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Comment

Since Dodd Frank lenders settled upon distancing themselves to use outside Appraisal Management Companies to provide individual appraisals in market areas. The Appraisal Management company is an intermediary who vets the licensed appraiser, collects funds, assigns work, and communicates with lender. Lender/banks have one in house or a list of four Appraisal Management Companies (sometimes called the RAC or AMC …) The loan officer/mortgage banker collects credit card information from Borrowers after time frame signing the LE has passed and forwards contact information for access, residential purchase agreement, preliminary title and any other documentation needed to prepare data. The reason why lenders have this intermediary service is to keep the loan officer/banker from influencing the valuation.
In reality the system doesn’t keep the pressure to hit value out of the mix. Banks can direct work to preferred appraisers and money is still used as influence.
As digital information on perhaps thirty percent of all residential real estate in America has been complied by our government GSE’s appraisal information on a subject property is often available as enough information to waive the full human generated USPAP walk through appraisal. In tracts where builders put similar stick built homes in a row there is a small difference in condition and upgrades that ultimately relates to market value.
With Covid pressures to not have human physical inspections, some appraisals have relied on drive by photographs and information provided by listing agent or owner of record. Lenders and GSE’s have accepted these less thorough appraisal valuations in a time where pandemic could have frozen our market. Yet values nationwide seem to hold mainly because the number of homes for sale continues to decrease while sales rise. In an upward markets lenders feel confident the valuation is adequate.
In addition to the millions of statistics on residential real estate appraisals available there are several computer-generated algorithms that calculate the value by Automated means, or AVM’s. The AVM is available in seconds, with little or no cost and has proved to speed up the lending process as a tool to circumvent the human appraiser.
Problems in the overall industry:
AVM’s do not take into account: view, upgrades, remodels, square footage incorrect or under counted, and unique cost approaches or flaws in the subject.
The number of licensed appraisers in the United States continues to decrease. The job is a trade where the person must be a self-employed mathematician wizard who can also sell themselves to Appraisal Management System as the best person to get the information done fast, cheap, and perfect the first time. Appraisers are aging out (average age 59) and not mentoring a new crew of youth to learn the many tools needed. As digital tools continue to overtake jobs in this world it is uncertain if the licensed appraiser will continue to make a liveable wage.
You wonder what is the value of a human generated appraisal? It is of course the opinion of a person who analyzes comparables, looks at condition, reports all the statistics as the eyes, ears, and nose of the lender and also the buyer.
Mark Calabria I say to you the human licensed appraiser is one piece of the market that keeps everyone honest. He/she is the one of the lowest paid pieces in the transaction. A desktop appraisal does not disclose many market flaws that can be hidden by listing agent/owner to push the desired valuation. Using Google maps to determine the interior condition of a property is a terrible way to verify the house is standing in fair shape. Taking the piece out that is a check and balance on the system and replacing with some new app is not prudent.
Caroline Gerardo Barbeau NMLS 324982