Where Do You Think "geographic Competency" Begins And Ends?

[Joe Flacco]

I guess disruption is not unique to appraisal. It is what it is. We just facilitate it.

 

[timd354]

I never said they were wrong, but they do not talk for me or tell me what to do.

Yeah we all get it dj, nobody can ever tell you what to do. You just do whatever you want to do and everyone just has to accept it and keep sending you business....yep, we got it, lol

 

[djd09]

The foundation of the public trust is the appraiser/client relationship.

Exactly. And how does the Client feel about Public Trust?

 

[hastalavista]

Your argument is that by complying with standard 1 that geocompentecy is acquired, as a result, it does not matter where the appraiser is located. It's backwards thinking.

Not quite, but close.
I'm stating that everything starts with the SOW: that is how the level of analysis required for compliance with the standards is judged. It isn't backward thinking (although I appreciate why you would say it is).
The level of Competency required is based on the SOW, which defines the problem to be solved and the process necessary to solve the problem.
If local, boots-on-the-ground knowledge is needed, that is identified in the SOW process. SR1 then directs to what degree things must be done based on what is identified in SOW.

That's what I'm saying. Which is exactly what the USPAP says.


Here is the residential mortgage appraisal world as I see it. And, yes, I have less years in front of me than I do behind. And, in case anyone is wondering, I do residential origination mortgage work that must comply to the GSE guidelines. So my perspective isn't theoretical.

30 years ago nearly every type of residential mortgage lending assignment required an appraisal. The appraisal bucket was where loan apps were dropped into so a collateral valuation could be obtained. While there were some drive-by products, nearly all residential mortgage assignments were predecessors of the 1004 (or their alternate property-type equivalent) we have today. Why? Because they needed that type of analysis to obtain the collateral value for their needs.
As time went by, some of that work shifted to something less than an interior inspection. But everybody still dipped the loan app into the appraisal bucket.

Today, the appraisal bucket is not the only bucket available. The appraisal bucket is still the gold standard, but not the only standard. Today, the question asked is, "Do I need to dip this loan app into the appraisal bucket, or does it qualify for something else?" The something else is a PIW or an evaluation, or something on that level.

Within the appraisal bucket, just like with the drive-bys, the mix of appraisal products is also changing. Today, the hot item is hybrid appraisals.

I haven't heard anyone say that a good alternate valuation process is as good as a good appraisal. I know of no banker, no appraiser, no regulator, or no underwriter who would say that.
I do know of bankers, underwriters, regulators, and underwriters who say, "given this loan and its risk profile, the alternative is good enough for our purposes." Appraisals as the gold standard haven't changed. The need for the gold standards has changed. Liking or not liking this doesn't change the reality of it. An honest assessment of most of the markets we work in would agree with this (exception I'd make are rural appraisals and rural markets... but that's me). Not every loan gets something other than an appraisal. But more and more loans do, because their risk profile does not require the gold-standard for collateral valuations.

Since this thread has morphed from its original question to residential mortgage appraisals and the need for local knowledge to do a hybrid appraisal (where someone other than the appraiser inspects the property); such that the appraiser knows the market as well as s/he would as if s/he went and inspected the property her/himself, my answer is this: Yes, of course the local, competent appraiser is expected to do the best job at analyzing the property's value in its market. Pound for pound, local-competent beats distant-competent. I know of no one who would argue that. But just as some loan apps are not dipped into the appraisal bucket anymore due to the risk profile and alternatives available, so will (I predict, in time) some hybrids be dipped into the distant-competent appraiser sub-bucket rather than the local-competent sub-bucket. How can this be? Because those risks can be better differentiated by the risk-evaluators.
If I have an improved property located in Mountain View, and the loan amount is $700,000, I can tell you right now that I'm (Denis) 90% certain the land is worth more. But maybe the house is 50 years old, so I want to know if I'm making a land loan or if I'm making a house loan. I'll send out an inspector to evaluate the condition of the property and it turns out the 50 year old house has been renovated and updated. I have extensive market information available (sales trends, DOMs, inventory levels, list to sell ratios, etc., etc., etc.) for this market; and I can draw the boundaries of a neighborhood so I get it to whatever configuration I need. I give all this information to an appraiser who lives 60 miles away and hasn't done an appraisal in Mountain View in 10 years, but has access to the local MLS. The SOW of this assignment is this: Based on the data you are presented, and relying on it, please provide an opinion of value for the subject property. You can supplement the information as you see fit.

Can it be done?
Yes.

Is it as good as if a local appraiser did an interior inspection?
I'd say no.

Is it as good as if a local appraiser did the valuation part only?
Probably not quite as good (we are assuming good local vs. good distant).

Is it good enough given the risk profile I outlined?
Yes.

Does the USPAP allow for such assignments?
Yes (IMO; others don't think so).

That's the truth. To be called out as not caring for the profession or being a sellout when calling out the truth is extremely disingenuous.

Now, Mountain View is an extreme example. It is extreme because there is plenty of data in that market to be able to differentiate the risks down to that level. In other markets, maybe not (in rural, I don't think at all; although a low LTV and good credit score in a rural market may not need an appraisal either). But as the ability to gather such information and differentiate the risk of the loan improves, expect to see the loan app getting dipped into some other bucket than the 1004. What that other bucket is, is dependent on how risky the loan is (baring some regulation which requires no flexibility in certain cases... as DF does now).

The entire discussion above, as far as I'm concerned, is a USPAP discussion. And, that's how the original poll and question was framed.

The wisdom of moving away from the gold standard appraisals in large transaction volume is not a USPAP question; it is a banking regulation question. The appropriateness of any one assignment being completed to any specific SOW is a USPAP question and one that each individual appraiser needs to determine when deciding if to take on or pass such an assignment.

What I see here is a shaming of the honest discussion of how such valuation processes fall into our requirements to follow the USPAP. We cannot even explore what is or isn't appropriate because to ask the questions labels someone as anti-appraiser.

I've said before that there is a legitimate battleground for the concern of shifting-away from appraisals; it is not the USPAP. It is the banking regulations.
I've written the regulators expressing my concerns about moving too swiftly into alternative valuation products when there is a gold-standard structure in-place, which has worked well for years, and which we should not be in a hurry to disregard.
But to deny that the need for the gold standard appraisal is changing is to deny reality. And to shut-off honest discussion among appraisers about how such alternatives fit within our requirements (the USPAP) does, in my opinion, more harm to the profession than talking about it.

 

[Joe Flacco]

Not quite, but close.
I'm stating that everything starts with the SOW: that is how the level of analysis required for compliance with the standards is judged. It isn't backward thinking (although I appreciate why you would say it is).
The level of Competency required is based on the SOW, which defines the problem to be solved and the process necessary to solve the problem.
If local, boots-on-the-ground knowledge is needed, that is identified in the SOW process. SR1 then directs to what degree things must be done based on what is identified in SOW.

That's what I'm saying. Which is exactly what the USPAP says.


Here is the residential mortgage appraisal world as I see it. And, yes, I have less years in front of me than I do behind. And, in case anyone is wondering, I do residential origination mortgage work that must comply to the GSE guidelines. So my perspective isn't theoretical.

30 years ago nearly every type of residential mortgage lending assignment required an appraisal. The appraisal bucket was where loan apps were dropped into so a collateral valuation could be obtained. While there were some drive-by products, nearly all residential mortgage assignments were predecessors of the 1004 (or their alternate property-type equivalent) we have today. Why? Because they needed that type of analysis to obtain the collateral value for their needs.
As time went by, some of that work shifted to something less than an interior inspection. But everybody still dipped the loan app into the appraisal bucket.

Today, the appraisal bucket is not the only bucket available. The appraisal bucket is still the gold standard, but not the only standard. Today, the question asked is, "Do I need to dip this loan app into the appraisal bucket, or does it qualify for something else?" The something else is a PIW or an evaluation, or something on that level.

Within the appraisal bucket, just like with the drive-bys, the mix of appraisal products is also changing. Today, the hot item is hybrid appraisals.

I haven't heard anyone say that a good alternate valuation process is as good as a good appraisal. I know of no banker, no appraiser, no regulator, or no underwriter who would say that.
I do know of bankers, underwriters, regulators, and underwriters who say, "given this loan and its risk profile, the alternative is good enough for our purposes." Appraisals as the gold standard haven't changed. The need for the gold standards has changed. Liking or not liking this doesn't change the reality of it. An honest assessment of most of the markets we work in would agree with this (exception I'd make are rural appraisals and rural markets... but that's me). Not every loan gets something other than an appraisal. But more and more loans do, because their risk profile does not require the gold-standard for collateral valuations.

Since this thread has morphed from its original question to residential mortgage appraisals and the need for local knowledge to do a hybrid appraisal (where someone other than the appraiser inspects the property); such that the appraiser knows the market as well as s/he would as if s/he went and inspected the property her/himself, my answer is this: Yes, of course the local, competent appraiser is expected to do the best job at analyzing the property's value in its market. Pound for pound, local-competent beats distant-competent. I know of no one who would argue that. But just as some loan apps are not dipped into the appraisal bucket anymore due to the risk profile and alternatives available, so will (I predict, in time) some hybrids be dipped into the distant-competent appraiser sub-bucket rather than the local-competent sub-bucket. How can this be? Because those risks can be better differentiated by the risk-evaluators.
If I have an improved property located in Mountain View, and the loan amount is $700,000, I can tell you right now that I'm (Denis) 90% certain the land is worth more. But maybe the house is 50 years old, so I want to know if I'm making a land loan or if I'm making a house loan. I'll send out an inspector to evaluate the condition of the property and it turns out the 50 year old house has been renovated and updated. I have extensive market information available (sales trends, DOMs, inventory levels, list to sell ratios, etc., etc., etc.) for this market; and I can draw the boundaries of a neighborhood so I get it to whatever configuration I need. I give all this information to an appraiser who lives 60 miles away and hasn't done an appraisal in Mountain View in 10 years, but has access to the local MLS. The SOW of this assignment is this: Based on the data you are presented, and relying on it, please provide an opinion of value for the subject property. You can supplement the information as you see fit.

Can it be done?
Yes.

Is it as good as if a local appraiser did an interior inspection?
I'd say no.

Is it as good as if a local appraiser did the valuation part only?
Probably not quite as good (we are assuming good local vs. good distant).

Is it good enough given the risk profile I outlined?
Yes.

Does the USPAP allow for such assignments?
Yes (IMO; others don't think so).

That's the truth. To be called out as not caring for the profession or being a sellout when calling out the truth is extremely disingenuous.

Now, Mountain View is an extreme example. It is extreme because there is plenty of data in that market to be able to differentiate the risks down to that level. In other markets, maybe not (in rural, I don't think at all; although a low LTV and good credit score in a rural market may not need an appraisal either). But as the ability to gather such information and differentiate the risk of the loan improves, expect to see the loan app getting dipped into some other bucket than the 1004. What that other bucket is, is dependent on how risky the loan is (baring some regulation which requires no flexibility in certain cases... as DF does now).

The entire discussion above, as far as I'm concerned, is a USPAP discussion. And, that's how the original poll and question was framed.

The wisdom of moving away from the gold standard appraisals in large transaction volume is not a USPAP question; it is a banking regulation question. The appropriateness of any one assignment being completed to any specific SOW is a USPAP question and one that each individual appraiser needs to determine when deciding if to take on or pass such an assignment.

What I see here is a shaming of the honest discussion of how such valuation processes fall into our requirements to follow the USPAP. We cannot even explore what is or isn't appropriate because to ask the questions labels someone as anti-appraiser.

I've said before that there is a legitimate battleground for the concern of shifting-away from appraisals; it is not the USPAP. It is the banking regulations.
I've written the regulators expressing my concerns about moving to swiftly into alternative valuation products when there is a gold-standard structure in-place, which has worked well for years, and which we should not be in a hurry to disregard.
But to deny that the need for the gold standard appraisal is changing is to deny reality. And to shut-off honest discussion among appraisers about how such alternatives fit within our requirements (the USPAP) does, in my opinion, more harm to the profession than talking about it.

I get what you are saying Danny pointed out that it is the regulations. We are here today because we have been going in this direction for a long time with subpar appraisals. Now we are going further in the same direction to irrelevance. Nobody cares but I am not happy about it.

 

[George Hatch]

Exactly. And how does the Client feel about Public Trust?

The client is not responsible for the public trust in the appraisal profession (which is what that term means in that usage).

If what makes your services marketable is your credibility then that's the same factor that makes the services of our profession marketable - the perceptions of credibility.

As as the SOWR plainly states, the credibility is measured within the context of the intended use.

Since before licensing and ever since, we have NEVER offered only one level of reporting and development for all services. We have ALWAYS offered different levels of services for different uses and users. The whole madrassa thing where appraisers are sitting on the floor facing Washington, DC and chanting "there is only one appraisal under the heavens and the URAR is its' name. Peace be unto Fannie" is just one big fallacy.

 

[hastalavista]

We are here today because we have been going in this direction for a long time with subpar appraisals. Now we are going further in the same direction to irrelevance. Nobody cares but I am not happy about it.

The only part I disagree with you on is "nobody cares".
We all care. We just have a different perspective of how to deal with it "now" and what to do with it going forward.

Let me put it to you this way: If someone waved a magic wand and required all mortgage lending to have appraisals completed by local appraisers and set the minimum fees at $450, indexed to inflation, that would probably solve a lot of problems for a lot of appraisers.
That's not in the cards as I see it.
So my perspective is based on how I see things "now" and where I see them "going", and then I have to make a decision of how I want to react to that. If I'm wrong, so be it.
I've written extensively on how I see things now. There is no doubt about how I see things going forward: the demand for mortgage finance appraisals... first in the residential arena and then in the commercial arena will diminish.
I know what i'm doing about it: I'm advocating that the banking regulations slow down on the acceptance of non-traditional appraisals and advocating that there be limits on those non-traditional appraisals. I'm seeking out work where I'll be less impacted by regulatory and market changes that diminish the type of appraisal practice I do.
I advocate others do the same; build a better mousetrap if one is going to compete within a diminishing market or look to get into other markets. In the second part of that advocacy, I'm explicitly inviting in my own competition.

 

[Joe Flacco]

The only part I disagree with you on is "nobody cares".
We all care. We just have a different perspective of how to deal with it "now" and what to do with it going forward.

Let me put it to you this way: If someone waved a magic wand and required all mortgage lending to have appraisals completed by local appraisers and set the minimum fees at $450, indexed to inflation, that would probably solve a lot of problems for a lot of appraisers.
That's not in the cards as I see it.
So my perspective is based on how I see things "now" and where I see them "going", and then I have to make a decision of how I want to react to that. If I'm wrong, so be it.
I've written extensively on how I see things now. There is no doubt about how I see things going forward: the demand for mortgage finance appraisals... first in the residential arena and then in the commercial arena will diminish.
I know what i'm doing about it: I'm advocating that the banking regulations slow down on the acceptance of non-traditional appraisals and advocating that there be limits on those non-traditional appraisals. I'm seeking out work where I'll be less impacted by regulatory and market changes that diminish the type of appraisal practice I do.
I advocate others do the same; build a better mousetrap if one is going to compete within a diminishing market or look to get into other markets. In the second part of that advocacy, I'm explicitly inviting in my own competition.

I believe that you guys care. I just meant that nobody probably really cares that I am not happy about it.

 

[Meandering]

And what part of the Truth in Lending Act,
did you think wasn't applicable to residential lending appraisals?

And what part of the higher priced mortgage REQUIREMENTS did not include the level of inspection for the appraisal?

If Rodger were here, he'd tell you................

But just keep making up little stories to make yourselves feel better.

.

 

[George Hatch]

Nobody care what we think, either.