Obtaining multiple valuations to select the most reliable valuation;

[RCA]

How did I miss this? When did "value shopping become legal"

§ 1026.42 Valuation independence. | Consumer Financial Protection Bureau

§ 1026.42 is part of 12 CFR Part 1026 (Regulation Z). Regulation Z protects people when they use consumer credit.

www.consumerfinance.gov

3) Permitted actions. Examples of actions that do not violate paragraph (c)(1) or (c)(2) include:

(i) Asking a person that prepares a valuation to consider additional, appropriate property information, including information about comparable properties, to make or support a valuation;

(ii) Requesting that a person that prepares a valuation provide further detail, substantiation, or explanation for the person's conclusion about the value of the consumer's principal dwelling;

(iii) Asking a person that prepares a valuation to correct errors in the valuation;

(iv) Obtaining multiple valuations for the consumer's principal dwelling to select the most reliable valuation;

(v) Withholding compensation due to breach of contract or substandard performance of services; and

(vi) Taking action permitted or required by applicable Federal or state statute, regulation, or agency guidance.

What else is new? What is the surprise? We have sloppy appraisal standards. The value conclusions are invariably questionable because of the sloppy USPAP and other standards and guidelines which don't specify strict protocols for the different valuation approaches, in particular the SCA. Two indepedent appraisers can and do evaluate the same property as of the same effective date under the same SOW and come up with large differences in their value conclusions. Given that, getting several opinions and taking the highest is indeed acceptable - although a statistician would most likely recommend taking the average of the two, according to established principles.

We need a new appraisal organization and new standards that are more advanced and accurate.

 

[alebrewer]

Probably was put in there for that reason. Or the lenders lobbied so that they can have a way out to order another appraisal so that they would not lose out to their competition.

I remember coming in low on a purchased 4 years ago. I accidentally checked "slab", even though I took the pic of the foundation and the crawl space. The order was for a conventional loan....Did the lender asked to to correct this? No. Did I get a call from the buyers agent asking if homes with crawl spaces have more value? Yes.

After not receiving any more orders from this company, I checked to see if the loan went through. It did. They must have used that one error to order a new appraisal.

My appraisal was not crap, just one error that did not affect the value (as I said, they had a pic or the crawl space and the pic was labeled crawl space.) If they asked me to fix the appraisal, they could not justify ordering a new appraisal....for value shopping purposes.

I have another lender that will research the heck out of my appraisal and for comps when I come in low....looking for a reason to order another appraisal or to reject the report to lower my score (less orders).


FWIW, I think lenders are abusing what was supposed to be a meaningful change in the practice. Instead of when seeing a juiced appraisal and ordering another one, they are doing the opposite. They are nick picking the reports just to have an excuse to order another appraisal.

No doubt the loophole is used to subvert the system, and no doubt your appraisal was spot on. I have been on the other side - with FHA appraisals - where the appraisal was just crap. And there are still a lot of folks out there that generate crap. At any rate, the lender was stuck with the crappy appraisal (or at least believed they were) as the crappy appraiser refused to acknowledge his/her crappiness.

 

[J Grant]

What else is new? What is the surprise? We have sloppy appraisal standards. The value conclusions are invariably questionable because of the sloppy USPAP and other standards and guidelines which don't specify strict protocols for the different valuation approaches, in particular the SCA. Two indepedent appraisers can and do evaluate the same property as of the same effective date under the same SOW and come up with large differences in their value conclusions. Given that, getting several opinions and taking the highest is indeed acceptable - although a statistician would most likely recommend taking the average of the two, according to established principles.

We need a new appraisal organization and new standards that are more advanced and accurate.

Choosing the highest value is value shopping and contradicts the market value definition, which states the most probable price ( not the highest price). There are times when the most probable price is higher, lower, or the average, and this is the appraiser; 's opinion and not cold statistics.

Competent appraisers, in most cases, should not have large differences in value opinions, though the divergence will be larger in complex properties. It is usually a profiteering motive of a poor appraiser selection that leads to a large difference where one of the values is not credibly supported.

There is nothing wrong with the standards, though I agree some can be more focused and specific, partially for lending practice. What is wrong is the profiteer intrusion, which leads to poor appraiser selection and a turn time, typically 48 hours after inspection in lending, which does not allow proper development. Adding even a day in turn time would help. Yes, an appraiser can ask for more time, but doing so on too many occasions leads to work being cut off. As does coming in "low" ( which often is a well-supported market value opinion ). The system is so corrupt by now in many cases as to who is selected it is worse than back in the mortgage broker select days.

 

[RCA]

Choosing the highest value is value shopping and contradicts the market value definition, which states the most probable price ( not the highest price). There are times when the most probable price is higher, lower, or the average, and this is the appraiser; 's opinion and not cold statistics.

Competent appraisers, in most cases, should not have large differences in value opinions, though the divergence will be larger in complex properties. It is usually a profiteering motive of a poor appraiser selection that leads to a large difference where one of the values is not credibly supported.

There is nothing wrong with the standards, though I agree some can be more focused and specific, partially for lending practice. What is wrong is the profiteer intrusion, which leads to poor appraiser selection and a turn time, typically 48 hours after inspection in lending, which does not allow proper development. Adding even a day in turn time would help. Yes, an appraiser can ask for more time, but doing so on too many occasions leads to work being cut off. As does coming in "low" ( which often is a well-supported market value opinion ). The system is so corrupt by now in many cases as to who is selected it is worse than back in the mortgage broker select days.

Within the context of what most residential appraisers understand, and to be clear their is much they don't understand - but as the saying goes: what they don't know, they don't know - anyway within this context, I do pretty much agree with their observations. I started using MARS after 2-3 appraising. My appraisal techniques have advanced by an order of magnitude in the past several years. So, my opinions have changed. I am in a different world than most. I try to explain my arguments on this forum from time to time - but the explanations are rather short and if you are not willing to actively consider them, they are easy to dismiss or turn a blind eye towards. I really don't care at this point - because I have more important things to do than convince hard-headed appraisrs who are happy with the way things are.

There are very very few really competent people, technically competent, in residential appraisal. Very few. One could say "appraisal science" is virtually non-existent. If you want to listen to appraisers who claim to be experts on statistics - you will find enough of them - but they actually don't really know the right kind of statistics for appraisal. They know parametric and inferential statistics - yes. These people are a dime a dozen.

What you need to know is Data Mining, non-parametric statistics - and programming (Preferably R or Python). If you are not at this level, you are in absolutely no position to understand what I am saying.

So, your post is BS, in fact it is highly contradictory. "... should not have large differences in value opinions ..." is beside the point, because in high profile cases we do see there are indeed high differences in value conclusions. And since the appraisal reports are rarely if ever published, none of us is in a position to say why they are different and certainly in no position to make speculative judgements as to motive. The fact is they are different. And one very large reason for that is that currently practiced protocols allow for large unconstrained subjective judgements. --- Unfortunately almost no appraisers are trained in "Constraint Logic Programming" - and so don't really understand the impact of mathematical constraints on appraisal. So, all I can do here is hint at some avenues that curious and highly intelligent appraisers might consider.

The reality is that most residential appraisal reports are little more than rubber stamps. They certainly can't be relied upon. And for the past 20 years, other have been saying the same. So, it should not be a surprise that their market value is so low.