Proposed Hybrid Guidance Document
The words of the laws and regulations do have meaning; the intent of the law and regulation is the true meaning. Our laws and regulations were put in place to provide consumer protection. This is a direct result of bad actors causing an economic crash. Hybrid appraisals create unnecessary risk for the citizens of Virginia, the housing market and the economy. Those promoting hybrid appraisals claim they will save time and money. The claim of an appraisal shortage has also been exploited. Warnings from attorneys and investor rating firms such as Moody’s and Bloomberg have been made publicly that these products are dangerous and open up huge liability concerns for all involved. The purpose of a hybrid appraisal is nothing more than profitability at the expense of consumer protection.
Virginia laws and regulations require licensing. References to direct supervision of unlicensed individuals assisting and complete direction and control over the appraisal are part of those laws and regulations. In the case of an amc, the law requires they only engage licensed appraisers.
Unfortunately there is no standard hybrid appraisal format. The GSE’s have stated they are a “pilot test program” and have developed the 1004P. This is basically the first page of the current 1004 form. The information requested on the 1004P is more than factual property characteristics. Highest and best use, effective age, conformity to the neighborhood, etc. are all opinions about aspects of the real property and are an appraisal by definition. These opinions and conclusions are significant in developing a credible appraisal of the property. Most amcs have created their own proprietary on line form and some of these products automatically integrate sales, graphs, photos and other data into the report. How does an appraiser comply with the requirement of complete direction and control?
The proposed guidance document presented does not provide confidence to a licensee these products, by general nature or otherwise, comply with Virginia laws and regulations. The samples of hybrid appraisals presented at the VREAB Hybrid Appraisal Committee Meeting certainly raised concerns by those present and additional samples that have surfaced since have not eased those concerns.
The Governor of New York signed into law AMC legislation (S9080) that prevents an amc from engaging/employing or contracting with anyone other than a licensed appraiser. The language in this law is similar to language in Virginia’s law. The intent of both the New York law and Virginia’s law are the same. The law can be found at: https://nyassembly.gov/leg/?default_fld=&leg_video=&bn=S09080&term=2017&Summary=Y&Actions=Y&Text=Y
Additionally, the State of Illinois provided guidance on hybrid appraisals to its licensees in the February 2019 newsletter. Their guidance was clear on what is and what is not acceptable under Illinois law. The Board should consider a similar approach in moving forward with guidance to licensees. The newsletter can be found at https://www.idfpr.com/Forms/DRE/RENews/IDFPR%20Monthly%20Newsletter%20-%20February%202019.pdf.