The law is simple - Protect the Public Interest & Only Qualified Appraisers Can Complete Appraisals
Prior to licensing, one had to apprentice under an appraiser to gain years of experience in the business, take college level courses and get to be known by the quality of your work before lenders would accept you onto their appraisal panel.
There were abuses on both the lender and appraisal side including one large local bank where the loan officers even did their own appraisals. Licensing was established to protect the public interest. As far as lenders were concerned anybody with a license was equal. Then came Appraisal Management Companies (AMCs) who falsely convinced a lot of lender that the only way to comply with regulations was to hire them to order appraisals. Fees increased to the public and AMCs used the cheapest person they could find – often new people who were not experienced enough to have developed a client base. Half or less of the market fee was better than nothing. I am still getting requests for full appraisal reports at $300 below the VA DPOR established C&R fee!
But half of the fee wasn’t good enough for AMCs. They immediately started looking for ways to pass off a substandard product that would in best case completely bypass the law protecting the public interest and came up with Broker Price Opinions where they generally pay an agent $25 to take exterior photos of a house and provide a opinion of value. These are often used in REO and short sale lending decisions – again another violation of the public trust because many of these properties were sold below actual market value and were government guaranteed loans and the public picks up the loss.
Then AMCs tried “Appraiser Assisted” computer generated appraisals where a computer- generated automated valuation model (AVM) estimate was reviewed by an appraiser. There were marketed to lenders as cheap and quick alternatives to full appraisals – and to appraisers as a legal way to increase business for $25. Once company estimated that I could complete 10 an hour all from the comfort of my desk.
So here we are again. AMCs are back with yet another attempt at enriching themselves at the expense of the public. Use unlicensed 3rd party to inspect the property of the unsuspecting public, use an AVM value then have an appraiser sign off so that it can be called an appraisal.
Under USPAP and other industry guidelines, we are required to inspect each property we appraise, and at minimum the exterior of each comparable sale. Says so right on the URAR form.
As a person with business and computer background, I have watched computer modeling with interest. While AVMs are getting better, they still lack the ability to accurately access differences in attributes. I have seen models that assigned a minus $22k value to a garage – because there was a difference that had to be applied somewhere but it didn’t know where so it put is a garage. In the course of a year I review thousands of AVM values (CoreLogic/Realist) while completing appraisals for the subject property and reviewing generally 6-15 (or more) actual sales. The AVMs often have a very wide range and are also no where near the actual sales prices.
As a Licensed Residential Real Estate Appraiser in Virginia with more than 30 years experience I an deeply concerned at the repeated disrespect that AMCs continue to show for laws and regulations, the appraisers they work with, VA DPOR and the public/taxpayers.
Protect the public interest like the law requires and reject these AMC attempts to bypass them.