Freddie Mac vs Appraiser Bias

[J Grant]

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?

What basis is the judgment for an "inaccurate " C rating? How can that be determined by someone who never personally observed the property?

If an appraiser has a history of a high number of not accurate condition ratings, then drop that appraiser from the approval list. An individual appraiser can be "off" on occasion, but I suspect that appraisers making condition ratings that truly do not match the photos or age of home on a frequent basis would be a limited number of repeat offenders .

 

[CGinMN]

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.

What if you survey a number trained property appraisers to get a median condition rating? Would that be an objective way of quantifying it?

 

[Dale Floyd]

It's just my take - But unless the data involved personal inspections by appraisers, in comparison with personal inspections by third party inspectors of the exact same properties, then assumptions are all that's left about who is doing this right versus wrong.

Without that specificity, I think the conclusions are skewed rather than factual. Too many assumptions.

And just for the record - I'm talking about specific data, not general data.

 

[alebrewer]

What if you survey a number trained property appraisers to get a median condition rating? Would that be an objective way of quantifying it?

I personally would say 'well supported'. IMO, a collection of opinions is simply a collection of subjective events - which does not make it an objective event. Guess I should define objective in the terms of my use: objective event: an event not related to an opinion. Kind of like in appraising - an OOV can be 'well supported', but cannot be 'accurate' unless it is quantified (again) by a separate non-opinion related event (a sale of that asset for instance).

 

[DWiley]

What basis is the judgment for an "inaccurate " C rating? How can that be determined by someone who never personally observed the property?

The basis for that is comparing (1) the data, comments and photos in the report, (2) the condition rating assigned by the appraiser, and (3) the actual definition of that rating.

Example: Home is ~100 years old, with kitchen and baths that have not been updated in the last 40 years. Photos show roof and siding not in the best condition. Appraiser reports condition rating as C3. What more does one need to determine the C3 rating is incorrect? Do you really think that you need to inspect that home personally to determine it is not in C3 condition (as that is defined by the GSEs)?

The report should contain enough data, comments and photos to validate the condition rating. If the report does not contain such information, that is an error of a different type.

 

[J Grant]

The basis for that is comparing (1) the data, comments and photos in the report, (2) the condition rating assigned by the appraiser, and (3) the actual definition of that rating.

Example: Home is ~100 years old, with kitchen and baths that have not been updated in the last 40 years. Photos show roof and siding not in the best condition. Appraiser reports condition rating as C3. What more does one need to determine the C3 rating is incorrect? Do you really think that you need to inspect that home personally to determine it is not in C3 condition (as that is defined by the GSEs)?

The report should contain enough data, comments and photos to validate the condition rating. If the report does not contain such information, that is an error of a different type.

If an appraiser is reporting what sounds like an older not updated that should be a C 4 home as C 3 then why is that appraiser still being used by clients or on approved agency lists ? If that appraiser has such bad judgement, why would that appraiser be more " accurate" if they assign a rating when they don't visit a property vs when they do?

There are borderline cases where a house could be C 3 or C 4 so I assume this applies to more clear cut examples where it should be one or the other, per age, updates, repairs, photo evidence .

 

[alebrewer]

The basis for that is comparing (1) the data, comments and photos in the report, (2) the condition rating assigned by the appraiser, and (3) the actual definition of that rating.

Example: Home is ~100 years old, with kitchen and baths that have not been updated in the last 40 years. Photos show roof and siding not in the best condition. Appraiser reports condition rating as C3. What more does one need to determine the C3 rating is incorrect? Do you really think that you need to inspect that home personally to determine it is not in C3 condition (as that is defined by the GSEs)?

The report should contain enough data, comments and photos to validate the condition rating. If the report does not contain such information, that is an error of a different type.

Kind of like visually offensive stuff, huh? It's easy to make the call of what is 'wrong' - not so easy to make the call as to what is 'accurate'. It's easy to pick out what is truly offensive. Not so much the 'grey' stuff - like a nude statue - is that **** or no? RE the topic at hand - calling a 20 year old home C1 is wrong based on the definitions promulgated by F/F. OTOH - is a 15 year old home in very good condition C2 or C3?... what about a 40 year old home that has been renovated, but it's been 10 years since the renovation? C3 or C4?

 

[glenn walker]

The dirty little secrete is many I knew would-make almost anything a C-3 to bump a value .

 

[Doug DeMars]

The basis for that is comparing (1) the data, comments and photos in the report, (2) the condition rating assigned by the appraiser, and (3) the actual definition of that rating.

Example: Home is ~100 years old, with kitchen and baths that have not been updated in the last 40 years. Photos show roof and siding not in the best condition. Appraiser reports condition rating as C3. What more does one need to determine the C3 rating is incorrect? Do you really think that you need to inspect that home personally to determine it is not in C3 condition (as that is defined by the GSEs)?

The report should contain enough data, comments and photos to validate the condition rating. If the report does not contain such information, that is an error of a different type.

Sounds about right to me. C4 would be appropriate based upon what you state. However, this is rather pointless.

The conflict is very predictable.

It is more objective because the third party inspector doesn't have to be concerned with how does the rating impact the comparison with the other properties.

Does that lack of interest or concern with the appraisal and sales comparison result in more reliable valuations? No.

When the idea that condition can be objectively classified, I saw trouble. A K nailed it in the 4th post. The appraiser not only has to incorporate the condition rating in juxtaposition with the competing properties for one assignment, these ratings are intended to remain consistent across multiple assignments.

The appraiser has bias with the objective of completing as many assignments as possible with as little narrative as possible. Despite the well-intended and noble objective to have consistent condition ratings, the market speaks in terms of relative comparison.

 

[J Grant]

The dirty little secrete is many I knew would-make almost anything a C-3 to bump a value .

It's not that secret. The same folks who drag in cherry picked comps to bump up value are very likely to be the same ones who might deliberately assign a condition rating to bump up value. Granted, any appraiser can be off once in awhile, but repeat offenders would show a pattern of frequency.

If there are appraisers massaging C ratings on a frequent basis to bump up value and reports are being reviewed those appraisers could identified and dropped from agency approval lists. Looks like everyone will have a lot of time on their hands now -if the agencies choose to actually address the problem they claim to see.