More AMC and PDC Bull$hit

[J Grant]

"typically motivated" compared to what? That's where you and I have always disagreed. If it's even possible for what's typical to vary by property type, by locale, by year or even time of year then that possibility stands as proof of the idea that "typical" is always relational, not fixed.

My previous point stands untouched. Actually, it stands as being reaffirmed.

I did not invent the definition of market value. It is what it is. The terms work together, not in isolation. A buyer who is typically motivated, well-informed, and not subject to undue stimulus. Not just one thing in isolation.

 

[J Grant]

So there you have it. If the appraisal requirements of the GSE pipelines prove too cumbersome for these lenders then some of them might seek their other alternatives.

The lenders seek whatever will make their loans work. That was reined in by the HVCC and Dodd-Frank on the loan end, with many former reckless lending practices no longer allowed. So what to do? Become more reckless and evade regulations on the valuation end. Thus, a waiver/value acceptance and fast-food hybrids, which are supposedly faster.

The other alternatives these lenders seek still come from the GSE's, because they hold the conduit to taxpayer backing. Private held mortgages often have higher downpayment terms and higher interest rates or balloon mortgages due in fiv years. Boo hoo, the lenders who benefit by offering consumers the fav orable terms of GSE-backed loans have to wait several days for an appraisal. Cry me a river for how cumbersome that is!

 

[George Hatch]

I did not invent the definition of market value. It is what it is. The terms work together, not in isolation. A buyer who is typically motivated, well-informed, and not subject to undue stimulus. Not just one thing in isolation.

This discussion does not hinge upon the definition of MV as a whole. You should let that strawman go. What is at issue is the meaning of "typically motivated". Which is not addressed in the definition of MV regardless of any presumption to the contrary.

 

[Tom D]

I did not invent the definition of market value. It is what it is.

As per the liberal mind thought. MV is a living document, it changes as the current time need's it to change. Just like our appraisal form, irregardless of any known common sense, or truth. There are now definition subsets of subsets, depending on fannie's need. We just have to take the classes to know them all to the 1/10th degree.

 

[J Grant]

This discussion does not hinge upon the definition of MV as a whole. You should let that strawman go. What is at issue is the meaning of "typically motivated". Which is not addressed in the definition of MV regardless of any presumption to the contrary.

I wish it were adressed in the definition - that would clarify things and put appraisers on a more even footing.

 

[George Hatch]

None of the qualifiers in the other assumptions are directly addressed, either. All can vary and do vary on the basis of property type, location, time, market conditions, etc. What's typical for one combination of factors can be very different for another. What do any of these qualifiers mean except in comparison to the other transactions to which they are being compared?

buyer and seller are typically motivated
both parties are well informed or well advised
reasonable time is allowed for exposure in the open market
price represents the normal consideration

I daresay that "compared to the other competing sales" is as solid footing as it takes for any appraiser to form their opinions. If "reasonable exposure" for this particular SFR type in this location during this time frame is <30 days then what difference does in make if the median DOMs for all SFRs in that area is 4-6 months? If a particular home type is most commonly marketed between individual brokers - as is sometimes the case with certain non-res property types - then what difference does it make if other property types are marketed through the MLS or Craigslist or FSBO signs in the front yard?

I can point at these sales to explain why my opinion of exposure time is <30 days, why reasonable exposure might mean broker-to-broker or cold-call telemarketing, why typical financing might mean bitcoin or horses and not cash.

 

[sputnam]

The AMC is a wholesale buyer of appraisal services - they are not simply looking for a lower cost. They are looking for the lowest cost so they can make a profit over it with the remaining fee split of what the borrower paid

A lender or loan wholesaler on the other hand is a retail buyer of appraisals - their end use is to use the appraisal to UW a loan - the lenders profit comes from making loans,not from up charging on apparsials (which they are not allowed to do - only a third party is allowed to upcharge on the HUD- which is why when a lender owns an AMC, it is a thrid party set up umbrella company with its own name )

Exactly right... which is what a rational company would do. They can't force appraisers to accept low fees.

 

[J Grant]

Exactly right... which is what a rational company would do. They can't force appraisers to accept low fees.

Of course, they can't force appraisers to accept low fees ; however, the AMC's narrow control of a large share of volume creates an extremely imbalanced supply and demand, which is why they can get such low fees. And as you did not contest it, we agree that the AMC is a wholesale buyer, not an end-use buyer ( like a lender is ) of appraisal services.

A lender's profit comes from making loans, not gouging a split of an appraisal fee. Thus a lender only needs an appraisal fee be C and R since the borrower covers the appraisal fee. The AMC, on the other hand, takes a split from that appraisal fee, - an AMC gets compensated from its vendor appraiser, thus is unlike any other "rational" business that charges its customer a cost (the customer of the AMC is the lender) .

An appraisal was never meant to be a middleman "product" to provide the profit for the AMC industry. An appraisal is far too labor-intensive and yields too little production output for that. AMCs in the old days, prior to HVCC, used to charge maybe 15% of the appraisal fee as a discount; now they gouge as much as they can.

 

[Terrel L. Shields]

I said the RESULT of MV appraisals would be to stem extreme volatility, either up or down, in the market.

Actually, that volatility was exactly what happened in 2008-11. Using REOs as "arm's length" sales was a major part of that.

The most probable price is the definition of Market value.

Under certain conditions. But is there not a time when no sale or few sales can meet all the conditions of MV? Such as, is it really a competitive and open market when a financial crisis is dominating the market?

Can a seller really act prudently with a foreclosure notice sitting on their table? Thus are the buyer and seller, each acting prudently and knowledgeably, and each having equal bargaining power? Of course not. The buyer has the whip hand and other buyers are limited by the reluctance of lenders. Cash is King. The seller is forced to sell by the lender. And the lender reselling an REO might be forced to do so, or they might keep the house and marking it up as part of their own effort to inflate their reserves . (meaning 'booking' $300,000 as their own asset as the FDIC requires - again I am talking banks not FNMA- rather than selling it for $200,000 and thus having to cut their bank reserves by $100,000.)

 

[Terrel L. Shields]

we agree that the AMC is a wholesale buyer,

I think they are a jobber, an intermediary who delivers a product to the end buyer and does not necessarily act as an independent buyer of services. They arbitrage the difference in what the lender is extracting from the borrower and what the appraiser agrees to accept for compensation. So, there are 2 sides of the equation. The AMC cannot dictate fees but the appraiser is unwilling to hold out for more in fear of losing work. Catch 22.