Geographic Competence

[J Grant]

No offense but all the trainees rushing in to do desktops, so confident they don't need to see a property, or know an area....well doesn't that speak for itself?

Of course any appraiser can appraise a property without seeing it. The question becomes when seeing it ( and the comps ) would have changed their opinions and conclusions. Perhaps appraisers working on desktop hybrids think it does not matter, since it is for a small equity loan or portfolio review. But they might want to consider that even if the appraisal is being used for a 20k equity line of credit , the appraiser is still responsible for their 300k (for example) value opinion.

I am not against desktops but since they have not been used in such volume to evaluate properties ( the kind of low fee fast desktops referred to are mostly replacing BPO's and AVM's ) it is unknown if they might be reviewed or the sheer increase of volume of them become scrutinized should they be found lacking. An AVM or BPO can't be later reviewed or the provider held liable, but a desktop, since it is an appraisal, can..

OP- but relying on their personal subjective feelings created during a site visit- change that to relying on their judgement and opinions of the property created during a site visit ( and what you call a personal subjective feeling is their market expeirence creating a reaction in them to the property , site, neighborhood ). The OP might want to consider that the very definition of an appraisal is AN OPINION, that is literally the USPAP definition of what an appraisal is. An appraisal is not defined as "data analysis"....though data analysis can be part of an appraisal.

 

[J Grant]

DEFINITIONS For the purpose of the Uniform Standards of Professional Appraisal Practice (USPAP), the following definitions apply: APPRAISAL: (noun) the act or process of developing an opinion of value; an opinion of value. (adjective) of or pertaining to appraising and related functions such as appraisal practice or appraisal services.

An appraisal IS, literally, as defined by USPAP, "the act or process of developing an opinion of value. "An appraisal is NOT defined as "the act or process of analyzing data. "

Opinions by their nature have an element of "subjective " informing them, which the OP misunderstands as "subjective feelings". As humans, not computers we do have feelings,so what do they mean in a professional realm? It is what those "feelings", the reaction to and feedback from a property mean in context or experience , derived from years of looking at other properties , in person, not photos of them on MLS.

Most buyers look at , in person, the properties they buy. So now we have an appraiser who is less well informed than the buyer about a property, because appraiser has not personally seen the property. Though some buyers do purchase sight unseen over the internet, that often translates to a price out of whack with a local market or other mis calculations in the purchase decision.

The first thing many RE agents ( or owners in a refinance) ask is, do you know the area? ( and then they launch into a nightmare story of a crappy appraisal done by someone who did not know the area)

While It is true a crappy appraisal can be done by an appraiser who knows the area ,or visited the property, that is on the client, why is a bad appraiser is selected. The problem is that even "good " appraisers trying to do a good job will face limitations not having visited the property or not knowing an area.

 

[Carnivore]

If you took away all government backing of mortgage loans then desk tops/bifur appraisals would almost vanish overnight.

Maybe they would still be around for 2nd mtg's because a desktop is a superior alternative over AVM's.

 

[J Grant]

If you took away all government backing of mortgage loans then desk tops/bifur appraisals would almost vanish overnight.

Maybe they would still be around for 2nd mtg's because a desktop is a superior alternative over AVM's.

Consider that it is the govt backing of mortgage loans which creates reasonable interest rates, lower down payments, and long payoffs ( 15-30 years ).which enables more people to own homes.

If you care to compare private funded mortgages, which are available, to Fannie, FHA, Freddie backed mortgages, you will see that *typically) non govt funded mortgages require larger down payments, have higher interest rates, and often have short term of loan, like 1-5 years. How many people would finance a home if those were the only terms available, and what would that do to prices?

Many times a private funded loan (sometimes known as a hard money loan) will not require an appraisal...why would it? The borrower is putting 30% down and only in loan for a short time. I am not a foreclosure expert so am not sure about the protections or process a borrower has in a private loan if the borrower misses a payment or is late but it may not be that of govt backed loans

 

[Carnivore]

Consider that it is the govt backing of mortgage loans which creates reasonable interest rates, lower down payments, and long payoffs ( 15-30 years ).which enables more people to own homes.

If you care to compare private funded mortgages, which are available, to Fannie, FHA, Freddie backed mortgages, you will see that *typically) non govt funded mortgages require larger down payments, have higher interest rates, and often have short term of loan, like 1-5 years. How many people would finance a home if those were the only terms available, and what would that do to prices?

Many times a private funded loan (sometimes known as a hard money loan) will not require an appraisal...why would it? The borrower is putting 30% down and only in loan for a short time. I am not a foreclosure expert so am not sure about the protections or process a borrower has in a private loan if the borrower misses a payment or is late but it may not be that of govt backed loans

IN BOLD ABOVE: Why wouldn't a Hard Money lender want an appraisal? You say many times they do't, but my experience is they always do want a 1004 or at least a 2055. I don't see how term would have anything to with it. Maybe so, but on a short term loan it would makes sense to even more than a long term loan.

So I don't disagree with you on the liquidity aspect...it makes sense.

Common sense say otherwise. If you lending money with risk of loss so diminished by Gvt Programs to mitigate your loss then human nature of a production staff would be full throttle.

Currently as I understand it, the lenders are using a desktop when FNMA gives them a green light on 1st mtg's. Lenders are jumping on desktops for 2nd mtg's because they have less risk then the traditional AVM's they often use. If I was loaning a 2nd I certainly would use a desktop over a AVM. I can sue the appraiser, can't sue the avm company.

 

[TRESinc]

If a one page desktop product that truly only took 45 minutes to do, but paid $150-$200 was available in a city 100 miles away from you (but still in your own state), and you got recruited to do those, I cannot believe some of us would not be tempted to do it. Perhaps some of us are already doing that. If you are doing it, why do feel you are competent to do so?

it's already happening my friend, and has been for some time, but for far less than you quote. valuenet took over almost all the exterior orders that one of my lending clients have, and they charge the client less than $150, so i am guessing the appraiser makes $75-100 per report. the majority of these are for bridge loans or equity lines, so they stay "in house", but it's been like that for at least 3-5+ years now.

-edit-

a thought just occurred to me as i read this thread. there are multiple people in here talking about the need the visit the site as an integral part of the appraisal process. i wonder how many of the same people have posted in the past about wanting the removal of the requirement to inspect the comps from the street....

 

[J Grant]

Desktops and evaluations are not designed as appraisal replacements. My understanding is that they are designed as alternatives to a 3 week wait on servicing or refinance for a borrower good equity. Ultimately the lender chooses to loan money and often the cost in time and fees encourages this alternative. It's a watered down version of an appraisal and I feel it should be part of the appraiser's toolkit so to speak. Drive by work is similar but in today's age of data why does anyone need to visit a property they can see on the MLS, Google Street view, or satellite image. Any apprsiser claiming they can't derive a value without visiting the property IMO is not an appraiser. I mean that they aren't looking at or understanding market data but relying on their personal subjective feelings created during a site visit. I have literally seen this fist hand. An incompetent trainee was just as confused on the range of value before the inspection and after. Unfortunately I think this hybrid stuff hits hard on the apprsiser that doesn't know how to analyze data and theyre stuck in old inspection mode. My overall impression of our culture is a move towards equality and removing complexities from properties as maybe they are subjective and so not help people "buy or own" their houses. After all isn't this government push for ownership what has created the regulatory environment which caused the 2008 collapse??

Make desktops part of your toolkit , maybe we all will at some point. As long as you think you are providing credible results and develop a work file that is USPAP compliant .

Imo, what newbies or new to desktops may not realize is a risk because it has not been seen appraising before, and that is the new widespread use of these desktop appraisals to replace BPO's or AVM evaluations. It's nice to have an additional income stream, even if it is $60 a pop. But don't get complacent as to the ramifications and liability. While the desktop might get quickly accepted and disappear, you might think nothing of it. However, ,,

Realize that if the borrower later goes into short sale or default, the lender who owns the primary mortgage can in certain cases sell the 2nd mortgage/other ( which desktop was done for ), to a company that buys non performing loans for a discount. That company then tries to collect from the borrower.

These companies are super aggressive about collecting, like pit bulls and they do not behave as lenders of first mortgage, who usually do not try to collect after a default.

I personally know two people who this happened to, and for one of them it was 8 years after they short saled their house. The company that bought the second mortgage went aftre them for the 30k.

In the past, these loan valuations were done by an AVM, BPO etc, so the companies had no recourse for the valuation, they only could go after the borrower. But going forward, these companies can also go after the E and O of the appraiser who did the desktop, since it was the desktop that was used to UW this second or additional loan.

Whether they will or not is unknown, but hard to think why they would't, it would be just another source of collection for them if they believe the desktop was deficient - esp if they can get nothing or reduced amount from a BK or destitute borrower.)

Note: I am not an attorney so some details can deviate but what I describe is a general trajectory of companies that buy non performing additional to primary mortgage loans and then go after borrowers for collection.

 

[J Grant]

http://www.washingtonpost.com/wp-dyn/content/article/2010/03/26/AR2010032600027.html?noredirect=on

READ THIS especially newbies ! Keep in mind that most of these 2nd mortgagees and equity lines in past were not done using an appraisal, but if going forward they are done using a desktop appraisal, guess who these pitbull companies might be coming after....and it can be years later. Since now it is not a problem , it is easy for appraisers ti be cocky or dismissive about the risk. (perhaps because some of not aware of it )

Below from the article

"That's because lenders have been quietly selling second mortgages and home-equity lines left unpaid after foreclosures and short sales. The buyers: collection agencies, which in some states have years to make a claim."

 

[ucbruin]

Make desktops part of your toolkit , maybe we all will at some point. As long as you think you are providing credible results and develop a work file that is USPAP compliant .

Imo, what newbies or new to desktops may not realize is a risk because it has not been seen appraising before, and that is the new widespread use of these desktop appraisals to replace BPO's or AVM evaluations. It's nice to have an additional income stream, even if it is $60 a pop. But don't get complacent as to the ramifications and liability. While the desktop might get quickly accepted and disappear, you might think nothing of it. However, ,,

Realize that if the borrower later goes into short sale or default, the lender who owns the primary mortgage can in certain cases sell the 2nd mortgage/other ( which desktop was done for ), to a company that buys non performing loans for a discount. That company then tries to collect from the borrower.

These companies are super aggressive about collecting, like pit bulls and they do not behave as lenders of first mortgage, who usually do not try to collect after a default.

I personally know two people who this happened to, and for one of them it was 8 years after they short saled their house. The company that bought the second mortgage went aftre them for the 30k.

In the past, these loan valuations were done by an AVM, BPO etc, so the companies had no recourse for the valuation, they only could go after the borrower. But going forward, these companies can also go after the E and O of the appraiser who did the desktop, since it was the desktop that was used to UW this second or additional loan.

Whether they will or not is unknown, but hard to think why they would't, it would be just another source of collection for them if they believe the desktop was deficient - esp if they can get nothing or reduced amount from a BK or destitute borrower.)

Note: I am not an attorney so some details can deviate but what I describe is a general trajectory of companies that buy non performing additional to primary mortgage loans and then go after borrowers for collection.

What was the outcome for the 2 people you know?

 

[J Grant]

They PAID, even at personal hardship ( one liquidated a pension fund) because these companies are not constrained the way lenders are, they use every avenue of the law to collect and are relentless.

My post 28 has link to an article about it.