Unintended consequence of reviews

[J Grant]

Do you see the irony in acknowledging that "appraiser shopping" is common enough that there is a term for it, yet at the same time trying to blame it on a party other than appraisers?

As to the second part of the post, other than what was said in public meetings, I don't think you have any idea what the GSEs did or did not say to any group.

?? It is both parties' fault - if an appraiser is hitting high values that are not credibly supported, it is on them, but one also has to ask why they are still around, since supposedly the AMC;s are a firewall against value pressure - I have not heard the term appraiser shopping lately but it used to be a common term.

 

[Surf Cat]

Hit the contract bullseye = "good" review.

Miss the contract price = "bad" review and dropped from the AMC roster....I think it says that in USPAP somewhere....

 

[alebrewer]

Individual homeowners may order as many appraisal reports as they desire, for any reason. Lenders, however, are likely subject to restrictions (to avoid what JG referred to as "appraiser shopping").

The icky part is that the homeowner has to pay for the one the lender wants to use - whether they agree or not.

 

[J Grant]

The icky part is that the homeowner has to pay for the one the lender wants to use - whether they agree or not.

Unlike most consumer products, an appraisal is not ordered to make the owner happy or achieve their goal of hitting X to get a loan, whether they agree or not. There is nothing icky about it. The borrower wants the advantage of the mortgage rates and 30-year repayment and low down payment terms,and paying for an appraisal is the ticket to ride ( or used to be )

The borrower frustration, imo, is due in part to the fact that lenders want to placate a borrower and not lose their business, so they do not explain the appraisal process thoroughly enough before it happens, or might want to blame the appraiser afer it happens.

 

[alebrewer]

Unlike most consumer products, an appraisal is not ordered to make the owner happy or achieve their goal of hitting X to get a loan, whether they agree or not.

That is completely correct. However, at the end of the day, an appraisal is an 'opinion' - some of which are better supported than others. If I'm a homeowner (or buyer) and I have to drop $500-$600 for an appraisal, if I get one back where the appraiser's opinion causes the deal to fall through, I'd like a 2nd opinion. Buying a home is one of the biggest purchases someone will make - and it is, in fact, 'icky' (there are worse words, but I'm trying to be nice) that some loser appraiser can ruin that transaction.

One thing about AVM's relative to appraisers - they're much more consistent...

 

[J Grant]

That is completely correct. However, at the end of the day, an appraisal is an 'opinion' - some of which are better supported than others. If I'm a homeowner (or buyer) and I have to drop $500-$600 for an appraisal, if I get one back where the appraiser's opinion causes the deal to fall through, I'd like a 2nd opinion. Buying a home is one of the biggest purchases someone will make - and it is, in fact, 'icky' (there are worse words, but I'm trying to be nice) that some loser appraiser can ruin that transaction.

One thing about AVM's relative to appraisers - they're much more consistent...

Good, then go pay for a second opinion - if the lender allows it.

The RE agents should inform the buyers that if the appraisal or valuation falls short, a buyer can opt to put up their own funds for the difference. If a buyer lacks the funds or refuses to put them up, then why is that the appraiser's fault?

I suppose an AVM can be consistently right , or wrong.

 

[alebrewer]

I suppose an AVM can be consistently right , or wrong.

Meh - IMO, appraisals aren't 'right' or 'wrong' any more, or less, than an AVM. An appraisal is an opinion, which is what drives the inconsistency between appraisers. AVM's are algorithms, and as such, they are - by definition - more consistent than appraisers. The other cool thing about AVM's is that they have the ability to return confidence intervals, which is something I wish appraisers were allowed to do.

The only way to determine the accuracy of an appraisal or AVM is to measure the results against subsequent sales of properties, and adjusting for market differences.

Just for grins - pull a Redfin property value for your place. My guess is that it's not too far off - maybe even closer than an appraiser might be. Pulled one for my place and it's within 3% of what I would have come up with.

 

[Sadie]

The icky part is that the homeowner has to pay for the one the lender wants to use - whether they agree or not.

They have to pay for their credit report and title insurance policy also.

 

[alebrewer]

They have to pay for their credit report and title insurance policy also.

I completely get that there is a cost associated with borrowing money - and am ok with that. I just see a ton of deals go sideways because appraisers don't know how to employ appropriate valuation tools.

 

[J Grant]

Meh - IMO, appraisals aren't 'right' or 'wrong' any more, or less, than an AVM. An appraisal is an opinion, which is what drives the inconsistency between appraisers. AVM's are algorithms, and as such, they are - by definition - more consistent than appraisers. The other cool thing about AVM's is that they have the ability to return confidence intervals, which is something I wish appraisers were allowed to do.

The only way to determine the accuracy of an appraisal or AVM is to measure the results against subsequent sales of properties, and adjusting for market differences.

Just for grins - pull a Redfin property value for your place. My guess is that it's not too far off - maybe even closer than an appraiser might be. Pulled one for my place and it's within 3% of what I would have come up with.

The benchmark is not the same - value is conceptual, not factual, so judging if an appraisal hit an actual price exactly is not the proper way to judge it; however, a sale at MV terms should often have a close range to a MV opinion. An AVM is an estimate and more price-driven.

IMO, the problem could be solved by allowing the lender an option to loan LTV within a range of 3% or 5% of the appraisal value, whether up or down from it. I believe they have that option but rarely use i due to the liablity.