Has the quality of appraisals gone up since the AMCs took over?

[DWiley]

I have repeatedly observed that none of the reports I reviewed during COVID made any upward adjustment for the rising market conditions, even though some of my markets were increasing by 25% annually.

With the many tools that are available, an adjustment for market conditions is one of the easiest to support. But, the reluctance of appraisers, as a group, to apply market condition adjustments is well documented. It seems that many still operate under the assumption that a report with such adjustments will be subject to extra scrutiny. It seems that a favored technique is to avoid market condition adjustments, but to then make up for that by using comps with more GLA than the subject and applying a small GLA adjustment rate.

 

[Digger88]

I still don't believe it takes 6-8 hours to do a report but I don't work anywhere else so what do I know

 

[George Hatch]

As far as "quality" goes, there's a huge distinction to be drawn between an error being made due to sloppy/lazy (competency) vs an error being made deliberately (ethics). Of the two, an accident usually doesn't result in a gross overvaluation or an unusable value conclusion, whereas a lie can and often is told for the specific purpose of getting that gross overvaluation. The deal that doesn't get done because the appraisal comes in low is bad, but it doesn't pose a threat to safe/sound for a lender. A nominal deal that does get done because it was enabled by a lie DOES pose a threat to the lender's legitimate interests. There isn't a whole lot of moral equivalency between the two forms of errors.
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Back when I was reviewing MB-generated reports for the big box I saw a lot of examples of reports that got kicked into review only because of the low level of SR2 reporting. The SR1 value conclusions were reasonable but a layperson reader couldn't tell what was going on by reading the report due to the lack of detail.

I remember one report being so scant in SR2 content that it only contained 16 words that were specific to that property and its valuation. Obviously not enough. The rest was 100% boilerplate and not all that relevant to the specific situation at hand. But as a reviewer that's an error I had the ability to fix. When combined with the added explanations in my review report, the original report was usable for that use. I did bring that situation to the appraiser's attention though, so as to avoid any repeats.

But on the other side of the spectrum and all too common for that lender's wholesale line there were the lies.
I saw several examples of appraisers dorking diagrams to fit the GLA reported (in error) in the public records, I saw examples of appraisers repeating obvious errors in lot size and then dorking their comp selection to exclude the real comps in favor of better quality homes on much larger lots. MANY examples of appraisers not disclosing recent sales or listings because they were far lower than the value conclusion. All manner of dishonesty.

Here's the thing about client advocacy: A value conclusion that results from a sloppy /lazy SOW usually isn't going to be grossly overvalued, whereas a value conclusion that's based on a lie attributable to client advocacy often will be grossly overvalued. Not to mention the point that in comparison, "competency" issues are readily curable whereas "ethics misconduct" is incurable. If/when an appraiser makes a mistake we can easily fix that. But when an appraiser is lying on behalf of their client in order to cheat their client's trading partner and the actual user of the appraisal then there is no cure for that.

Sloppy doesn't mean dishonest about the subject attributes and/or the comparability of the sales being presented as most similar.

 

[Elliott]

GSE's required the MC form, not AMCs. From the MC, it often followed in my market why there wasn't going to be an extensive explanation for adjustments. There was a learning curve with AMCs (they had to learn what was possible). But basically, more work requires a higher fee and that coincided with required Listing Comps and MC form. I go out of my way not to look at other appraisers work. I had two refi reports done on properties I own about 3-years ago and I was not impressed....pretty mediocre work, slam bang, thank you work. They were AMC products.

 

[glenn walker]

I still don't believe it takes 6-8 hours to do a report but I don't work anywhere else so what do I know

It can in dense urban areas where driving is most of the day. There were tomes when I was on the road a total of almost 4 hours, just crawling along at 15 MPH on congested freeways. 65% of time on roads 35% on working on appraisal. Those same commutes 35 years ago were 45 minutes. Thats why most older appraisers are quitting lender work or semi retiring and doing Non-Lender or other real estate ventures. The high volume loan production appraisers, are still using runners and cutting every corner they can, but will always lie about just being a one man operation as with traffic conditions its just not possible to do high volume even if your a young guy.

 

[Fernando]

With the many tools that are available, an adjustment for market conditions is one of the easiest to support. But, the reluctance of appraisers, as a group, to apply market condition adjustments is well documented. It seems that many still operate under the assumption that a report with such adjustments will be subject to extra scrutiny. It seems that a favored technique is to avoid market condition adjustments, but to then make up for that by using comps with more GLA than the subject and applying a small GLA adjustment rate.

Time adjustments are difficult to determine.
Instead of using increasing value based on time adjustments if not sure if prices have definitely increased, I use older comps and just say prices have not dropped from a year ago. Other more recent sold comps help in reconciliation of final value. Another practical tip from Fernando.

 

[jay trotta]

Depends on the work being required and the effort involved. At this point in the game, I don't feel the work required is appreciated or respected, and sliding into semi-retirement is well deserved even if I say so myself.

 

[TC]

Somewhat related, there is a fellow Hearing Officer that I work with that you may have wondered where he's been. Pittsburgh Pete! He's alive and doing well. He took his "act" to Facebook. Good guy, and excellent appraiser.

 

[Tim Hicks (Texas)]

Somewhat related, there is a fellow Hearing Officer that I work with that you may have wondered where he's been. Pittsburgh Pete! He's alive and doing well. He took his "act" to Facebook. Good guy, and excellent appraiser.

If you say so...

 

[Dale Floyd]

With the many tools that are available, an adjustment for market conditions is one of the easiest to support. But, the reluctance of appraisers, as a group, to apply market condition adjustments is well documented. It seems that many still operate under the assumption that a report with such adjustments will be subject to extra scrutiny. It seems that a favored technique is to avoid market condition adjustments, but to then make up for that by using comps with more GLA than the subject and applying a small GLA adjustment rate.

When dealing with time adjustments, it’s much better to simply use very recent comparable sales, rather than older and then trying to apply a grouping adjustment to one sale. Doing so eliminates the concern of the fluctuations of time. Market changes aren’t as easy to support as DW stated, especially in non-urban environments.

If recent data is not available, then do what is necessary but be very cautious with blanket adjustments.