Where Do Appraisers Come Up With Stuff Like This?

[timd354]

I know the sale prices as I easily found all 22 sales myself in about 5 minutes since it is in a disclosure state with really good online assessor's records. Every sale with a lower sale price was a smaller model home and there were 4 or 5 model matches that all sold within a very tight range that includes the subject contract price and there were some larger models that all sold for substantially higher.

That all sounds good as far as prices, but just from looking at online assessors records you have no idea if the similar size model matches had same level of upgrades as subject or highly superior upgrades or if there were concessions etc. It's your call but I don't understand why a field review is not ordered . A fee like that does not sound like a newbie but who knows...maybe he/she is just a lucky person able to get a good fee for doing crappy work , since nobody in charge wants to spend a dime for a field review nobody knows.
You don't understand our business. As a mortgage insurer, ordering a field review is not a viable option...if we need a field review in order to get comfortable with value, then we will just turn the loan down as the lender will just take loan to another MI anyhow before they pay for a field review (and we sure are not going to pay for a field review). In this case we pended the file to request two additional recent comps from within the subject's subdivision. We will see what we get and make our decision based on that. If we are not comfortable with the risk if and when we receive an updated appraisal report with the two additional comps that we requested, then we will decline insuring the loan.

FYI, since the subject property is very highly upgraded with just about every option available in that subdivision, I am confident that the appraiser did not cherry pick the comps and the other sales in the subdivision were likely not substantially or any higher in quality/upgrades. If the appraiser was trying to cherry pick the comps and hide something he would not have disclosed that there had been 22 sales in the subdivision in the past year and made the dumb comment that he made. Sometimes, the appraiser is just not too swift, but that does not mean that he or she is dishonest and it also does not mean that it is not possible for us to get comfortable with the collateral risk. As much as you may not want to hear this, my company is not in the business of insuring that we receive a flawless appraisal, we are in the business of analyzing risk and if we determine that the risk is acceptable, then we will insure the loan even if the appraisal.

 

[timd354]

oh wow, we track zombie appraisers on the no fly skippy list. can we drone them? so are we saying that getting the value right is second to how we write those other 30 pages. i did 2 reviews all of a sudden for my favorite lender. both had the value right, but what a mess to read. yea, yea, i do understand you USPAP-ers. i haven't figured out why, but every profession has people at the bottom who you don't want to operate on you, fix your car, or do your drywall.

I am not sure what your point is but I don't know of any secondary market participant or large lender that does not have in place some process for tracking and monitoring parties (including appraisers and others) that they have identified as representing possible increased risk.

 

[timd354]

Tim,

What is your stance (or the GSE's) on using pre-sale's or built-to-suit homes? I have alway's wondered about this.

I am speaking of a PUD development which is being built by a national builder in a typical tract home project. The lots are all owned by the national builder and the buyer goes into the model home or design center and chooses the selections and upgrades.

Some developments are selling so well that no active or closed sales are in the MLS.
Other builders list the sales in the MLS as "for comps only" or the good sales for the appraisers to use. They have "fake" DOM as most of the time the homes were already under contract when the builder put it in the MLS.

So I get where Marion is coming from. What is the DOM for these sales? Are pre-sales or built-to-suit homes market exposed sales? How do you derive market based adjustments for pre-sale homes? Download the builder cost sheet and make dollar for dollar adjustments?

FWIW, I avoid new construction appraisals..... it is a scam and a waste of time....worthless. My family is (was a mid-sized builder, we sold our residential building business for 90 million several months back) so I know what goes on.

I find it funny and ridiculous that a appraiser uses pre-sale homes as comparables and makes adjustments for quality or differences in upgrades....yeah...market based adjustments???? From what market...the builders cost sheet LOL!!! And then in the MLS the builder has one spec home that sold for 5-10% under what pre-sales are selling for and was fully finished and full exposed to the market.

Builders either own their on mortgage business or have their preferred lenders. Builders, real estate agents and the mortgage companies (and now AMC's) are all in bed together. From my experience, the same olde appraisers and larger appraisal firms gets most of the new construction work and sets the market for when the buyer does not use the builders preferred lender. Builders offering incentives for the buyer to use their preferred lender..... Trust me, if you kill a deal with a builder, you will not work for the builders preferred lender. To many bonuses and business deals for the lender to lose for some honest appraiser to screw up.

I understand that there can be lots of games played with new home sales. That is why it is extremely important for appraisers to verify sales transctions by obtaining signed copies of HUD-1's for non-MLS builder sales and it is also why there is a requirement for at least one comparable sale that was sold outside of the influence of the builder/developer (either a resale or a sale in a competing project from a different builder/developer). Personally, I would like to see a requirement for 2 sales that are outside the influence of the builder/developer, but I don't make the rules.
I also wish that Fannie, Freddie, FHA and VA would adopt a policy of not purchasing any loans from any mortgage originator that is affiliated with a builder or real estate brokerage as I believe that there is an inherent conflict of interest in such arrangements, but again I don't get to make the rules.

 

[timd354]

That answer is not good enough for me. It sounds like more of an excuse on their part. How much business do they send you?

If you had to sit and underwrite or review appraisals all day and many of those appraisals had pages and pages of useless boilerplate and CYA comments, you would know full well that it is entirely possible for a reviewer to miss a comment that is buried in the middle of those pages of useless boilerplate and CYA. I don't care whether that answer is good enough for you, that is the simple reality of the situation when human beings review appraisals. When artificial intelligence advances to the point that computers can actually read and understand narrative comments, then maybe this won't happen, but until that time, expecting human beings to have an error rate of zero is not realistic.

 

[Michigan CG]

......... pages and pages of useless boilerplate and CYA comments.............

Useless boilerplate is the result of AMC stips. It is not a secret. Appraiser works for ABC AMC this week and gets a stip and they create a boilerplate comment that goes into every single report. Appraiser works for XYZ next week and they come up with a stip. Appraiser writes a boilerplate comment to address that stip that then goes in every single report.

What causes this? AMCs hire "reviewers" from Craigs List and they are taught to make the appraiser make a statement that if the one-acre parcel is a working farm when zoned AG. What idiot thinks it is possible for a one-acre site to be a working farm?

AMC "reviewer" see a pole barn on the property and they make the appraiser write a comment as to the commercial aspect of the property.

AMC "reviewer" sees that there are corn fields behind the subject and demands that a comment be made about the marketability of the subject property based on the corn fields.

The insanity continues.

 

[NC Appraising]

I understand that there can be lots of games played with new home sales. That is why it is extremely important for appraisers to verify sales transctions by obtaining signed copies of HUD-1's for non-MLS builder sales and it is also why there is a requirement for at least one comparable sale that was sold outside of the influence of the builder/developer (either a resale or a sale in a competing project from a different builder/developer). Personally, I would like to see a requirement for 2 sales that are outside the influence of the builder/developer, but I don't make the rules.
I also wish that Fannie, Freddie, FHA and VA would adopt a policy of not purchasing any loans from any mortgage originator that is affiliated with a builder or real estate brokerage as I believe that there is an inherent conflict of interest in such arrangements, but again I don't get to make the rules.

Yes!!!
2 fully finished and market exposed spec homes or re-sale homes. Not pre-sale homes.

I would also add that a higher down payment is needed or a certain % of the upgrades to be paid for by the buyer... New construction was a large factor in the housing crash. You would have thunk that the GSE's would of learned something....I always wondered how much power the builders had over the GSE's via GOVCO.

I my opinion, verifying is not the most important issue. In down markets...a little more important.

The issue is with pre-sale homes where the buyer goes into the design center and spends someone else's money. You have been approved for $300,000 so go at it!!!!

Are we appraising market value or price/cost? Pre-sales are cost or price...and may or may not be equal to market value....and then we use pre-sales (which is cost or price) to develop an opinion of market value.

And then appraisers use these pre-sales as comps!!!

I hope I do not sound harsh, as I am not trying to be. I honor your opinions and learn from them.

 

[timd354]

Useless boilerplate is the result of AMC stips. It is not a secret. Appraiser works for ABC AMC this week and gets a stip and they create a boilerplate comment that goes into every single report. Appraiser works for XYZ next week and they come up with a stip. Appraiser writes a boilerplate comment to address that stip that then goes in every single report.

What causes this? AMCs hire "reviewers" from Craigs List and they are taught to make the appraiser make a statement that if the one-acre parcel is a working farm when zoned AG. What idiot thinks it is possible for a one-acre site to be a working farm?

AMC "reviewer" see a pole barn on the property and they make the appraiser write a comment as to the commercial aspect of the property.

AMC "reviewer" sees that there are corn fields behind the subject and demands that a comment be made about the marketability of the subject property based on the corn fields.

The insanity continues.

While some useless boilerplate is the result of AMC stips, much of it is also the result of an effort of some appraisers to try to limit their own liability and pages of useless boilerplate and CYA comments have been around in many appraisers' reports since well before the rise of the AMC model

 

[timd354]

Yes!!!
2 fully finished and market exposed spec homes or re-sale homes. Not pre-sale homes.

I would also add that a higher down payment is needed or a certain % of the upgrades to be paid for by the buyer... New construction was a large factor in the housing crash. You would have thunk that the GSE's would of learned something....I always wondered how much power the builders had over the GSE's via GOVCO.

I my opinion, verifying is not the most important issue. In down markets...a little more important.

The issue is with pre-sale homes where the buyer goes into the design center and spends someone else's money. You have been approved for $300,000 so go at it!!!!

Are we appraising market value or price/cost? Pre-sales are cost or price...and may or may not be equal to market value....and then we use pre-sales (which is cost or price) to develop an opinion of market value.

And then appraisers use these pre-sales as comps!!!

I hope I do not sound harsh, as I am not trying to be. I honor your opinions and learn from them.

You don't sound harsh at all, I get your concerns. One thing I disagree with is that new construction was a large cause of the housing crash. In my opinion, the housing bubble was a credit bubble created by easy credit loans in which anyone with a pulse could qualify for a mortgage. This caused rampant speculation and unsustainable price growth in the housing market and also drove rampant property flipping and purchases of properties by non-owner occupants. All of this involved resales just as much as new construction. I think that the bubble and subsequent correction would have happened even without so much new construction, although I could be wrong.

 

[J Grant]

If you are satisfied, then good. Your company does not order the origination appraisal, you insure PMI so apply a risk analysis that is different in scope than a field review. The origination appraisal is prepared for client/intended users, in this case a questionable appraisal met your company's risk standards.

A field review by a local, competent appraiser can discover if an appraisal was developed credibly. This is the world's luckiest appraiser it seems!

 

[timd354]

If you are satisfied, then good. Your company does not order the origination appraisal, you insure PMI so apply a risk analysis that is different in scope than a field review. The origination appraisal is prepared for client/intended users, in this case a questionable appraisal met your company's risk standards.

A field review by a local, competent appraiser can discover if an appraisal was developed credibly. This is the world's luckiest appraiser it seems!

At this point we have not insured the loan as we have stipped the file for 2 additional comps from within the subject's subdivision. If an updated appraisal report is submitted, then we will make a decision at that point of whether or not to insure the loan...we will just have to wait and see. It is also possible that the lender took this loan to one of our competitors to insure and we will never see it again.