Freddie Mac vs Appraiser Bias

[Carnivore]

It seems to me that somehow an Inspector is not biased? Yet, Appraisers are biased(at least some) How is that possible?

FTR I have immense Respect for DW. He is often the voice of reason at this forum.

I do recall DW posing the Question: What if the Inspector was Highly Trained? That's a very legitimate question. I know in the military aviation we have very highly trained Aircraft Mechanics. It works well. BUT we also have Highly Trained Tech Inspectors. The Tech Inspectors signed off on the Aircraft Mechanic's work. When I was assigned to Bell Textron as a Test Pilot First, I also could sign off on mechanics work , but rarely did that. I relied on the TI signature. Reason I was limited is because I inspected that aircraft AFTER it was assembled. So I could only see so much. I trusted the TI's because they were involved all along the process.

So if Home Inspector/data collectors are on salary, I can see that as being very good data. If they are paid per Inspection , I can see that as prone to errors or omissions.

 

[J Grant]

DW and I are having a respectful conversation about this topic right now. He proclaims FreddieMac reviews thousands of appraisals each month revealing appraisers getting condition ratings completely wrong, versus thousands of reports revealing third party inspectors getting condition ratings right.

I'm asking questions about that, because I'm not sure how they know who is right or wrong without those comparisons being made of the exact same properties side by side. I think they use a ton of general assumptions.

It's funny to me that appraisers are so easily criticized these days. Danny was truly an excellent appraiser in his days in Mid-Tennessee, and my bank used him and his firm back then. Doesn't mean we always agree, but I have a truckload of respect for him.

Can you please clarify if it is the Third party inspectors giving a condition ratings?

I thought a condition rating was an opinion and that the appraiser applied the condition rating.

 

[DWiley]

I thought a condition rating was an opinion and that the appraiser applied the condition rating.

Yes, it is the appraiser that provides the condition rating in the appraisal report.

For a traditional appraisal, that rating is based on the appraiser's personal data collection.
For a "hybrid" appraisal the rating is based on a property data report provided by a trained third party.

 

[Dale Floyd]

Can you please clarify if it is the Third party inspectors giving a condition ratings?

I thought a condition rating was an opinion and that the appraiser applied the condition rating.

After our conversation, there are literally thousands of appraisals being audited every month revealing appraiser inspections with inaccurate condition rating conclusions versus thousands of appraisals with third party inspectors that result in correct condition ratings.

He can be a little too general in his responses these days, but I think the ratings are still coming from the appraisers - but - they tend to do a better job in rating a dwelling's condition when somebody else provides the inspection information rather than doing the inspection personally.

Again - That's my take. DW may correct me.

 

[J Grant]

After our conversation, there are literally thousands of appraisals being audited every month revealing appraiser inspections with inaccurate condition rating conclusions versus thousands of appraisals with third party inspectors that result in correct condition ratings.

He can be a little too general in his responses these days, but I think the ratings are still coming from the appraisers - but - they tend to do a better job in rating a dwelling's condition when somebody else provides the inspection information rather than doing the inspection personally.

Again - That's my take. DW may correct me.

What is the benchmark for a "better job" when the ratings are from third party vs when the ratings come from the appraiser's own inspection?

I have my own ideas on the subject which is a property can look worse or better in person then it does in photographs. Thus, if They think the condition rating is more "accurate" in matching the photos taken by an inspector that may be the case, which is not the same thing as the condition rating better represents how the property really is.

Is there an agenda to fannie or freddie claiming the condition rating is more "accurate" when the inspection was done by a third party? How can they claim to know how "accurate" the condition rating is, when they never personally observed the property?

 

[Non Sequitur]

After our conversation, there are literally thousands of appraisals being audited every month revealing appraiser inspections with inaccurate condition rating conclusions versus thousands of appraisals with third party inspectors that result in correct condition ratings.

He can be a little too general in his responses these days, but I think the ratings are still coming from the appraisers - but - they tend to do a better job in rating a dwelling's condition when somebody else provides the inspection information rather than doing the inspection personally.

Again - That's my take. DW may correct me.

OK, given the context of the overall appraiser bias debate that's driving these studies and articles: What I take from this is there may be a bias associated with personal contact between the owner/borrower and appraiser that manifests in the C rating? And it looks like they are implying the "more accurate" ratings are higher C ratings.

 

[CGinMN]

I don't doubt Danny’s statements. Whether these trained third party property inspections can be scaled up without running into the same issues remains to be seen. It is hard to maintain quality at scale. Hybrids are reportedly a very thin slice of the pie, and I have a hunch that there are lots of people invested in the quality control of modern products. But when they are become the norm will Freddie be reviewing thousands of hybrids with inaccurate condition ratings?

 

[Joe Flacco]

80% of properties are in the range of C4 or C3 condition ratings. Accuracy is not a reasonable benchmark with the varying scope and timing, of updates or remodeling. There is no one is correct and the other is not correct. 80% of properties are somewhere in the range from low end of C4 to high end of C3.

 

[J Grant]

OK, so what I take from this is there may be a bias associated with personal contact between the owner/borrower and appraiser that manifests in the C rating? And it looks like they are implying the "more accurate" are higher C ratings.

Their conclusion there is appraiser bias at a level that is problematic is absurd, since their own studies only show a sliver of a percent of more values not meeting SC price in certain areas. And the cases where bias was alleged were never made available wrt what the second higher appraisal consisted of, was it privately ordered, which of the two appraisals is more credible

I can understand why the agencies have to treat the charge seriously, however if the cases had little or no credible support wrt the lower value being due to "bias" then the agencies should state that.

 

[alebrewer]

As I see it, the only way to 'quantify' accuracy on an opinion is if there is a subsequent 'objective' event to corroborate said opinion. To wit: about the only way to quantify if an appraiser's OOV is 'accurate' is to match that with a subsequent sales price (objective event). Regarding 'accuracy' of condition ratings, I just don't see how you can quantify the accuracy of an opinion without a subsequent objective event. That's just me, though.