Hybrid

[J Grant]

If I could program, or were not broke from being run into the ground, I would set up a web presence to capture the alternate market. However, someone will do it, and when someone does it right, they could likely dominate the market for it (it is surprising it hasn't been done yet). The internet dynamic is an interesting place. Seems to me the winners are the ones who get there first. Would love to see you pull it off J. Like I said, I would go there myself, but I'm tapped out. Bravo to whoever does.

...now if we had an organization uninfluenced by special interests that we all got behind, maybe they would have the resources and know-all to get something like this done...lol...

I am aging out of the profession ( though might continue another 5 years, +- depends) , not a great tech person and not rich but would contribute some $ and time, all appraisers have at least some $...need a core group to meet about it and brainstorm, perhaps partner up with an entrepreneurial person who is computer whiz ....

 

[DWiley]

Let them have BPO's and AVM's for that.

Why? In my view, it was this approach that led in great part to where we are today. There was a great demand for something other than the 1004. Yet, appraisers, as a group, dug their heels in and tried to protect the status quo (the 1004 world) rather than seeing the market that existed for something else. The result? Today, everyday millions of dollars flow to agents doing BPOs instead of appraisers doing some form of appraisal (something is less than a 1004). Anyone care to guess that ratio of BPOs ordered everyday as compared to 1004s? Most would be shocked.

Big market participants, through their use of BPOs for years, have clearly demonstrated what they will do if appraisers reject the new valuation services that some want to test.

As a group, we need to hold dear and promote the fundamentals of our profession and quit throwing out specious arguments driven by self-protection. If we are to survive, we have to really start acting as a profession rather than a trade.

 

[J Grant]

(my bold)

I think everyone, whether they are in favor, neutral, or against the hybrid process, has consistently argued the bolded part. The difference I may have with some/others is this: I advocate that the appraiser charge an appropriate rate for their time/efforts/work product/liability. But if their rate, after all those things are factored in, is lower than mine, then all things being equal, they will be more competitive.

These products will succeed or fail based on appraiser participation. If appraisers, as you suggest, come to the realization that they need to charge more than what is being offered, and if they hold that line, then they'll get more or this product will disappear from the appraiser-option list.

This is good advice, and of

(my bold)

I think everyone, whether they are in favor, neutral, or against the hybrid process, has consistently argued the bolded part. The difference I may have with some/others is this: I advocate that the appraiser charge an appropriate rate for their time/efforts/work product/liability. But if their rate, after all those things are factored in, is lower than mine, then all things being equal, they will be more competitive.

These products will succeed or fail based on appraiser participation. If appraisers, as you suggest, come to the realization that they need to charge more than what is being offered, and if they hold that line, then they'll get more or this product will disappear from the appraiser-option list.

Yes we should all charge appropriate, but except for the segment of direct lender clients already paying decently, it won't matter to volume AMC's and lenders who will have staff appraisers do the bifurcated reports, and in anticipation are recruiting new licensed to do lower paid work including training them with their own -( see the thread CoreLogic appraiser trainee program )

 

[hastalavista]

Instead of losing years fighting a vs Goliath battle appraisers should put their efforts into developing an additional source of work and a suite of alt appraisal products and new products for consultation that feed off Zillow, Trulia, the internet buy /sell services, the fact that appraisal waivers buyers may still want an appraisal contingency in contract etc ...appraisers are not known for being entrepreneurs/tech visionaries, so may pay to get one on board.

More wisdom that has been advocated by many on this forum: Residential mortgage lending, while having a lot of transactions, by definition limits an appraiser's choices, and locks the appraiser into its cycle. In good times, the money flows; in bad times, it crashes.
Diversification is not a new concept ("how old is the saying, "don't keep all your eggs in one basket"), yet for a long time, a big argument against diversification was by many on this forum is, "Well, its easy for you to say, but not that easy to do."
No kidding. If it were that easy, than I suspect everyone would be diversified. But the thrust of your comment (as I interpret it) is this:

We cannot rely on residential mortgage business as we have done so in the past... too many uncertainties and things are changing quickly. We need to expand our business offering outside of that box.
​

I think that paraphrases what I've heard George Hatch say since I first started reading his posts on this forum.

 

[J Grant]

(my bold)

I think everyone, whether they are in favor, neutral, or against the hybrid process, has consistently argued the bolded part. The difference I may have with some/others is this: I advocate that the appraiser charge an appropriate rate for their time/efforts/work product/liability. But if their rate, after all those things are factored in, is lower than mine, then all things being equal, they will be more competitive.

These products will succeed or fail based on appraiser participation. If appraisers, as you suggest, come to the realization that they need to charge more than what is being offered, and if they hold that line, then they'll get more or this product will disappear from the appraiser-option list.

This is good advice, but might hit a wall...

Yes we should charge appropriate, but except for the segment of direct lender clients already paying decently, it won't matter to volume AMC's and lenders who will have staff appraisers do the bifurcated reports. In anticipation and to counter fee appraisers trying to retain fee parity, they are recruiting new licensed to do lower paid work including training their own -( see the thread CoreLogic appraiser trainee program ) It's not for nothing we see so many posts emerging this past year asking for guidance from trainees or from new licensed. Seems they are busy doing AMC work and asking for help from experienced appraiesrs they underbid lol.

 

[Joe Flacco]

Why? In my view, it was this approach that led in great part to where we are today. There was a great demand for something other than the 1004. Yet, appraisers, as a group, dug their heels in and tried to protect the status quo (the 1004 world) rather than seeing the market that existed for something else. The result? Today, everyday millions of dollars flow to agents doing BPOs instead of appraisers doing some form of appraisal (something is less than a 1004). Anyone care to guess that ratio of BPOs ordered everyday as compared to 1004s? Most would be shocked.

Big market participants, through their use of BPOs for years, have clearly demonstrated what they will do if appraisers reject the new valuation services that some want to test.

As a group, we need to hold dear and promote the fundamentals of our profession and quit throwing out specious arguments driven by self-protection. If we are to survive, we have to really start acting as a profession rather than a trade.

Appraisal can't compete with AVM's and BPO's because they are not bound by the same standards. If they are okay with no standards valuations then let them have it. The emphasis on speed and cost in appraisal is making a lot of the appraisals subpar when it comes to developing the value. Probably getting same level of standards as a BPO but just labeled as a appraisal. It is just not being measured because standard 1 compliance is assumed.

 

[J Grant]

More wisdom that has been advocated by many on this forum: Residential mortgage lending, while having a lot of transactions, by definition limits an appraiser's choices, and locks the appraiser into its cycle. In good times, the money flows; in bad times, it crashes.
Diversification is not a new concept ("how old is the saying, "don't keep all your eggs in one basket"), yet for a long time, a big argument against diversification was by many on this forum is, "Well, its easy for you to say, but not that easy to do."
No kidding. If it were that easy, than I suspect everyone would be diversified. But the thrust of your comment (as I interpret it) is this:

We cannot rely on residential mortgage business as we have done so in the past... too many uncertainties and things are changing quickly. We need to expand our business offering outside of that box.
​

I think that paraphrases what I've heard George Hatch say since I first started reading his posts on this forum.

Exactly. But not try to expand in the tired, dated advice seek attorney/estate work....there is not enough of that to keep most res licenses busy and it takes contacts/years of schmoozing for work/ designation to get enough to matter..

If res appraisers can develop a large scale public presence online and create demand with new products for consultation and short form appraisals or appraisals for contract contingents, it can develop to be an alt source but need a core group and entrepreneur/computer whiz involved.


Either it would succeed or not, but just hanging on to l diminishing work and hoping the AMC low pay drive will ever not be there is naive...AMC's and their aligned lenders would never allow supply and demand such as happened in the COW states to drive fees to appropriate levels or above dirt cheap.... now that Fannie/Freddie are going in direction of waivers and bifurcated that except tor the complex/rural and FHA , and segment of lenders not using AMC;s the res lender income source is (painfully ) shrinking.

 

[hastalavista]

This is good advice, and of

Yes we should all charge appropriate, but except for the segment of direct lender clients already paying decently, it won't matter to volume AMC's and lenders who will have staff appraisers do the bifurcated reports, and in anticipation are recruiting new licensed to do lower paid work including training them with their own -( see the thread CoreLogic appraiser trainee program )

As has been brought to light through this discussion (although some want to shout-down those who bring useful information into this discussion because they don't like what they read... and that isn't directed to you, JGrant), there are two types of hybrid products in the market today:
1. A minimal SOW product used for (a) low-risk decisions or (b) asset management
2. A test program being driven by Fannie (with, perhaps, some participation from Freddie)

The minimal SOW product is the one that has been around for years. It is the one that featured prominently in a residential conference presentation in my area earlier this year. It is the one that is promoted as taking less than an hour on the valuation side.

The test program for Fannie is a different SOW. Significantly different. And it remains to be seen if the expectations of Fannie are much different than the expectations for the analysis portion of the 1004. If the test program is adopted into the mainstream, then I doubt seriously it will be a $150 valuation analysis expected to be completed within 1-hour. It will require the same level of development/analysis that a 1004 will require with the only exception being that the inspection-portion will be a "given" in the SOW or by virtue of an extraordinary assumption. If that is the case, then banks/AMCs will need the same competency-level appraiser as they need to do the 1004 (the inspection is the lowest skill-set requirement in the entire process. That doesn't mean that complicated homes don't require a certain skill set to inspect correctly; but does any appraiser question which part of the assignment requires the higher skill-set: physical inspection of a complex property or the valuation of the complex property?
And keep in mind that the hybrid, as it stands now for Fannie Mae, is not a universal replacement for a 1004. So those more complicated properties might not fall within the hybrid bucket to begin with.

If the lenders/AMCs want to hire staff to do the minimal SOW hybrids and pay them $50 (along with their normal employment compensation) and that works for the appraiser-employee, more power too them.
I doubt that a lender is going to want to bring back large appraiser departments to do the hybrids to the higher SOW because I believe they can offer and will take a fair rate from an independent appraiser to do them, thus relieving them of additional employment costs.

Assume there is no change in the total fee paid for a hybrd vs. a 1004 (Let's say that fee is $400 to the appraiser as it stands now). Assume that the hybrid process results on a 2-day faster turn-time.
Question: Is there enough money in that $400 fee to adequately compensate the appraiser and inspector?
If there is, then lenders are going to opt for the hybrid when the transaction falls into the hybrid bucket.
If it isn't, then the lenders have a decision to make: How much more will I pay to get that additional 2-day turn-time?

 

[hastalavista]

Exactly. But not try to expand in the tired, dated advice seek attorney/estate work....there is not enough of that to keep most res licenses busy and it takes contacts/years of schmoozing for work/ designation to get enough to matter..

I wouldn't disagree with looking for untapped opportunities; that's good business. But I wouldn't discount the so-called tired/dated advice. It is neither tired or dated. I turn down work from attorneys/accountants/estates because my pipeline is full of work from attorneys/accountants/estates.
The business is out there.

 

[George Hatch]

Appraisal can't compete with AVM's and BPO's because they are not bound by the same standards. If they are okay with no standards valuations then let them have it. The emphasis on speed and cost in appraisal is making a lot of the appraisals subpar when it comes to developing the value. Probably getting same level of standards as a BPO but just labeled as a appraisal. It is just not being measured because standard 1 compliance is assumed.

The most equal comparison to an appraisal on a SOW basis is the BPO. I doubt there are many users who - if the price is equal - would not choose to obtain an appraisal rather than a BPO. So what's the difference between the two? It isn't necessarily the substantiative elements of the SOW because aside from some reporting disclosures there aren't any.

The primary difference between an SR2 compliant appraisal report and a BPO is the appraisers disclose what they actually did and didn't do, including the various assumptions and limitations involved; whereas most BPOs don't. This is why the readers sometimes assume things about the BPO that didn't happen - because they weren't informed it didn't happen.

To a certain extent the same is true for the AVMs. They don't use the same protocols for data qualification that appraisers routinely use, which isn't necessarily a problem in and of itself; but where they come up short is in not informing the reader of exactly what they did and didn't do and what assumptions and limitations are involved.

So when appraisers complain about being "limited" by the requirements of say what you do and do what you say they are missing the primary REASON those specific elements are required in our minimums. What UTILITY the conformance to those minimums add to the credibility of their work.