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New Appraisers Hate The Idea

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Tom Foster

Senior Member
Joined
Apr 18, 2003
Professional Status
Certified Residential Appraiser
State
California
Appraisers hate the idea. But major lenders this summer have begun offering the fastest-growing alternative to traditional, full-cost appraisals: insured site-inspected electronic appraisals at deeply-discounted prices.


Patrick Stone argues that traditional, full-priced appraisals in many cases represent overkill. “They are more than what is needed to establish value,” he says. CEO Larry Matin claims that most appraisers are just a bunch of lazy worker bees that could never make it in the real bussiness world.

Stone believes “it is idiotic” to spend $350 for a full appraisal on a house that was refinanced using a traditional appraisal a year or two earlier. Similarly, subdivision houses, townhouses and condominium units tend to have relatively predictable market values because comparables are so plentifully available nearby.

Lenders, in turn, say insured electronic valuations beat traditional appraisals by cutting the time required for delivery from two to three weeks on average to just two days.

Adam Bass, senior executive vice president of Ameriquest Mortgage says that in addition to speed, his firm uses the new insured electronic alternative to “replace the subjective aspects” of traditional appraisals.

Giant investors Fannie Mae and Freddie Mac also now encourage use of electronic valuations in certain situations, particularly refinancings of borrowers with high credit scores and equity stakes, as well as certain new home purchases where property data is readily available online.


The fifth largest mortgage lender in the country, ABN-Amro Mortgage Group, says it now uses electronic appraisals extensively and passes along the lower costs directly to its borrowers. Ameriquest Mortgage Co. began using them for certain home purchase transactions in July, and several of the top 10 largest national loan originators reportedly are about to do the same.

The principal developer of the concept, Fidelity National Information Services, a subsidiary of title industry giant Fidelity National Financial, calls its appraisal alternative “Collateral Valuation Insurance” or CVI for short. CVIs typically cost around $175 to $250, according to CEO Patrick Stone, compared with $300 to $350 for traditional appraisals.

At its core, CVI is a form of electronic valuation--tapping into online property databases to obtain comparables and an estimated market value for a loan applicant’s property. But electronic valuations traditionally have had several shortcomings: They may be unable to come up with a final valuation number in parts of the country where online real estate data is scarce or unreliable. They also are “blind” in that no human visits the house being valued to observe its condition and surroundings. And finally, electronic valuations carry no warranty of the valuation itself. If the computer program somehow gets the numbers wrong, the lender may be at risk of loss in the event of foreclosure.

CVI purports to deal with all the drawbacks. It provides access to multiple proprietary databases and guarantees to “hit” the value -on houses anywhere in the U.S. CVI also dispatches a realty agent or appraiser to the property for $15 to $20 for an exterior assessment of the house and the surrounding neighborhood conditions. A checklist must be filled out onsite answering questions about traffic, quality of maintenance of the property, and the existence of any conditions that could depress--or raise-- the market value of the house.

Finally, CVI insures the lender against loss in the event of a foreclosure where the valuation was too high.

The rapid-paced adoption of CVI by major lenders has traditional appraisers in a tizzy. Patrick Turner, an appraiser based in Richmond, VA., says the concept is inherently flawed and is motivated by “greed.”


What’s the bottom line here for you as a home buyer or a prospective refinancer? Ask your lender whether a lower-cost electronic valuation may be sufficient for your transaction. If you are refinancing your house or buying a condo or townhouse and your lender is comfortable with an electronic valuation, why pay more than necessary?
 

Christine Barton

Freshman Member
Joined
Aug 7, 2003
Hi Tom,

Do you know what type of qualifications or certification one needs to perform electronic valuations? Is it the same as a licensed appraiser? I am considering getting into appraisals, mostly due to the new construction in my area. However, these homes are around the same price range and type (Florida Style) so this may be useful in my area. I think this is where the appraisal industry is heading. Do you know where I can get me info?

Thanks,
Christine :D
 

Sean Braudrick

Sophomore Member
Joined
Jul 2, 2003
Christine-

I find it hard to believe that you used the terms "I'm thinking about getting into appraisals" and "I think [CVIs] could be useful in my area" in the same statement. Why bother getting into appraisal if all you can make is $15 to $25 for the exterior inspection??

1. Appraising is NOT math
2. Appraisal involves an "opinion" of value, I haven't met a computer with an opinion yet

The lenders will push for electronic valuations until they, or the companies that insure the transactions, get burned. Then we're right back to the late 80's/early 90's... FIRREA.... gov't bailing out the lenders, etc.

Of course, this time the appraisers that are left will not get the blame, will be viewed as heroes, and can command a LARGER fee! :beer:
 

Farm Gal

Elite Member
Joined
Jan 14, 2002
Professional Status
Licensed Appraiser
State
Nebraska
methinks this be wishful thinkin....


this time the appraisers that are left will not get the blame, will be viewed as heroes, and can command a LARGER fee!

or will be shot at sunrise with all the crooked appraisers and the slimy 'we don' NEED no stinkin' appraisals' lender crowds (who proceeded to charge the borrwers for 'an appraisal anyway) <_<

both of whom assisted in the development of the problem.
 

Tom Foster

Senior Member
Joined
Apr 18, 2003
Professional Status
Certified Residential Appraiser
State
California
These have AVMs have been going on for 7 years +

Check out www.valuecheck.com


Lenders only use them when the loan to value is low and and the borrower has good credit. They will still need some photos of the house to make sure it didn't burn down last week.

Most of us here also have other lines of work that we can fall back on if appraisals become just a "push of the button"
 

Ross (CO)

Senior Member
Joined
Jan 17, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
Wow, that Patrick Stone fellow sure does appear to have all the angles figured out, huh ? He has given the AVM a new name, and seems he has appraisers willing to take a liability position in providing supporting data for a valuation product upon which loans are made....and upon which foreclosures can happen. And, he will pay them $15 for their "report". SShhhhh! We don't want the word to get out. ( If just a few of us horde up all these $15 "report" assignments we can keep the others from getting any of them ) Tom, are these folks good people to work for ? Can one get c.o.d. payment for those $15 reports, or is invoicing the only way it happens ? How many have you been able to do in a day, on average ?
 

Mike Garrett RAA

Elite Member
Gold Supporting Member
Joined
Jan 14, 2002
Professional Status
Certified Residential Appraiser
State
Colorado
They have been contacting real estate agents in our market for the past 6 months. Most just laugh at $15 or $20 to go do an inspection.

Nothing new other than the name....same ol s###, different day. Just wait a few months...half of the mortgage lenders will be out of business as the interest rates rise.

I find it interesting that Fannie Mae will not use it's AVM program on it's REOs. They want a real live appraiser out there to determine what the property is worth.

Wow, just think, for $75 dollars less you can have ahhhhh, ahhhhhh, what is that thing called now?????
 
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