This hybrid process is very disturbing to the true residential valuation professional. Just today I was provided what seemed like a bread and butter easy sale conventional order. Upon inspection there were serious issues with the home that would cost 10's of thousands. By my experience I identified the issues and alerted the client. 9 out of 10 non-appraiser inspections would have missed this issue. The buyers were not getting a home inspection so this was the only chance for the banks to not have lent on an unlivable home. The loan to value was 98%. A huge loss for both the home owner and/or bank.
FNMA has tried to make these hybrids more USPAP compliant by saying that the appraiser will now judge condition and quality rather than the unlicensed inspector. Sounds great - that is not possible without walking through the home. You must understand that the difference in one quality or condition level can be $200,000+ in many of the markets I serve. Quality and condition are entirely necessary for a credible report. And nobody can make that determination without witnessing it.
I cannot tell you how many homes I walk into where the photos are terrible due to clutter - but as an expert I can see the new updates and the home owner gets credit. On the flip side a well cleaned and painted home can look like an entirely different condition level yet be falling apart at the seams with aged updates that no buyer would want.
This is much different than the appraiser making this determination of the comps we use in the report - which is an argument I've often heard. We use many sales - often 6 - and that significantly limits any incorrect determination of one through 3rd party sources. The anomalies jump out at you and we are able to correct the issue by selecting a different Comp. and by averages the impact is minimal when bracketed. But that can't be done with the subject. You MUST get the subject right or the bank is loaning on an incorrect collateral analysis. Wildly incorrect.
So how did we get here? Why is this insanity suddenly seen like a good idea?
To understand how we got here let me walk you back in time. Through the misinterpretation of Dodd/Frank our industry was hijacked and the playing field tilted in favor of AMCs. What AMCs were meant to do was to provide a buffer for the appraiser so that they could value real estate without pressure. That is how it was sold to you and the public. What transpired was just the opposite. A storm of fly by night establishments popped up and with their sales teams hoarded all of the appraisal orders in the industry. Once established they've been looking for ways to increase profits as the middle man. They began broadcasting orders in search of the lowest fee possible.. rather than selecting qualified appraisers with geographical competence, experience, professionalism, etc.
Imagine if you did that with your Doctor, Lawyer, or even your Plumber. You end up with an inferior product. Additionally the AMCs found a loop hole and began hiring staff appraisers. Staff appraisers are not independent. And the only appraiser's willing to work staff are the least experienced and qualified. Yet here we are today with the least qualified doing the majority of appraisal work across the nation due to AMC staff and AMC hiring the lowest priced appraisers to keep the most profit.
Why must we race to the bottom with this very necessary service? Break the strangle hold of the AMCs on our industry. Allow appraisers to train their own staff to be compliant and competent in the markets they serve. We've had one of the biggest bull real estate markets in history this past 10 years. It is the underwriting standards that has allowed banks to feel more confident than 2007 - not differences in the appraisal process. The appraisal process, if allowed to be what it was meant to be, without AMCs, can be much better than it is today ... and today it is considered pretty good.
But everyone wants the appraisal fee for their bottom line. FNMA, the AMC, the banks. But the home owner is who pays this fee and they deserve a true professional licensed by their state to do their job properly for that fee. That is what they deserve. Not a hybrid cheap product. Not an AMC low bidder or staff worker. A professional independent opinion.