The Dangers of Hybrid Appraisals
This topic is of special interest to me. I am an active appraiser in North Carolina. I worked as a Realtor® for 10 years and have been an appraiser and author for over 15 years. I have studied the subjects of square footage, public records, automated valuations, and the impact of square footage since a few months after obtaining an appraiser’s license. The talk of hybrid appraisals and using untrained/unlicensed property data inspectors, in my opinion, is a danger to the public trust and could be devastating for consumers, appraisers, and mortgage investors, who depend on the “quality” of the products in which they invest.
Inaccurate square footage is already an issue that hurts the home-buying public. The lack of a nationally mandated measurement standard creates confusion and disagreement among all those that provide this information for the public. The inconsistencies among agents and appraisers is a huge problem. Mandating ANSI® would be a great start, but even ANSI® leaves numerous measurement issues subjective and causes debates among agents and appraisers. I authored a CE course titled ANSI®, Home Measurement and the Power of Price-Per-Square-Foot for agents and appraisers, and even developed a Home Measurement Specialist certification program. I am always amazed to see the comments from 20-year veterans who learn new info and so many comments suggesting this information be a part of mandatory education.
Even with the training an appraiser’s license requires, there continues to be problems with inconsistent data. I can only imagine what a disaster we would have if we allow home inspectors without any training or licensing requirements to create the square footage data that appraisers rely on to calculate values. We live in a price-per-square-foot world and every quality valuation is dependent on the accuracy of the very first number – square footage. Without appraisers calculating these numbers we are inviting inaccurate appraisals.
Virginia and North Carolina are well respected around the country with proactive appraisal boards. Over the last 15 years, I have heard from hundreds of appraisers asking us to set examples so their states can follow suit. This is a dangerous time in the appraisal industry. I authored a book titled “Death of an Industry-Real Estate Appraisal” back in 2010. I have watched what I believe to be a very well orchestrated plan to reduce, and then eliminate, the appraisal influence in the mortgage industry. This is the “Golden Rule” alive and well in the appraisal industry. If we don’t draw a line in the sand to stop the so-called “modernization” of our industry, we will reach the point of no return and consumers and mortgage investors will be the ultimate losers in this battle. At the end of the day, all the changes to this industry are simply about money and control. If no one other than licensed appraisers were allowed to profit from the appraisal process, all the talk of modernization would disappear immediately. This entire debate is about who profits from the appraisal process, pure and simple.
It’s hard to imagine the very people who will not allow a licensed and trained appraisal Trainee to inspect a home, will now allow any undisclosed and untrained person to enter people’s homes and provide the very data they would not accept from a trained expert. Why the change? Follow the money. They can basically hire the person they can pay the least to complete an inspection. The appraisal process requires the appraiser to be involved in the entire process, to see the neighborhood and view the house personally is one of the most important steps in the process. If others perform the inspection, appraisers are at the mercy of their pictures, their comments, and also items they leave out of the report. Things the appraiser would have noticed, and things that would impact the valuation. These inspections will lead to reports filled with errors. Inaccurate square footage alone will cause a dramatic increase in valuation errors. If those numbers are wrong so is every number that follows. Also, these inspectors don’t even have to be named and have no responsibility when the errors are discovered. All in all, it’s an invitation to fraud and abuse and a nightmare waiting to happen.
I urge you to stand up and protect home buyers and not allow the appraisal process to be further dismantled. You have a great power and responsibility in your hands, and I sincerely hope you will side with logic and end this before it goes any further. Since the inception of the AMC model, appraisals are more expensive and take more time than ever. It reduces the number of quality people entering the industry and reduces the most qualified to train the next generation. Any further reductions to our numbers ensures that big banking may ultimately get their wish, and eliminate the only participant in the home buying process without bias. Appraisers protect homebuyers and are the very best chance at sustaining a credible valuation process. Thank you for listening.