Hybrid Appraisals

[Joe Flacco]

I bet if lenders were able to offer a small bonus for early delivery (say within 3 business days), they'd solve most "friction" just by sheer market force. However, Reg Z makes resclosing appraisal fees basically impossible and overly burdensome. If lenders could simply redisclose appraisal fees they could eliminate a lot of disclosure staff, cutting costs to consumers. Instead, they just shop and shop til they find an appraiser who takes the assignment at the quoted fee. That shopping ends up wasting a lot of manpower, and results in bottom-of-the-barrel appraisals. The costs are passed on to the consumer and the risks are passed on to the taxpayer. Another dumb and wasteful part of the process that needs reform.

That is a great idea.

 

[Terrel L. Shields]

On a proposed home, the appraiser inspects the site, and often sees a finished builder model, and drives the comps. None of which is true in a hybrid where the appraiser does not inspect.

...and when those plans and specs change, we are tasked to do the final inspection and adjust the report accordingly. I mean, I bet 1 in 5 P & S has something different from what the plans say that I've encountered. It might be simple, one time they reversed the floor plan because of the lay of the site. Another time 3' was added to one side to make 2 bedrooms larger so they could build bigger closets. Plans change but we can adjust later.

So, Danny is conveniently forgetting that. No one gets to go out and second-guess if Bozo the Inspector has accurately described the property. And at what point in the 'verification' process can we actually determine if the inspector has accurately described the property? Never. With P & S, I can see if the builder is blowing smoke or not.

I once did a P & S for a builder for a 1 story 1800 SF house. But the builder was trying to stretch the house bigger to sell higher because he was very quickly going under. Before he was done, he bellied up. Roofed, framed, sheathed, bare interior walls. And he walked away. The bank then called me to inspect for them and they found another builder to complete the dwelling. Well, the now 2,200 SF or so house wasn't to the new builder's liking so, he modified it, moving some walls and a few other things. He completed the dwelling and liked it so well he bought the house from the bank, and the bank was delighted to come out whole and the builder got a house so close to the school his wife worked she could walk to work in less than 5 minutes. In short, we were able to adjust the value(s) according to what the actual construction was that we encountered. We were not bound by the P & S, either the original, or the sort of built on the fly final product when executing a final.

I do not believe that when a report is so absolutely wrong even when every mistake is the fault of the "property inspector" that the appraiser is not ultimately responsible for the accuracy of the report. When a fairy tale has been written based upon false data, I see no way that the appraiser will not share the blame and could be held accountable by the state boards.

 

[Terrel L. Shields]

then hybrids should only be used in the infrequent market spikes of high volume.

I doubt that would save 15 minutes in the turn time. Why are the GSEs so focused upon turn time? Is that really an attribute of "safe and sound" banking?

 

[Joe Flacco]

Yeah, there is nothing efficient about lenders having to engage two different providers instead of one. Double the sourcing, double the reviewing, double the accounting. On top of that, the information the appraiser gets is less reliable than if the appraiser was on site. And then they want the providers to accept 25% or less of the normal fee. Twice as much work for lenders, fraction of the compensation for appraisal providers, and the result is a less reliable appraisal. Hybrid appraisals are not efficient at all. Hybrid appraisal is a dumb idea all around.

 

[CGinMN]

This summarizes the process, and AMCs are very much intertwined in it. This is great business if you work in collateral at the GSEs and you end up leaving for a job at an AMC. It is not good for anyone else.

 

[Terrel L. Shields]

The best appraisers do not have to work with the GSEs.

 

[CGinMN]

This is all used to justify hybrids and waivers. The process is very much broken. The solution is to unleash appraisers and incentivize the right metrics - speed and quality. This can be done, but if your background is at an AMC, you think there is nothing that can be done because appraisal fees and appraisal quality bear no relationship. That is because you were incentivizing AMC profit the whole time. You put any warm body with a license on the panel. Different people need to be in charge.

 

[Joe Flacco]

This is all used to justify hybrids and waivers. The process is very much broken. The solution is to unleash appraisers and incentivize the right metrics - speed and quality. This can be done, but if your background is at an AMC, you think there is nothing that can be done because appraisal fees and appraisal quality bear no relationship. That is because you were incentivizing AMC profit the whole time. You put any warm body with a license on the panel. Different people need to be in charge.

I would like to put you in charge.

 

[CGinMN]

DMs are open.

 

[chad hampton]

Don’t forget what Mark Calabria said, all the stuff they pushed during Covid was supposed to be temporary. Expanded use of waivers and fake hybrid appraisals were never supposed to continue the way they have been.

He should’ve known better than to make deals with unethical folks. That’s a mistake. I no longer make.