Freddie Mac vs Appraiser Bias

[George Hatch]

They could say the third party inspector set eyes on them and transmitted it to the appraiser, in the form of coded comments and/or that the appraiser had prior bias about the neighborhood wrt comps.

There was never any supported conclusion any bias occurred wrt the "lower value" appraisal in any of the cases that we know of, so it is beyond unfair that Fannie/freddie are using those cases to indicate there is a "bias problem " in appraising.

If there is a bias problem, it is on the high end, to push values to make contract sales and refi target directions work.

Which that latter - bias in favor of rich people - is also a non-zero event. You can make the argument that if I'm stretching for the rich borrower but not stretching for the poor borrower I am in fact treating these two groups differently.

 

[J Grant]

Which that latter - bias in favor of rich people - is also a non-zero event. You can make the argument that if I'm stretching for the rich borrower but not stretching for the poor borrower I am in fact treating these two groups differently.

That is correct. wrt treating the two groups differently

My point was some appraisers are biased to "make the deal work " regardless of housing type/borrower income .

And on the other hand, some appraisers are too affected by either very wealthy housing types/areas or very poor/struggling areas to do a credible job. Imo it has less to do with the people living in the dwellings/area, and more to do with that some appraisers can not get beyond their own expectations or assumptions about what is typical /expected for either of the value extremes. But that would apply whether they personally inspected or a third party did.

 

[George Hatch]

TBH I think most of these anecdotes trace back to "appraiser didn't do enough work". Not an inability to do the work or a personal bias.

My #1 suspect is appraisers limiting their market analysis to a single MLS query for direct comparables using the 6mo/1mi criteria and picking the sales at the top or bottom of the list. If they had gone into more detail on the composition and pricing trends of the neighborhood and gone back a couple years in looking at the comparables on they would have been able to convey how their subject attributes fit into its environment and what the limitations were for that market segment in their p1 problem identification step of the appraisal process. Then their pg 2 solution to that appraisal problem would have made a lot more sense to their readers and deprived their critics of the opportunity to say they relied solely on their personal feelings and biases.

 

[Dale Floyd]

I don't know if the inspectors can be assumed to be more unbiased than the appraisers but I do know it's going to be harder to accuse the appraiser of being personally biased against a borrower when they never interacted with anyone in the transaction or even drove into the neighborhood.

Where would the plaintiffs in the Marin City or Baltimore or Indianapolis complaints be if the appraisers had never even set eyes on them or the neighborhood?

It's a good point, but there are masses who would quickly point out the regulations, parameters, and restrictions involving what appraisers can / or cannot do.

Perhaps there needs to be another discussion about allowing an appraiser to run his/her office and utilize whatever tools they believe are credible without violating some law or regulation. In all cases, the appraiser is ultimately responsible, and it is still extremely difficult to sell an appraiser to accept the liability of an inspection they did not do - unless - the inspector is somebody they employed or trained in an ongoing business relationship.

Inspectors have no regulations, licensing, or oversight. Those of us accepting their findings, have it all.

We've talked about these things before.

 

[George Hatch]

If the appraiser's SOW is a desktop appraisal then they already aren't responsible for anything the inspector did or didn't do. We're only responsible for what WE do.

In the event we have reason to suspect the accuracy of a data source then that would be a reason to decline to use it. But in lieu of information to the contrary it is not unreasonable to assume the info is sufficient for our use. Especially given the point that we already include that as being a standard assumption,

 

[glenn walker]

They could say the third party inspector set eyes on them and transmitted it to the appraiser, in the form of coded comments and/or that the appraiser had prior bias about the neighborhood wrt comps.

There was never a supported conclusion any bias even occurred in the lawsuits cases wrt the "lower value" appraisal was due to bias, (or that the higher appraisal was not the problem) Which makes it unfair that Fannie/freddie are using those cases to indicate there is a "bias problem " in appraising.

If there is a bias problem, it is on the targeting of pushing values to make contract sales and refi target directions work.

Pushing values to make contract sales and refi target directions work are whats called POSITIVE Biases and that is approved by everyone. It's Low Values that are created due to negative Biases.

 

[J Grant]

Pushing values to make contract sales and refi target directions work are whats called POSITIVE Biases and that is approved by everyone. It's Low Values that are created due to negative Biases.

lol. Pushing values in either direction, high or low, is bad ( as you are aware). Unbiased means we have no interest in seeing a value be high or low, we opine value where the appraisal process takes us- which can be high, low or mid range.

The problem in real life is in lending, valuing on the high end makes deals work, and the low end value might not. A bias toward a pre determined assignment result $ direction is different than a personal Racial/ income class /other bias. It is impossible for people, imo to be 100% unbiased on a personal level, it is how we handle it and separate it out from our professional result that matters.

I'll admit to having difficulties at either price extreme end. Very high $ properties and very low $ properties can present problems in the subject itself, and finding the right comps.

 

[djd09]

let the party start

 

[J Grant]

If the appraiser's SOW is a desktop appraisal then they already aren't responsible for anything the inspector did or didn't do. We're only responsible for what WE do.

In the event we have reason to suspect the accuracy of a data source then that would be a reason to decline to use it. But in lieu of information to the contrary it is not unreasonable to assume the info is sufficient for our use. Especially given the point that we already include that as being a standard assumption,

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We're only responsible for what WE do.

The problem is, much of the development in the appraisal that WE do is based on, or intersects with the results from the subject inspection. So we end up being responsible for the results regardless.

The reality is anyone can challenge us on our decision to rely on the inspection, claiming we should have (somehow) suspected the accuracy of ( fill in the blank ). It does not matter if they are right or wrong- all they need do is allege we made a poor decision about it.

 

[djd09]

you cannot scope away misleading , ask elmo the craigslist inspector