer Aided Catastrophe

can be mass valued and rote valued using Kelly Blue Book

The difference in an efficient market (cars) and an inefficient market (houses.) No matter how much quantification occurs, no computer is going to make an inefficient market efficient. Dissecting a property via quantification of all the aspects is a glorified cost approach and no more accurate than a well prepared appraisal.

Hybridization is certainly not going to increase the accuracy of the estimate nor improve the skills of the appraiser who will be put on half rations or less. This is all about the urge to eliminate the one firewall that prevents banks from swindling millions of homeowners be it a perfect system or not. Without a doubt the desire of those promoting the hybrid are seeking to eliminate the appraiser and the one possible source of preventing a sale - any sale at any price- from going through.

Once prices collapse we will see a huge transfer of wealth from the average homeowner to the banks and proponents of this stupidity.

 

[RCA]

I am sure a lot of homeowners incorporate laser 3D house measuring when they look at a property.

But can you quantify them? Especially in rural areas, unique properties, etc. The answer is no. False accuracy is still false at 3 decimal place "precision".

If a computer can do all this then the appraiser is pointless. Hire a quant. It's the appraisers judgment that counts. CAC - all this invites is a Computer Aided Catastrophe

The difference in an efficient market (cars) and an inefficient market (houses.) No matter how much quantification occurs, no computer is going to make an inefficient market efficient. Dissecting a property via quantification of all the aspects is a glorified cost approach and no more accurate than a well prepared appraisal.

Hybridization is certainly not going to increase the accuracy of the estimate nor improve the skills of the appraiser who will be put on half rations or less. This is all about the urge to eliminate the one firewall that prevents banks from swindling millions of homeowners be it a perfect system or not. Without a doubt the desire of those promoting the hybrid are seeking to eliminate the appraiser and the one possible source of preventing a sale - any sale at any price- from going through.

Once prices collapse we will see a huge transfer of wealth from the average homeowner to the banks and proponents of this stupidity.

1. A good floor plan is going to show the dimensions and sq.ft of the rooms, relative sizes - all important to support the appraisers statements about the how good or bad the functional utility of the subject is in comparison to the sales comps.

2. As in #1, yes quantification is possible. The CAD program (e.g. Chief Architect or Home Designer Pro) does this automatically, it also calculates total GLA automatically.

3. The appraiser builds his opinions on the output of the tools he uses, and he is required to understand them.

4. It takes maybe two weeks to sell a house around here at $1.5M+, plus another month to close. Not bad. In fact, they have contractors buying these up like pronto, if you are willing to take the lower price. Some do. You can just move out and leave whatever you want behind. Some do.