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Lender Desktop Appraisals

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J asked if I would start a specific thread on this so here it is.

There are many different clients that might desire a desktop appraisal. An absolutely enormous market for these has opened up in recent years for our lender clients. I am somewhat familiar with these, as well as other alternate valuation products that lenders employ. Terrel opened a thread (5-cent cigar) challenging the forum to write a new form format for these.

So what I know is this:

Lenders employ alternate valuation products of many various sorts. I don't think many appraisers grasp the scope of the market for alternate valuation products that are out there and our lender clients are purchasing currently. I don't have the numbers, but would not be shocked if it was 50% of the market in terms of total dollars spent (I would guess it is less, but just saying I would not be shocked if it was that much). Many of these are AVM type products and many of those are populated with you guessed it, appraisal data. Not all of these are used for loan origination. Now lets not get bogged down with that for the moment and keep going. One of the products licensed appraisers have a shot at completing are limited desktop appraisals. This market segment was previously dominated by the BPO, however that appears to be shifting to appraisers. I can only guess this is for various reasons, not short of being illegal in most states. It is clear from many posts on the subject, that many appraisers are still learning about desktops in general, as we are all so used to doing on-site inspection, "full" appraisals if you will.

I have done many of the limited desktops and was also a user of the alternate valuation products in a previous job. Understanding the appraiser role using all of the products is another subject worth discussing, but again lets skip that for now. What we need to talk about here are the lender desktop appraisals they want us to do as independent contractors.

Again there are many versions of these out there. The one that I am most familiar with is Red Bell. Red Bell is a service that provides numerous alternative valuation products, sourced with as many sources of data as are out there. The desktop appraisal product is one that a licensed appraiser completes. Red Bell has a system where the appraiser logs into it, and a group of assignments are placed in the que. Each is a separate desktop appraisal. The appraiser uses only the data Red Bell supplies and does not use their own data from the MLS. The reports do have language that limits the scope to only the Red Bell data. The appraisals are defined as a single price and they are appraisals, not reviews, although part of the appraisal report compares an original appraisal to the desktop appraisers work - hard to explain without seeing it. I would get 10-20 of these at a crack and was paid $75 and up per order (depending on the needed turn time). These took between 1-3 hours to complete with an average of just over 2 hours.

Most of these were rural appraisals or ugly appraisals, which was obviously why the client wanted a second look. I did them for the entire state and was not allowed to choose certain areas - it was all or nothing. I had zero problem with any of this so far and the reports had language that put this in context. However, the problem I ultimately had was not the language that was in the reports, but the language that was not. The contextual language did not go far enough to identify the expectations of the client in the context of the limited scope, at least as far as I was concerned. Certainly there are appraisers out there who feel differently (or don't care). The other major problem was that I did not have control over the digital signature - that was applied by the client! I became uncomfortable with the arrangement immediately and after failed attempts to get these concerns addressed, stopped doing them.

I highly question if the advertised USPAP compliant reports today are in fact USPAP compliant. But who knows, maybe they have figured it out. The market segment is growing for licensed appraisers and there is no doubt many appraisers are going to start doing them.
 

J Grant

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Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Thank you for posting what is going on from direct experience. The majority of these desktop products I presume will be to some degree pre filled out/populated on Client proprietary based web based software (not completed on appraiser's own software)

I did a few BPO's on this type of web based software and hated working with it. But at that time for the 3 I did, I researched and inputted my own comps.

If Red Bell pre populates the data or comps, how is it the appraiser's "own" product? What takes 1-3 hours (or maybe I misunderstand...do they populate the comps, or does the appraise do it? Wow they are ordering them statewide from an out of area appraiser on rural properties ..that would make me nervous, I can see doing them in local area where appraiser has knowledge...
 
D

Deleted member 130081

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Thank you for posting what is going on from direct experience. The majority of these desktop products I presume will be to some degree pre filled out/populated on Client proprietary based web based software (not completed on appraiser's own software)

I did a few BPO's on this type of web based software and hated working with it. But at that time for the 3 I did, I researched and inputted my own comps.

If Red Bell pre populates the data or comps, how is it the appraiser's "own" product? What takes 1-3 hours (or maybe I misunderstand...do they populate the comps, or does the appraise do it? Wow they are ordering them statewide from an out of area appraiser on rural properties ..that would make me nervous, I can see doing them in local area where appraiser has knowledge...

Right. So the geo-competency thing is really at the appraiser discretion - would you feel ok with the conclusion based on the scope of work sort of thing - not all appraisers are comfortable in this scenario and I don't blame them (I'm just not one of them). However, that was one piece where there was some contextual language, but not enough. The report is not populated by the appraiser, other than the address and client, etc. What is populated is the data sources. There are some search mechanisms that can produce different sets of data, but the source is Red Bell, not the appraisers sources (though to be fair we could use our own MLS if the situation called for it). I don't think many appraisers fully grasp how big of a business it is to capture and sell data. Alternate data collection has been big business for a very long time and really the use (or theft?) of (our?) appraisal data is sort of new to the industry (not so new anymore I suppose). MLS sells their data, FNMA probably sells appraisal data, I wouldn't be shocked if Appraisal Port and Mercury sell our appraisal data too. These data companies employ people to harvest public records data too. When you go into one of these systems, there is often more data than an appraiser dreamed was possible to assemble in one place. The hilarious thing is, you still cant (and never will be able to) program a computer to reconcile it - lol. I was a person employed to reconcile all of this data once.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
If Red Bell fills out everything including the comps and all appraiser fills in is the address and client...what is the appraiser doing ? The adjustments? Nothing? The appraiser just accepts the pre populated Red Bell comps as the appropriate comps? Is the value pre populated too, or does the appraiser fill that in?

I personally fail to see how a form filled in with client pre populated data and their selected comps can result in "my" opinion of value,...the lack of geo competency makes it hghly questionable ....(jmo maybe I am missing something. ).
 
D

Deleted member 130081

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If Red Bell fills out everything including the comps and all appraiser fills in is the address and client...what is the appraiser doing ? The adjustments? Nothing? The appraiser just accepts the pre populated Red Bell comps as the appropriate comps? Is the value pre populated too, or does the appraiser fill that in?

I personally fail to see how a form filled in with client pre populated data and their selected comps can result in "my" opinion of value,...the lack of geo competency makes it hghly questionable ....(jmo maybe I am missing something. ).

No, no, no. The only thing pre-populated in the report is the name of the client and the subject address. You need to envision a software program that incorporates both a report function and multiple search engines integrated to each other (its actually awesome). Its like your software provider, MLS, public records, and internet all on one screen. Within the same platform, the appraiser can do research and report conclusions. The final report is a separate document that is sent to the client. The appraiser makes conclusions about market trends, picks comps, makes adjustments, opines a value, etc., however much of the data selected by the appraiser is populated into the report instead of manual entry - this is why the appraiser can do more in less time. It is an appraisal developed by the appraiser every step of the way.

In terms of client/USPAP context, think about it like this, what if you decided that you were only going to use MLS sales and not consider any other sources for sales? Nothing really wrong with that right? So long as you can still develop an opinion that is credible to the client in the context of the intended use. Its like that, except Red Bell provides the sales data and the language that defines the credibility in the context of the of the intended use is missing/inadequate!!! So, they hit it out of the park on the first part and struck out on the most important part.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Thanks for clarification. I can see how it would work but for out of area in other parts of state or region..I suppose that is an individual appraiser decision.

How soon did they expect turn time from the time they sent the order?
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
The fact that a company uses out of area appraisers for desktop-.how can an appraiser who has not personally spent time in an area know it well enough to choose /reject appropriate comps and understand trends , even with a plethora of data-...because the data still does not inform about a specific location, esp MLS which rarely if ever mentions a negative.

Real world example...report I am working on now. Subject is.located in a section of downtown Lake Worth...anybody who knows it knows that certain sections are nice and others terrible, a mere few blocks apart. When MLS shows an individual property, it just shows the house, nothing around it.

Subject house is in the bad area. And I mean scary bad...a dumping ground sadly for addicts and the homeless and the mentally ill. None of which of course MLS mentions. About 5 blocks away it changes into Yuppie Ville, gentrifying cutsie poo, though with still a run down house here and there. Then a few blocks away motels that rent rooms by the hour and pawn shops. None of which an out of area appraiser would have a clue about by looking at MLS photos and property descriptions.
 
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D

Deleted member 130081

Guest
The fact that a company uses out of area appraisers for desktop-.how can an appraiser who has not personally spent time in an area know it well enough to choose /reject appropriate comps and understand trends , even with a plethora of data-...because the data still does not inform about a specific location, esp MLS which rarely if ever mentions a negative.

Real world example...report I am working on now. Subject is.located in a section of downtown Lake Worth...anybody who knows it knows that certain sections are nice and others terrible, a mere few blocks apart. When MLS shows an individual property, it just shows the house, nothing around it.

Subject house is in the bad area. And I mean scary bad...a dumping ground sadly for addicts and the homeless and the mentally ill. None of which of course MLS mentions. About 5 blocks away it changes into Yuppie Ville, gentrifying cutsie poo, though with still a run down house here and there. Then a few blocks away motels that rent rooms by the hour and pawn shops. None of which an out of area appraiser would have a clue about by looking at MLS photos and property descriptions.

Yes, this is a limitation of the credibility of these assignments. So, geo competency is sort of a relative thing when you think about it. It really has more to do with the client expectations than anything else. Take your example, you happen to know the area well right? But why wouldn't sales data tell the same story? Price is price no? Ok another example, I live in a small village and the houses look alike, but command different prices. This is due to the nuances of the neighborhoods - one street is different than the next. Now, I know these things because I am a resident, but another appraiser from the next city over will not know these things. The point is the geo thing has to stop somewhere, otherwise we would only work in our own neighborhood, which if course is not realistic. So while I do see and agree to your point to an extent, I also believe data is data and sale prices are sale prices. The other piece of this is that these desktops almost always include an original appraisal as a piece of the data, and these are relied upon as the boots on the ground. In some cases when the desktop is really going nowhere and the appraiser can not get around the geo thing, field reviews or additional appraisals from local people are ordered. The main question of these appraisals, even though they are not reviews, is did the OA do the best they could? Its sort of like getting a review by skipping the review and getting a second opinion.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
The best result no matter the format or short form or client purpose is to get an appraisal by a competent person who knows the area...one that appraises in an area often enough to be aware of trends and understand why certain sections or locations or subdivisions are worth more than others or have adverse issues ( which MLS typically ignores ). Even seeing an older appraisal might not be able to properly inform .

I appraise in downtown Lake Worth on a monthly basis and sill have to keep up ..MLS describes the whole town as having "potential". I had not been in the subject immediate section lately. It's actually gotten worse ( run down properties still..while other areas are improving, this one got worse..guess all the displaced are going there) While a few lone houses are fixed up , others are in declining condition. A drive around block passing by a street person walking in his underwear with his shirt on his head and then a man existing a car with what looked like 2 working girls -a long way to go to gentrification.

It's such an easy choice. A lender can order a desktop from a local appraiser or a desktop from out of area appraiser. How hard is it to do that, they can't even manage the most basic of due diligence, even for a desktop? Worthless data culled from data with no context but they get what they pay for.
 
Last edited:
D

Deleted member 130081

Guest
The best result no matter the format or short form or client purpose is to get an appraisal by a competent person who knows the area...one that appraises in an area often enough to be aware of trends and understand why certain sections or locations or subdivisions are worth more than others or have adverse issues ( which MLS typically ignores ). Even seeing an older appraisal might not be able to properly inform .

I appraise in downtown Lake Worth on a monthly basis and sill have to keep up ..MLS describes the whole town as having "potential". I had not been in the subject immediate section lately. It's actually gotten worse ( run down properties still..while other areas are improving, this one got worse..guess all the displaced are going there) While a few lone houses are fixed up , others are in declining condition. A drive around block passing by a street person walking in his underwear with his shirt on his head and then a man existing a car with what looked like 2 working girls -a long way to go to gentrification.

It's such an easy choice. A lender can order a desktop from a local appraiser or a desktop from out of area appraiser. How hard is it to do that, they can't even manage the most basic of due diligence, even for a desktop? Worthless data culled from data with no context but they get what they pay for.

I feel ya J but your just not grasping the whole thing. Of course it is best to have local person do it. But you are wrong about the due diligence part. This is due diligence. They are spending more money on a valuation because the first one was questionable. These are not for origination and if they are, are supplemental to the OA. Most of these are for portfolio assessments. These additional products help determine the over-all risk factor of each loan. There are often many valuations ordered for each loan that the appraiser has no chance of every being a part of. For instance UAV (Underwriter Assisted Valuation), AVM (Automated Valuation Model), BPO (Broker Price Opinion) and many more. I had a job for awhile where I served as a specialized underwriter. I was hired because I was an appraiser, but served as an underwriter. The loan file would have an OA, FR, BPO, REO, UAV, AVM and other value products. On top of that, I had access to MLS data mining services that would provide subject/market specific raw data. I also had access to systems where I could pull my own comp searches through public records data. We had system that sold MLS data, Public Records data and APPRAISAL DATA. the only data I couldnt access was the MLS data directly, because you have to be licensed in real estate for that and underwriters typically are not. Hence, the industry need for alternate data sources. I reconciled ALL of the data and if I still couldn't make sense of it, ordered a field review. The regular underwriters would attempt to do all these first and when they got stuck, sent it to us, the value guru underwriters.
 
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