Hybrid Appraisals

[Terrel L. Shields]

but APPRAISERS have perpetuated this with every low-priced assignment they accept. We have dug this hole. Don't look up.

Unfortunately, and exactly true. Accepting low fees hurts everyone in the biz, not just the fool that accepts the job. If you are struggling in this business, it's time to look for work elsewhere and do this part time only for the most profitable assignments. When I threw in the towel from the oil business, it was not because I cut fees. It was because there were few jobs. But I kept taking the few available while training in appraisals to soften the economic blow.

I am not saying everyone should charge a premium price. But I am saying everyone needs to set a fee that is reasonable for the amount of work done. And there is also an element of pricing that needs to compensate you for the risk of doing a report. You would not need E & O if no such risk existed, and E & O is only a fraction of the compensation needed if you get sued or turned into the state. Doing a hybrid in 1 hour is nonsense. 4 hours for a cookie cutter? Maybe. But what is 4 hours worth to you? I bet it is more than $75 less tech fee.

 

[CGinMN]

Why wouldn’t lenders just pay a 30% premium for hybrids on 48 hour turnaround. Once it’s adopted en masse you’ve won over appraisers and scaled your model up, then you start looking for efficiency in the appraisal fee and you find the price equilibrium.

 

[Joe Flacco]

They don't want to pay 30% more than regular appraisal. Cheaper is supposed to be half of the value proposition.

 

[Overimprovement]

Whatever that means.

Means those appraisers who are stuck down in the graves they have dug for themselves by accepting such low fees. Now the dirt is coming back in to bury them.

I am not one of them.

 

[Overimprovement]

Why wouldn’t lenders just pay a 30% premium for hybrids on 48 hour turnaround. Once it’s adopted en masse you’ve won over appraisers and scaled your model up, then you start looking for efficiency in the appraisal fee and you find the price equilibrium.

Many get 48 hour turn now. Remember, many, if not most, full appraisals now are done by AMC staff. I think the answer to every valuation question is--"follow the benjamins".

 

[TerryRohrer]

From a Fakebook thread about hybrids:

"I do these for 1 client, fee is $400 for a typical SFR. Another AMC sends them out for $180-250 and apparently someone accepts them as I counter back at $400 and never hear back. I think the data collector fee is $100+/-. They are fairly straightforward to complete, but I work in urban/suburban markets with very conforming properties and great data. I often can have a regular SFR mostly completed before the inspection, with only minor changes after inspecting the subject and verifying the quality/condition/features. Probably 25% of the time the 3rd party inspection report needs to be corrected before I can finish. Total turn time is almost double a traditional appraisal most of the time. When I get the assignment, the inspection is usually 5 or more days old. If I did a full appraisal, the report would be completed the next day after inspection unless there was something unique. I don't see where these are saving time or money for the borrower. In my opinion, most appraisers could complete a desktop only report with no inspection and have 98% similar results, at least in the markets I work in, especially if the subject is a sale that is in the MLS."

"I charge $500, which is based on a small 2000 sq ft home. I’ll have to review about 100 photos and a 20 page report. Reading all this information takes time and cost money. The larger the home the more I charge. Many things are unknown. Age of appliances, systems, condition of the roof, siding / exterior. The photos provided are terrible and not a super high quality like You would expect. I condition 8/10 of these reports for repairs or additional inspections. The product is similar to an exterior report for a foreclosure. In this case photos of the interior are provided. With this type of data the opinion is going to be limited based upon what data is provided. Not to mention the photo measurement does not follow ANSI for sloped ceilings."

"I just had a business trying to brag about these. The appraiser is licensed in 10 states and does 10 a day according to them. They also charge $255 per report"

 

[CGinMN]

They don't want to pay 30% more than regular appraisal. Cheaper is supposed to be half of the value proposition.

The point would be to pay a premium today to scale adoption, win over appraisers, then pull the rug on fees. This seems to be what a lot of start ups do to gain market dominance.

 

[Joe Flacco]

The point would be to pay a premium today to scale adoption, win over appraisers, then pull the rug on fees. This seems to be what a lot of start ups do to gain market dominance.

I just don't think the lenders are that pumped about hybrids.

 

[TerryRohrer]

From the linked post by Justin Alexander on LinkedIn:

"We assess collateral-related loan defect rates between valuation options that use property data collections and traditional appraisals. The difference in defect rates is a mere 0.6%, indicating that valuation options that use property data collections are on par with traditional appraisals in maintaining loan quality." (That doesn't seem to square with the claims from Freddie of a "two times impovement over traditional appraisals", whatever that obfuscation means...Freddie won't respond when asked)

"This option provides lenders and consumers with value certainty earlier in the mortgage process and saves consumers on average $350-$400 over the traditional appraisal." (Here, that translates to well under $150 left to the appraiser.)

And other sundry BS you can read yourself. Repeated requests for any documentation of methodology, etc, to review are being summarily ignored. Much the same playbook used in the creation and advancement of the biased appraiser narrative, by the same bunch who hasn't done an appraisal in 20+ years (or never, in the case of the FHFA "analysts" who did the flawed market conditions adjustment "analysis" based on Zillow algorithms.

Advancing Collateral Valuation: A Data-Driven Approach with Standardized Property Data Collection | Fannie Mae

In the rapidly evolving residential real estate landscape, there is a resounding demand to continue modernizing the property valuation process.

www.fanniemae.com

 

[Alsie35]

Despite your constant insinuations nobody here is pushing the hybrid model over a conventional 1004. With that said, if the lender's choice is between a hybrid vs an AVM, my guess is that even you might prefer they use an appraiser instead of a calculator. I would rather see an appraiser used regardless of which type of valuation they pick. I don't favor AVMs but if a lender is going to use one then I'd rather see an appraiser running it than a clerk.

There might be some appraisers who are mobility challenged and can't get around who appreciate the opportunity to continue working as an appraiser instead of being forced out. And I'm sure there are appraisers in low-volume areas or oversaturated areas who appreciate the opportunity to continue working as an appraisers instead of being forced out. We have at least a couple of our regulars here who have done them for those reasons. But that doesn't mean they actually think the hybrid is just as good as a conventional 1004. Even if they were to say otherwise in some virtue signal.

The only "defense" that's going on here is against the allegations that these cannot be done to specs or that nobody doing them is working to specs. That isn't advocacy for hybrid 1004s over conventional 1004s, it's just an observation.

Can we talk?

Behind all the bloviation of this thread is the real issue and that is this:

Appraisers are (quite rightly) seeing the slow demise of the 1004 "All-Done-By-Appraiser" as the simultaneous "Destruction of the Fee Appraiser Business Profitability" Model. USPAP-Schmoospap. Its always about 'The $$$'.

(Yeah, it's sorta inevitable due to actuarial factors - the future newly minted "appraisal homunculi running in an AMC hamster wheel" will never get anywhere close to our level of global appraisal experience or have the opportunity for success that we've had, but they will know how to upload and import stuff from "The Cloud" that someone else designed, that they may not completely understand.)

Anyway - that's why I'm personally not happy with the ongoing changes. The ability to make a good independent bu$ines$$ out of it. Otherwise, Just follow the $$$ (and don't y'all try to tell me that isn't the only reason you're unhappy with it either )