RIP AQB and ASC, to be replaced with "Federal Valuation Agency"

[DWiley]

Discretion: the freedom or power to decide what should be done in a particular situation.

Should appraisers have the power to decide (discretion) things like comp selection, adjustments, and reconciliation?

I would say they should not be "deciding" such things - they should be extracting and supporting them from data and analysis.

Suppose an appraisal report has multiple pages demonstrating, with data, that home prices were increasing 9% per year over the time period covered by the comps. But then the appraiser "decided" to use only 3% as the adjustment, and stated right in the report that was done to be conservative. Is that discretion?

Should appraisers keep "deciding" to adjust at $35-$40/SF for years and years, even when data in the area objectively shows that the adjustment should be far more than that?

Is it acceptable for an appraiser to decide to apply market condition adjustments to purchase appraisals but then not apply them for refinance appraisals of very similar homes in the same neighborhood?

How much "discretion" should appraisers have in the above situations??

 

[George Hatch]

I think "subjective judgement" might be a more functional way to characterize the types of undesirable practices people are attributing to appraisers.

And like it or not, management level employees at the federal agencies are more/less compelled to use considerable restraint in responding to such issues. Particularly where the facts haven't been more completely analyzed and where the results are subject to dispute. There is no downside for an official to take the position that even a small amount of such misconduct is entirely unacceptable and that there's always room for improvement. Regardless what numbers actually ensue from the more complete analysis, "room for improvement" is a position that basically cannot be spun into being incorrect or immoral WRT the role of govt.

Nobody really knows how large or small the problem is, or even what mechanisms are leading to these outcomes. The only way we can see how it's being done is to look at the appraisal reports themselves. Our critics can make the allegation and we can make the denials but it's all anecdotal until we pin down the facts. And it appears that both sides of this debate are still a long ways off from pinning those facts down.

Nor do the outcomes necessarily speak for themselves, which is the level of "proof" being used in support of both sides' conclusions. Just because you have a dead body out in the street doesn't mean they were murdered. Until you get all the way into the autopsy the only thing you can know for certain is that the body is dead.

 

[djd09]

no independent thought allowed or code words

 

[shrubberyvaluation]

I would say they should not be "deciding" such things - they should be extracting and supporting them from data and analysis.

Suppose an appraisal report has multiple pages demonstrating, with data, that home prices were increasing 9% per year over the time period covered by the comps. But then the appraiser "decided" to use only 3% as the adjustment, and stated right in the report that was done to be conservative. Is that discretion?

Should appraisers keep "deciding" to adjust at $35-$40/SF for years and years, even when data in the area objectively shows that the adjustment should be far more than that?

Is it acceptable for an appraiser to decide to apply market condition adjustments to purchase appraisals but then not apply them for refinance appraisals of very similar homes in the same neighborhood?

How much "discretion" should appraisers have in the above situations??

I don't think of going against your own analysis as discretion. The issue is clearly we don't want to be told hey look in this zip home prices are increasing by this much, so you must use that even when your data disagrees with it.

Appraisers deciding to adjust for 35-40 when its not warranted is a problem, but how are you going to apply some standard to use?

How is the federal government telling us what the adjustments we should be using going to help? The bigger issue is many mortgage clients preferring target hitters over credible appraisals because someone else will take the hit for bad loans when its not a lender that holds the loans in house.

 

[Elliott]

Much of PAVE is general in nature...."Don't be biased" but I went through their concrete recommendations and found three that were interesting:

1.5 Address potential bias in the use of technology-based valuation tools through rulemaking related to Automated Valuation Models (AVMs).

3.1 Update appraiser qualification criteria related to appraiser education, experience, and examination requirements.

3.2 Increase engagement with states’ appraisal regulatory agencies to help remove barriers to entry and advance diversity in the appraiser workforce.

And a general statement:

"Home loan lenders hire appraisers specifically to provide independent, fair, and objective estimates of the market value of a property so that lenders can accurately evaluate risk. Most commonly, appraisers estimate the value of a home by comparing it to similar, recently sold properties in comparable neighborhoods.

An appraiser’s opinion of value is very dependent on that appraiser’s selection of comparable properties and the adjustments and weighting the appraiser applies to those selections. This decision has subjective elements that depend on the expertise of the appraiser and the appraiser’s familiarity with the neighborhood, resulting in a natural imprecision of the appraiser’s estimate of the home’s value."

https://pave.HUD.gov/actionplan

So there will be a lowering of education and experience standards, equity recruitment of appraisers, and does anyone know how appraisers can be more "precise." Was the subject of 'natural imprecision' ever part of your appraisal education and how to correct it ?

 

[djd09]

talk about whining. if park wants discretion, he should start signing off. and how much "discretion" do the appraisal waivers get?

 

[Sadie]

How is calling for more objectivity and less subjectivity (discretion) contrary to USPAP? My copy of USPAP defines an appraiser as someone expected to be independent, OBJECTIVE, and impartial. More data driven analysis and less seat of the pants is a pretty good goal, IMO.

Then you agree with his statement?

 

[Sadie]

I would say they should not be "deciding" such things - they should be extracting and supporting them from data and analysis.

Suppose an appraisal report has multiple pages demonstrating, with data, that home prices were increasing 9% per year over the time period covered by the comps. But then the appraiser "decided" to use only 3% as the adjustment, and stated right in the report that was done to be conservative. Is that discretion?

Should appraisers keep "deciding" to adjust at $35-$40/SF for years and years, even when data in the area objectively shows that the adjustment should be far more than that?

Is it acceptable for an appraiser to decide to apply market condition adjustments to purchase appraisals but then not apply them for refinance appraisals of very similar homes in the same neighborhood?

How much "discretion" should appraisers have in the above situations??

Well, I suppose that person who did not use their own data will get an F in workfile. And perhaps a missive from their state board. Your example above is not indicative of the work that I see on a fairly regular basis. Most appraisers use the most relevant data available. Maybe you just see the bad reports and assume the worst?

 

[George Hatch]

Maybe the GSEs are seeing appraisals coming in nationwide and from more than one lender, and what's common in the different regions varies.

 

[shrubberyvaluation]

Well, I suppose that person who did not use their own data will get an F in workfile. And perhaps a missive from their state board. Your example above is not indicative of the work that I see on a fairly regular basis. Most appraisers use the most relevant data available. Maybe you just see the bad reports and assume the worst?

It depends, I have heard appraisers here say we should not use the best available market data because they don't think our peers are doing that. Seems faulty to me.