Broker information in MLS etc are data sources an appraiser uses, they were never considered part of the appraisal practice appraiser engaged in.
In a subject inspection, for decades Fannie/Freddie/FHA/lenders mattered where the "information" came from for inspection, as certification the licensed appraiser did it. or accompanied trainee (trainee getting licensed after years accompanying mentor on inspections)
Yes. For years, there were four kinds of appraisals typically used (I'll rank them in order of what I think their transaction volume is):
1. Traditional 1004, etc., with the appraiser doing an interior/exterior inspection.
2. Drive-by, where the appraiser is doing the exterior inspection.
3. Desktop where the appraiser is doing no inspection.
4. Hybrid, where the inspection (typically exterior) was done by someone else. BTW, anyone remember Zaio? Their model wasn't bad; their problem was it didn't work in a lot of markets. Had they stuck to the high-density markets where major RMBS's were concentrated, they could have been successful selling that product to those entities as part of a due diligence and troubled asset valuation tool.
Note how what was an inspection is now being re named. and demoted to "data gathering," , "data collection" or , "information" from a source ...setting the stage so subject inspection instead of appraisal practice can be said, nah, it;s not, it's just like any other data gathering...opening the door for bifurcated anyone can inspect for the appraisal, an hour class how to measure and press a button to photo. Fine, you win, appraisers can sit at computer instead of inspecting ( appraisers won't be able to afford a car anyway lol as each new development indicates)
It is what it is. It is an "inspection" that is part of the data-gathering/data-collection process. The change is that it isn't done by the appraiser who is doing the valuation component.
As I've said before, some assignments require reliance of a property's characteristics by a party who has a direct interest in the property and outcome. Ever do an insurance valuation where the property has burned down? Do you know what the insurance company (the client) says?
"We'll send you the photos we have, but they are few and old. Interview the property owner to find out anything else you need to supplement that data."
There are two USPAP Standards in regard to real property appraisals: Development (gathering the data, analyzing it, and making conclusions) and Reporting (communicating the pertinent data and analysis, and reporting the results).
Where does the inspection process fall?
And this isn't an argument about, on average, is a 3rd party inspector being as good or better at inspecting the property for an appraisal than the appraiser who is completing the assignment. Not only, in general, but for the significant part of the time, the appraiser is better. If the appraiser is the one who inspects and values the property, that increases the reliability of the results (IMO).
This is an argument about where does a hybrid fall within the risk-profile of the intended use, and is relying on a 3rd party inspection sufficient enough to conclude credible results (given the SOW & intended use)?
Well, if an assignment risk-profile (from the client's perspective) is a desktop might suffice, then how is the hybrid, with a drive-by contemporaneous photo of the subject, not better (more reliable)?
If an assignment risk-profile (from the client's perspective is a desktop is more than enough, then how is the hybrid, with a drive-by contemporaneous photo of the subject, not sufficient given the intended use?
If an assignment risk-profile is not low, should a hybrid be used? No (IMO). It shouldn't be an option. A more reliable (traditional) appraisal is the prudent appraisal to obtain.
Again, two things will stop hybrids dead in their tracks:
1. The regulators decide they are not appropriate (highly unlikely since they've already approved them)
2. Appraisers decide not to do them (highly unlikely since appraisers are doing them now... and if the fees increase, more will join in)
Short of the above, what is the next best solution?
A. Attempt to put limits on their use; if it isn't low-risk, a more reliable (traditional) appraisal is the prudent appraisal to obtain. These limits are best addressed by the regulators; define the loan/transaction types that will qualify for such a product. Easy for a FRT, not so easy for the GSEs. But not impossible. Just an uphill battle.
