Review an AVM as part of the appraisal?

[AppraizinAZ]

I have buckled under and am doing a big box AMC order....It seems they are giving me a "FREE AVM" which MUST be included in the appraisal with an attached addendum stating why it is good, flawed, bad, ugly, etc...about 15 sentences of "what to discuss" and write about. Is this typical??? I didn't know we are now in the business of doing reviews on AVM's. I've never EVER had anyone ask me to utilize an AVM, much less add it to my report. Is this new or just new to me? Love your feedback.

For those interested in the differences, this is what I found:

After I completed the appraisal, then just for fun,...pulled up the AVM prepared (free, just for little ol me) and I wrote what I found...AVM's sales were between 5 and 7 months old, most comps approx 1 mile away, all but 1 did not have pools. (which held water in this market, pardon the pun) All were on small lots. Only 1 was similar to the subject out of 7 sales.

All comparable sales utilized in my appraisal were recent, within 1-2 months old, within the same subdivision, same builder, 2 with the same floorplan, all with pools and similar .25 acre lots. Lest you think this AVM was run some time ago, it was prepared about 2 days prior to assigning the appraisal to me. Quite a difference.

I mentioned its parameters were probably flawed by the person making it, which means it's flawed from the beginning using someone uneducated in the choosing of comparable sales to create a credible or meaningful value and was misleading to anyone reading about the comparables (they had a $100K range by the way)

I guess I'm ranting, but is this expected now? I've never heard of this before, but it seems we are now to provide a review of AVM's on top of the appraisal? I'd really like to hear from anyone who has a solid opinion on this and how they are handling this kind of thing. I'm surprised they can even ask for it.

Thank you in advance for sharing your insights...I know it's hot out but please refrain from blasting me if I'm just not seeing this clearly.

 

[stangtime]

I'd pass. I think you're looking at a whole lot more work than you bargained for.

All AMC work does not require this. I've yet to be handed something like that and if I was I'd probably walk away.

Dan

 

[CANative]

How much extra are you charging for this additional work? How are you describing your analysis of this information in the main report?

I don't see how an AVM could be this bad. I mean, just run the "comp search" function in NDCdata and it will spit out quite a few sales with pretty good comparability.

 

[NC Appraising]

Freddie Mac frowns on this practice. They see it as a sort of pressure or a pre-determined value. Which it is in my opinion. It is similar to the broker putting a estimated value on the report and then having to explain why the value is different. Same damn thing, just more than likely the differant direction....Still WRONG!! A under-inlfated appraisal is just as bad as a over-valued appraisal...

Tell them that they are violating the HVCC and that you are going to report them to the IVPI


Contact Freddie or Fannie and see what they think about it. Does your state regulate AMC's? I see this as a form of pressure and pre-determined value....



http://www.freddiemac.com/sell/guide/bulletins/pdf/bll0918.pdf







Automated Valuation Model, Freddie Mac, Industry
Freddie Mac announced that starting February 28, 2010, Home Value Explorer (HVE) will assist lenders in reviewing appraisals. Loan Prospector will provide a point value estimate for the property address from HVE, which is Freddie’s AVM. The use of HVE, along with appraisal best practices, can be found in Seller/Servicer Guide Bulletin 2009-18. Loan Prospector will return the HVE point value estimate that can then be used to determine whether an appraisal requires additional review.
Freddie Mac recommends that if the variance between an appraisal and the HVE point value estimate is more than 20 percent then: 1) the appraisal should be considered for additional review by a senior underwriter or in-house appraiser; 2) obtain a review appraisal or a second appraisal; 0r 3) reject the appraisal.
Freddie adds that the HVE point value estimate from Loan Prospector should not be shared with the appraiser of the subject property; and all HVE data should be treated as strictly confidential and appraiser independence should be maintained

 

[Lee Lansford]

...

I've never heard of this before, but it seems we are now to provide a review of AVM's on top of the appraisal? I'd really like to hear from anyone who has a solid opinion on this and how they are handling this kind of thing. I'm surprised they can even ask for it.

Thank you in advance for sharing your insights...I know it's hot out but please refrain from blasting me if I'm just not seeing this clearly.

One suggestion: Carefully study Advisory Opinion 18 as it quite nicely addresses AVMs and appraisers "use" of same.

 

[Metamorphic]

Automated Valuation Model, Freddie Mac, Industry
Freddie Mac announced that starting February 28, 2010, Home Value Explorer (HVE) will assist lenders in reviewing appraisals. Loan Prospector will provide a point value estimate for the property address from HVE, which is Freddie’s AVM. The use of HVE, along with appraisal best practices, can be found in Seller/Servicer Guide Bulletin 2009-18. Loan Prospector will return the HVE point value estimate that can then be used to determine whether an appraisal requires additional review.
Freddie Mac recommends that if the variance between an appraisal and the HVE point value estimate is more than 20 percent then: 1) the appraisal should be considered for additional review by a senior underwriter or in-house appraiser; 2) obtain a review appraisal or a second appraisal; 0r 3) reject the appraisal.
Freddie adds that the HVE point value estimate from Loan Prospector should not be shared with the appraiser of the subject property; and all HVE data should be treated as strictly confidential and appraiser independence should be maintained

This is the foundation of it. FnF told the lenders they have to consider AVM results. Since they dont actually do any work or know anything about valuation they're putting that duty off on appraisers.

You could look at this as extra work. I'm starting to see where its really just expedited normal work. If they didn't give you this info up front, you'd be getting a stip a week from now asking you about this comp and that comp so you'd be doing the same work piecemeal without sight of the real objective.

One of the things I do on most assignments is run a couple of free AVMs than throw in a quick comment about why my number is different than the AVMs. I think maybe I head off a little of this that way. Who knows though.

 

[Summer]

Anyone who is reconciling their appraisals to AVMs should lose their license. That is just crazy. I refuse to do this, against BPOs, even do desktops and there is no way in hell I am giving them MLS data. Let them join the boards themselves.

Appraisers have no one to blame but themselves if they start doing this type of work.

To all the appraisers doing this - focus on what you are supposed to be doing. You are to determine market value, inspect the property and ensure you are not being influenced by data from AMCs. By giving you the avm or the BPO they are influencing value and no better then what they preach against.

 

[David Sawyer]

Anyone who is reconciling their appraisals to AVMs should lose their license. That is just crazy. I refuse to do this, against BPOs, even do desktops and there is no way in hell I am giving them MLS data. Let them join the boards themselves.

Appraisers have no one to blame but themselves if they start doing this type of work.

To all the appraisers doing this - focus on what you are supposed to be doing. You are to determine market value, inspect the property and ensure you are not being influenced by data from AMCs. By giving you the avm or the BPO they are influencing value and no better then what they preach against.

I could not agree more with what you have stated, Summer. As I will be more than glad to forward a 22 page document (ruling) that the FREAB probable cause found an administrative complaint. Now it goes before the board for disciplinary action on a complaint I filed.

This was where an idiot appraiser basically signed off on a LARS review AVM. He lived over 100+ miles from the subject and had not been in the area in 5+ years.

I do not think it is worth, right!

 

[Metamorphic]

Anyone who is reconciling their appraisals to AVMs should lose their license. That is just crazy. I refuse to do this, against BPOs, even do desktops and there is no way in hell I am giving them MLS data. Let them join the boards themselves.

Appraisers have no one to blame but themselves if they start doing this type of work.

To all the appraisers doing this - focus on what you are supposed to be doing. You are to determine market value, inspect the property and ensure you are not being influenced by data from AMCs. By giving you the avm or the BPO they are influencing value and no better then what they preach against.

Unless FnF change their mind, you might as well simmer down and get used to the idea. Bottom line, FnF want to know why the AVM is wrong when its not in your ball park. From there perspective this is an extremely efficient and cheep QC check and reasonably prudent. Since you're expert and you're the one in the best position to postulate where the AVM went astray, it only makes sense and is simple due diligence to ask you to comment.

If you feel the mere mention of an AVM based number is undue influence, I don't know what to tell you....you're sensitive I guess. An AVM is a number generated by a computer based on reasonably predictable algorithms, using reasonably predictable data, with predictably good or bad performance based on the subject and the neighborhood.....the subject and neighborhood that you are the expert of. You should be quite well prepared to take it for what its worth...be that a little or a lot.

 

[c w d]

Isn't the purpose of the appraisal to clearly indicate why the opinion of value is what it is? Shouldn't that serve as evidence why an AVM is correct/incorrect?

I suspect that reconciling the appraisal against the AVM is a carrot or the stick tactic. And I suspect should the appraisal contradict the AVM, one's workload increases substantially while if it agrees with the AVM, one's workload increases minimally. Even if it's not meant to be, the chance for abuse of such a QC policy is ripe. It smells very similar to current review assignment tactics that permeate the industry: review assignments for less than an appraisal. So long as the appraisal being reviewed is credible and it's conclusions reasonable the assignment is a cake walk. But, should the appraisal being reviewed not be credible and its conclusions unsupportable, well, one's workload just doubled or tripled that of the doing another appraisal entirely all for a fee of less than an appraisal. And it is that low fee that "pressures" many reviewing appraisers to support unreasonable conclusions.

Metamorphic, would you reconcile your appraisal against another appraisal? I suspect not. That would be a review assignment. And so too should the appraiser's consideration of any formal opinion of value.