Hybrid

[J Grant]

I know in my own practice, many times the property inspection is the "tie breaker". I can research the subject, do overhead maps , look at MLS interiror and ext photos and get an idea about the property....and some kind of read on value after looking at the comps. Then when I go to the inspecton and spend time at the property and see it in person, walk the site etc I often change my perspective. Even in "cookie cutters", the onsite inspection can reveal things photos and maps can't ...are the rooms light or dark, is there traffic noise, the quality of the finishes are worse/better than the photos, owner enclosed a porch to a room, RE agent onsite provides new information about a change in area etc.

If another party inspects and I get their photos and notes, sometimes I'll make the same call as if I went there, other times I won't. That's inevitable. Even my own photos of a subject can give a different impression than what the property is like , and its relation to the neighboring properties and feedback from immediate area. The inspector will also be an unknown entitiy, not chosen by appraiser, and some will do a good job and some mediocre and a few will do a poor job. Since I did not personally visit the site to check, how will 'I know? I can't know when their inspection jives with what I would have observed and when it doesn't, so it adds another layer of uncertainty to the process, making it harder to stand behind a value if it is challenged.

If the inspectors are home inspectors, if they will over emphasize repairs, blowing them out of proportion, or if they are RE agents, will they minimize repair issues? The other missing link is while these people will try to do a good job, they have nothing invested in any one particular inspection. Whereas I have a lot invested, because I own that inspection result, and it will inform my appraisal with my signature. To them, it's just another inspection on the list to get done that day and race off to download since they will be on a tight deadline or quota. . .

There are no new "information gathering " solutions that makes this change possible after decades of a long apprenticeship to inspect, it's that Fannie and Freddie have abandoned their role as being on the prudent side of things and gone over to facilitating the aggressive speed up UBER every minute spent is profit lost lender side of things. They are reversing course on their own policies and we won't know how this will turn out till years pass and the hybrids ( and properties financed with waivers ) make their way through the system. I suppose Fannie thinks it will balance things out by retaining a % of properties done with "traditional " appraisals, and the results will all be mixed in for the investors, like toxic loans used to be, A and B paper mixed with C and D, paper (how did that work out ). Add in the accelerated time pressure on both the inspector and appraiser for bifurcated for another factor impacting results.

The only reason, and thank D Wiley for being honest about it, for this craziness is that it costs lenders $ to delay getting funds by even a day. With only a fixed amount of lending possible, they've been squeezing the margins for every ounce of profit including profiting off appraisals when they run AMC style ordering divisions. Well, they are the client so they have the power to shape things, the fly in the ointment being its not their money and the tax payer backing is the bailout, didn't' Fannie need a bail out last time ? If Fannie is heading toward privatization it will take on risk, align with lenders and abandon or marginalize the mission of protecting toward public trust , for those who wanted de regulation, this is what it looks like.

 

[Evincere]

Hybrid appraisal products invite risk and banks want their cake and eat it, too. The appraiser takes the risk and liability and the bank skates.

All the big boys have stables of companies that service millions of properties. They have hourly wage subcontractors at their disposal who will spend 5-15 minutes at a property. In the past they were utilized to winterize the REO onslaught that has now stabilized so these products will ftake up the slack and fill a gap. They’re already equipped with cameras and tablets and probably sitting around with not much to do.

As to liability? If their scoped to do these property inspections the lenders should gladly accept their insurance policies in lieu of the Appraisers. I hardly think the lenders are going to let anyone get away without proof of insurance to cover their losses.

 

[Evincere]

Hybrid appraisal products invite risk and banks want their cake and eat it, too. The appraiser takes the risk and liability and the bank skates.

All the big boys have stables of companies that service millions of properties. They have hourly wage subcontractors at their disposal who will spend 5-15 minutes at a property - no measuring etc. In the past they were utilized to winterize the REO onslaught that has now stabilized so these products will ftake up the slack and fill a gap. They’re already equipped with cameras and tablets and probably sitting around with not much to do.

As to liability? If they’re scoped to do these property inspections the lenders should gladly accept their insurance policies in lieu of the Appraisers. I hardly think the lenders are going to let anyone get away without proof of insurance to cover their losses.

Ps. Servicelink being one of the multifaceted companies Danny in all probability already knows who is being lined up and groomed to do the hybrid interiors.

 

[J Grant]

All the big boys have stables of companies that service millions of properties. They have hourly wage subcontractors at their disposal who will spend 5-15 minutes at a property - no measuring etc. In the past they were utilized to winterize the REO onslaught that has now stabilized so these products will ftake up the slack and fill a gap. They’re already equipped with cameras and tablets and probably sitting around with not much to do.

As to liability? If they’re scoped to do these property inspections the lenders should gladly accept their insurance policies in lieu of the Appraisers. I hardly think the lenders are going to let anyone get away without proof of insurance to cover their losses.

Yes. I've already seen one company advertising for "desktop appraisers" because they have a slew of property inspectors ready to jump in , fast delivery etc ...how much faster can this be for an interior inspection? For ext inspection, yes, inspectors can run around and schedule immediate drive by. But for interior, someone has to meet them to let them in, and they can't get an appointment any faster than we can. Some RE agents or home owners don't call or text back for days, or can't let in till next week. How is that going to change ? This is not REO properties each on a lockbox they just barge in through a window if door is stuck. These guys will be frustrated beyond belief as their employer keeps bugging them about the order when the HO just isn't calling back. (or they have to hunt down three working numbers to reach them , ditto for email ) . What a farce but if it gets some of the appraisals done one day sooner its worth it? Fannie has gone off the rails, desperate to shed its old conservative image and get hip to the new technology and millenials ....too bad millennials are not buying homes and making crap pay their access to technology not resulting in income or employment opportunities. No fault of theirs, they are entering a brutal job market. Fannie is allowing income from Air BnB to qualify borrowers...nothing to do with appraisals, but shows how desperate they are to facilitate lenders; Air bnb income qual developed with Quicken Loans...

 

[ucbruin]

"are the rooms light or dark"....
WOW!!!!!

 

[Evincere]

Yes. I've already seen one company advertising for "desktop appraisers" because they have a slew of property inspectors ready to jump in , fast delivery etc ...how much faster can this be for an interior inspection? For ext inspection, yes, inspectors can run around and schedule immediate drive by. But for interior, someone has to meet them to let them in, and they can't get an appointment any faster than we can. Some RE agents or home owners don't call or text back for days, or can't let in till next week. How is that going to change ? This is not REO properties each on a lockbox they just barge in through a window if door is stuck. These guys will be frustrated beyond belief as their employer keeps bugging them about the order when the HO just isn't calling back. (or they have to hunt down three working numbers to reach them , ditto for email ) . What a farce but if it gets some of the appraisals done one day sooner its worth it? Fannie has gone off the rails, desperate to shed its old conservative image and get hip to the new technology and millenials ....too bad millennials are not buying homes and making crap pay their access to technology not resulting in income or employment opportunities. No fault of theirs, they are entering a brutal job market. Fannie is allowing income from Air BnB to qualify borrowers...nothing to do with appraisals, but shows how desperate they are to facilitate lenders; Air bnb income qual developed with Quicken Loans...

Righto. Chinese fire drills forthcoming. Lol

 

[J Grant]

"are the rooms light or dark"....
WOW!!!!!

Natural light...particularly in a condo, one floor height up or down if blocked by a building etc....can't tell till onsite

 

[DWiley]

Did you always have that opinion or only recently after the bottom line became more clear?

As I noted previously, my position on appraisals based on third party inspections was documented in a paper written circa 2007. As for being motivated by the bottom line, I don't see how anyone could be in such a position at this time. No one knows what SOW and reporting format that Fannie will approve (if any), and without knowing that I don't see how anyone can really project what fees and associated costs will result. The bottom line is an unknown at this point. Yes, we have lots of data on the fees and associated costs with the "hybrid" services that have been offered over the past decade or so, but some of the things being piloted are, from my understanding, very different in both SOW and report content. So, to compare fees for existing services with fees for some future service of unknown scope isn't very logical.

Why weren't trainees pretty much ever allowed to inspect on their own (whether that be lender requirements or otherwise)? How about we take the small step of allowing trainees who are at least somewhat trained do it first?

Trainees were prohibited by lenders for one simple reason - they had no need to allow that, given the over supply of appraisers in most areas. Most of the recent angst over a "shortage" was driven by a handful of markets. And, while those half dozen or so locations did have a legitimate shortage, most markets had ample supply, or even an over supply. I have said that many times in many settings.

As for this alleged training that trainees have, what are you referring to? There certainly isn't any required formal training in our criteria, and a search of available coursework shows very little in the way of formal education on this topic. Have you ever taken a formal course in property inspection? How many currently certified appraisers have taken such a course?

I view the property inspection as a vital part of the process. It's the foundation and starting point. It's actually shocking that anyone would feel otherwise.

Perhaps, in some cases. In many cases, not so much. If you go look at a 10 year old home with 1200 SF sitting in the middle of a subdivision with over 500 homes all built by the same builder, just how critical is it, really, that you personally collect the data on the relevant characteristics?

The real foundation is identifying the relevant characteristics. That is the key, not personal inspection. That is why USPAP says what it says rather than requiring an inspection. You may find that view "shocking" but it is my honest view based on my study of the fundamentals of valuation. And, as a Google search for the aforementioned paper can show, it is a view developed long ago that has nothing to do with my current employer.

I see this movement as a chance to actually increase the perceived professionalism of appraisers. When I go to the doctor, it is not the doctor who weighs me, takes my BP, etc. Others collect that data, and then he analyzes it. He also gets a higher hourly rate The same is true with many other professions. The role of the real professional is the analysis, while others collect the data.

I ask you the same questions I asked JG. If you really feel that personal inspection is so critical, have you been lobbying the AQB with regard to the importance of education related to property inspections? Have you written to the ASB with regard to the USPAP's position that inspection is not necessary? These are not exactly new things.

All credentialed real state appraisers had to take a USPAP class to get their credential, and they have to take an update every two years. It just seems to me that if all this indignation about someone else inspecting the property was genuine, then this would have been brought up long ago.

 

[Joe Flacco]

I see this movement as a chance to actually increase the perceived professionalism of appraisers. When I go to the doctor, it is not the doctor who weighs me, takes my BP, etc. Others collect that data, and then he analyzes it. He also gets a higher hourly rate The same is true with many other professions. The role of the real professional is the analysis, while others collect the data.

When you recruit the cheapest 20% of appraisers to complete these, does that also increase the perceived professionalism of appraisers?

 

[Joe Flacco]

As I noted previously, my position on appraisals based on third party inspections was documented in a paper written circa 2007. As for being motivated by the bottom line, I don't see how anyone could be in such a position at this time. No one knows what SOW and reporting format that Fannie will approve (if any), and without knowing that I don't see how anyone can really project what fees and associated costs will result. The bottom line is an unknown at this point. Yes, we have lots of data on the fees and associated costs with the "hybrid" services that have been offered over the past decade or so, but some of the things being piloted are, from my understanding, very different in both SOW and report content. So, to compare fees for existing services with fees for some future service of unknown scope isn't very logical.

Does that mean that you have been steering the profession in this direction behind the scenes since 2007?