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Michigander

Senior Member
Joined
Oct 23, 2003
Professional Status
Certified Residential Appraiser
State
Michigan
Serious question

Banks/lenders need to have valuation completed for loan purposes. Imagine a typical buyer with low 700 credit, purchasing with 20% down payment. Good credit but not to the level that the lender is risk free on the credit side. They have debt to income ratio with the property purchase of 25%, so capacity is there. The third C, the collateral side, is what appraisers are tasked with addressing.

Lender needs an opinion of value in a two-week period after application to be competitive with others. How can appraisers provide a service to meet the needs for a very typical lending situation such as this? Is it status quo? Or do appraisers have an answer to the need that might be different than what is currently proposed with PIWs in some cases or with desk top solutions.

What can we as appraisers propose that may end up meeting a need, at the same time considered by us to be good solid, credible and supportable appraisal work? We have the complaints about proposed (and being implemented) products driven by the lenders, but do we have any other proposed solutions other than the status quo? Let’s start brain-storming some ideas so we don’t become irrelevant in the lending arena.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
They either need an appraisal, or they dont'. Sure, we can propose any kind of shorter form, cheaper alternative- many of which already exist ( drive by's, hybrids, etc.) The problem is, at what point is the product so cheap that appraisers can no longer afford to be in the profession? Unless the volume of lending is not going to expand, or appraisers do valuations that now are done by other parties, the trends will lead to fewer appraisers .s.

The way for lenders to get faster service is for them to change requirements. Stop insisting on original comp photos, and that appraiser inspect comp from the street. It should be optional up to appraiser if they think inspecting comp from street is necessary , or not. .

Lenders need to pay the fee to AMC's for service and not have it gouged from appraiser fee.

As far as appraiser making our services more valuable to lenders, perhaps we can offer additional ala carte services (or integrate them into reports). Such as video embedded- a video while walking through house would show a lot more than photos, as would a video of the entire street around the subject. show more about neighborhood .An additional value other than market value, if it is of interest. It would not be hard for appraisers to get training to use a meter to get mold or moisture readings and put results in perhaps an addendum or attachment to report.
 
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Mr Rex

Elite Member
Joined
Jan 12, 2004
Professional Status
Certified Residential Appraiser
State
North Carolina
The lenders simply need to order the appraisal as soon as the process starts rather than at the last minute. If the borrower is such a bad candidate or doesn't have the funds to pay for an appraisal the lender knows almost immediately in the application process. It doesn't take a rocket surgeon to see the obvious.
 

Carnivore

Elite Member
Supporting Member
Joined
Jan 15, 2002
Professional Status
Certified Residential Appraiser
State
North Carolina
The lenders simply need to order the appraisal as soon as the process starts rather than at the last minute. If the borrower is such a bad candidate or doesn't have the funds to pay for an appraisal the lender knows almost immediately in the application process. It doesn't take a rocket surgeon to see the obvious.
That's the way it was years ago. During the application process the banker ordered credit and the appraisal. The lender also required payment up front for both.

What would end a lot of this would be reporting of fees of what was paid and to who. Lenders have and will continue to try and bundle fees into one large fee. From there they get to keep for themselves what they don't buy, all the while the borrower doesn't know squat. Over the years I have seen settlement statements with the appraisal fee north of $400 bucks...but what was actually purchased was a drive by or even worse some type of BPO or desktop. One I remember in particular was a $550 dollar fee for an appraisal and it was a 2055. $150 to appraiser and $400 to the lender. Property owner showed me the settlement statement. Gave me a copy of the appraisal.

So its not about fee's to the appraiser...its about skimming by the lender. Not only appraisals but other services also; termite report, home inspection etc.

What would be interesting is to find out total cost of the new Desktop where the house and pix are taken by someone you don't know. How much were they paid? How about the AMC fee also. Inquiring minds want to know. I would wager some money that the lender charge to homeowner is in 100's of dollars.

FTR, the only person who is at risk for a new style desktop is the appraiser. No one else!
 

SpartanAG

Member
Joined
Feb 12, 2008
Professional Status
Certified General Appraiser
State
Arkansas
If it's an "in-house" loan and meets the criteria, the lender can use an evaluation in lieu of an appraisal.

However, the reality is: Lenders don't really want (or need) appraisals on most properties, especially residential. Before the appraisal is ordered, the lender has already determined how much money they are going to loan in many (not all) cases.

Since lenders don't want (or need) appraisals (in many cases), they have been moving to replace the time consuming (and expensive) appraisal process with a cheaper, more efficient valuation service. That's why UAD was created; so residential reports could be data mined. With data becoming easier to obtain on the interwebs and better valuation algorithms, you can expect more valuations to be done without an appraiser involved at all.

Add to that, many of the lenders in my area are adding either in-house staff or contracting to third-parties for evaluations, validations and compliance reviews. Now refinance's are being handled with evaluations and validations in-house instead of an appraisal being ordered with a local appraiser.

Times are changing, especially for residential appraisers. The residential appraisers operating in rural markets will continue to see plenty of work because data is scarce. The urban markets where data is plentiful may start to see a reduction in workload. In those areas, lenders will likely be more sensitive to turn-time than the fee.

I've been thinking about ways to provide a faster & cheaper service to compete with in-house staff and unlicensed third-party providers of valuation services for a while now. Given that appraisers have to comply with USPAP while they don't gives them an advantage in the fast and cheap niche. It will be hard for any appraiser to compete with an AVM that can spit out a number is seconds or an in-house evaluator that can crank out 2 to 4 evaluations an hour (at $15.00/hr).

So really there are two choices: 1) Change with the times: Specialize, find a niche, develop a new skill set or dust off an old one. 2) Get the government to enact more laws and regulations forcing lenders (and everyone else) to use our services.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
Good post but I question the below statements:

However, the reality is: Lenders don't really want (or need) appraisals on most properties, especially residential. Before the appraisal is ordered, the lender has already determined how much money they are going to loan in many (not all) cases.

Lenders perhaps never wanted or needed appraisals- but their investors /insurers do - if the secondary market/GSE's no longer sees a need for appraisals, they can accept the consequences for their decision. I personally see as a fallout interest rates rising with less prudent collateral assessment and opportunity for fraud. The "savings" of a few hundred on an appraisal may cost them big time but that remains to be seen.

How can a lender can pre determine how much they are going to lend, when they don't know the value of the asset, since they base their loan on an LTV % of the asset? A lender can pre qualify a borrower for a certain amount, but until the value of asset is determined, whether by an appraisal or other method, they can't know exact amount to lend.

Since lenders don't want (or need) appraisals (in many cases), they have been moving to replace the time consuming (and expensive) appraisal process with a cheaper, more efficient valuation service. That's why UAD was created; so residential reports could be data mined. With data becoming easier to obtain on the interwebs and better valuation algorithms, you can expect more valuations to be done without an appraiser involved at all.

Fannie states UAD purpose is not for data mining, that it is about standards, consistency etc however if data is mined form it, then it serves both purposes. To that end, UAD demands a flow of new appraisals, because how can data be mind without new reports?
 

A K

Elite Member
Joined
Jul 31, 2013
Professional Status
Certified Residential Appraiser
State
Maryland
Two weeks is sufficient time. The main problem is that many banks don't want to order and pay for the appraisal as soon as under contract. Most of the time they wait for home inspection and everything else to be done before they order and pay for the appraisal. That's basically why there is so much time pressure. Contract to closing is typically 30-45 days.
 

J Grant

Elite Member
Joined
Dec 9, 2003
Professional Status
Certified Residential Appraiser
State
Florida
A portion of the time pressure is artificially created. The AMC';s promise faster appraisal delivery as a way to compete for clients, I bet after appraisal is delivered it sits in the file till the rest of UW is completed. That said, lenders do have legit pressure with their rate lock deadlines why don't they extend those deadlines....maybe they can't extend rate locks because of tied in to rate changes but if it is all so time sensitive, appraisers need to be paid enough on each job to not take on so much volume, so appraisers are free to jump on a new report and finish it.

Lenders are incredibly greedy now with appraisals and appraisers are supposed to endlessly give - the more appraisers give, the more lenders /AMC's take. Lenders want lightening fast turn times while demanding extensive reports and requirements be met, and the appraiser is supposed to charge a low fee for all this so lender and their AMC affiliate can profit handsomely off the appraisal itself. Maybe lenders and AMC's are creating conditions so untenable that appraisers can barely meet the demands or survive economically- they won't miss us till we are gone perhaps.
 

SpartanAG

Member
Joined
Feb 12, 2008
Professional Status
Certified General Appraiser
State
Arkansas
Lenders perhaps never wanted or needed appraisals- but their investors /insurers do - if the secondary market/GSE's no longer sees a need for appraisals, they can accept the consequences for their decision.

They just want a valuation; it doesn't have to be an appraisal.

How can a lender can pre determine how much they are going to lend, when they don't know the value of the asset, since they base their loan on an LTV % of the asset?

Lenders (loan officers and analysts) do their own valuations when determining whether or not the loan is feasible. This is done long before an appraisal is ordered. They already know how much they are willing to lend based on how much the loan applicants income. Doesn't matter to the lender how much the property is worth, just if the applicant can make the payment.

Fannie states UAD purpose is not for data mining, that it is about standards, consistency etc however if data is mined form it, then it serves both purposes. To that end, UAD demands a flow of new appraisals, because how can data be mind without new reports?

It really doesn't matter what Fannie states...it's what they do. Collateral Underwriter is a result of data mining. Data can (and is) mined from multiple sources. The UAD reports are just one source.
 
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