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Appraising “Bifurcated”
by David Brauner, Senior Broker at OREP.org
The following aphorism caught my eye recently as something I should share with you as I treated my in-laws to a deli sandwich in a small Michigan town: “Never be afraid to try something new. Remember that a lone amateur built the Ark; a large group of professionals built the Titanic.” (Thanks to Jimmy John’s!)
I laughed out loud. But the new reality is not a laughing matter. Fannie aims to replace appraisers as much as possible with automation.
Be that as it may, and regardless of what you may think about “bifurcated” appraising, everyone agrees that it looks like a done deal. And if the financial collapse of 2008 and Fannie Mae’s forced conservatorship didn’t humble those folks, nothing will. Change is here, and change is never easy: you can choose to try it or you can choose to defy it, but it’s happening.
Personally, I wish I was more receptive to change but not everyone is calibrated that way. It’s hard for me and maybe you, too, to move our own cheese, especially when everything is working pretty well.
These days, when I’m forced to change, I keep in mind how trimming a rose bush down to sticks doesn’t kill it; on the contrary it sparks faster and more robust growth. I have seen even modest risks pay dividends in business and I try not to view mistakes as failures when things don’t work out, as long as the decision was made thoughtfully. To paraphrase what Thomas Edison famously remarked about his first 1,000 attempts to invent the light bulb: the “failures,” he said, are merely learning what doesn’t work. Appraising has evolved over the years; now it is changing.
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Everyone we spoke to for this issue said there are many ways for an appraiser to utilize his/her skills to make a living in addition to residential Fannie Mae appraising. Jim Baumberger wrote a great story that did not make the deadline for this print issue titled Roadmap for Survival which offers clear and sage guidance on navigating these changes. You can find it at WorkingRE.com (Search “Roadmap”). We’ll see how this all works out but it doesn’t have to do you in. For our part, it’s our job at Working RE and our sister company OREP, to help you transform change into success.
This year OREP E&O is offering 14 hours of free, approved continuing education with our Appraiser E&O insurance package, along with other valuable business support to help you continue to grow and blossom. If you’re shopping for E&O please be sure to give OREP a look. (OREP.org)
About the Author
David Brauner is the Publisher of Working RE magazine and Senior Broker at OREP, a leading provider of E&O insurance for appraisers, inspectors and other real estate professionals in 50 states. He has provided E&O insurance to appraisers for over 25 years. He can be contacted at dbrauner@orep.org or (888) 347-5273. Calif. Insurance Lic. #0C89873. Visit OREP.org today for comprehensive coverage at competitive rates.
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by LaydeeTee
Well I see my previous comments posted Sept 27, 2019 to this article were never “approved”…so I’ll try again. Here goes…
My 2 cents (and then some)
NO, it is NOT a done deal and as a provider of E&O to appraisers, I am offended that you would publish an article saying that it is. Appraisers need to understand completely their requirements when performing these things….and many DON’T.
1. The professional Appraiser is the only party to a mortgage transaction that is unbiased and advocates for no one except the public.
2. The Appraiser’s primary function is one of protecting the public trust. Remove them from the lending equation, and you are putting the fox in charge of the hen house.
3. The issue with fees and turn times for appraisals is NOT about an “appraiser shortage”…it’s being caused by AMCs. They spend days, sometimes weeks shopping around for the cheapest appraiser, thereby causing delays in turn times.
4. AMCs engage the Appraiser for $200-$300 while charging $600-$700 to their client which is passed on to the borrower.
5. When TILA-RESPA was in the process and open for public comments, Appraisers tried to make everyone involved aware of the urgent need to separate and identify the actual Appraiser’s Fee from the AMC’s fees on the new closing documents, with NO LUCK. AMCs fought it tooth and nail. So the borrowing public remains CLUELESS.
6. You think that we had issues with the housing / lending / mortgage industry back before FIREAA…and as recently as 2007-2008, just hold on. Who honestly thinks allowing untrained, unregulated people into someone’s home is a good idea?
7. Even engaging brokers as “data collectors” is crazy. Brokers are famous for inaccurate MLS data and artificially inflating square footage and features of homes.I hate to say it, and I am actually a Realtor since 1988 (as well as an Appraiser) but I seriously question the reasoning of thinking that brokers are a good data source. Some do a good job…many do not.
8. Brokers regularly hire APPRAISERS to measure their listings. Who thinks brokers want to actually even do property data collection? Fees I’ve seen offered to brokers are $20-$25 per property.(yeah…you’ll get rich that way)
9. The truth is that the data collectors AMCs will be able to hire for the fees being offered, will not produce reliable, credible data. You can try to convince everyone that these collectors will be “virtually trained” and be given a data collection sheet to “check off” to be sure they gather what is needed at the property. How does any of that protect the public? How does that result in unbiased data or analysis? It doesn’t. Bifurcated appraisals are not ABOUT accurate, reliable data. They are about putting more money in the pocket’s of AMCs. (many owned by the Lenders!)
10. How does it make any sense that for years Lender’s have refused to allow Licensed, Supervised Appraiser Trainees to perform the inspection of the subject property, but now all of a sudden, will allow unregulated, unsupervised people to do “data collection”? The truth is that everyone understands how important the information gathered while at a subject property is…it is vital. It needs to be as accurate and unbiased as possible. THATS what an Appraiser is trained to do.
11. When we start hearing of data collectors “accidentlly” leaving a rear door unlocked at properties, only to have their friends return later to clean the place out, what then? Professional Appraisers go through an extensive education, training and licensing process far above anything a standard “background check” will provide.
12. If the data collector takes 50 photos of a property and only 25 are provided to the appraiser, who is in charge of filtering out which photos are used? The AMC? The Lender?
13. When market data and analysis is provided to the Appraiser via AVMs, does anyone honestly believe it’s completely unbiased? Computer generated data is easily manipulated. Garbage in = garbage out.
14. When an Appraiser, with 17 reciprocal state appraiser licenses, sits out in Texas doing nothing but bifurcated appraisals in coastal states he’s never worked in before, how can anyone say that’s a reliable, credible appraisal? Or say that that appraiser is geographically competent?
15. The Appraisal Foundation’s public statement about bifurcated appraisals being USPAP compliant is misleading. While bifurcated appraisals are not specifically prohibited under USPAP, it’s becoming apparent that many appraisers are not understanding their USPAP requirements as it relates to these things. Get ready state appraisal boards…you’re going to be SUPER BUSY with complaints about bifurcated reports. These things can not be compared to a regular “desktop appraisal” or a “drive-by appraisal”. We all know that.
16. The purpose of pushing these “products” is nothing more that an attempt at removing the ONE PERSON that keeps everybody honest…the Professional Independent Appraiser.
17. Everything about bifurcated appraisals leaves room for abuse at every turn. The housing industry plays an important, integral role in our nations overall economy. So this isn’t just about Appraisers being afraid of “change” or afraid they’ll be put out of business. Geeezz.
18. If this becomes “the norm”, get ready folks…we’re all in for a bumpy ride indeed.My 2 cents (and then some)
NO, it is NOT a done deal and as a provider of E&O to appraisers, I am offended that you would publish an article saying that it is. Appraisers need to understand completely their requirements when performing these things….and many DON’T.
1. The professional Appraiser is the only party to a mortgage transaction that is unbiased and advocates for no one except the public.
2. The Appraiser’s primary function is one of protecting the public trust. Remove them from the lending equation, and you are putting the fox in charge of the hen house.
3. The issue with fees and turn times for appraisals is NOT about an “appraiser shortage”…it’s being caused by AMCs. They spend days, sometimes weeks shopping around for the cheapest appraiser, thereby causing delays in turn times.
4. AMCs engage the Appraiser for $200-$300 while charging $600-$700 to their client which is passed on to the borrower.
5. When TILA-RESPA was in the process and open for public comments, Appraisers tried to make everyone involved aware of the urgent need to separate and identify the actual Appraiser’s Fee from the AMC’s fees on the new closing documents, with NO LUCK. AMCs fought it tooth and nail. So the borrowing public remains CLUELESS.
6. You think that we had issues with the housing / lending / mortgage industry back before FIREAA…and as recently as 2007-2008, just hold on. Who honestly thinks allowing untrained, unregulated people into someone’s home is a good idea?
7. Even engaging brokers as “data collectors” is crazy. Brokers are famous for inaccurate MLS data and artificially inflating square footage and features of homes.I hate to say it, and I am actually a Realtor since 1988 (as well as an Appraiser) but I seriously question the reasoning of thinking that brokers are a good data source. Some do a good job…many do not.
8. Brokers regularly hire APPRAISERS to measure their listings. Who thinks brokers want to actually even do property data collection? Fees I’ve seen offered to brokers are $20-$25 per property.(yeah…you’ll get rich that way)
9. The truth is that the data collectors AMCs will be able to hire for the fees being offered, will not produce reliable, credible data. You can try to convince everyone that these collectors will be “virtually trained” and be given a data collection sheet to “check off” to be sure they gather what is needed at the property. How does any of that protect the public? How does that result in unbiased data or analysis? It doesn’t. Bifurcated appraisals are not ABOUT accurate, reliable data. They are about putting more money in the pocket’s of AMCs. (many owned by the Lenders!)
10. How does it make any sense that for years Lender’s have refused to allow Licensed, Supervised Appraiser Trainees to perform the inspection of the subject property, but now all of a sudden, will allow unregulated, unsupervised people to do “data collection”? The truth is that everyone understands how important the information gathered while at a subject property is…it is vital. It needs to be as accurate and unbiased as possible. THATS what an Appraiser is trained to do.
11. When we start hearing of data collectors “accidentlly” leaving a rear door unlocked at properties, only to have their friends return later to clean the place out, what then? Professional Appraisers go through an extensive education, training and licensing process far above anything a standard “background check” will provide.
12. If the data collector takes 50 photos of a property and only 25 are provided to the appraiser, who is in charge of filtering out which photos are used? The AMC? The Lender?
13. When market data and analysis is provided to the Appraiser via AVMs, does anyone honestly believe it’s completely unbiased? Computer generated data is easily manipulated. Garbage in = garbage out.
14. When an Appraiser, with 17 reciprocal state appraiser licenses, sits out in Texas doing nothing but bifurcated appraisals in coastal states he’s never worked in before, how can anyone say that’s a reliable, credible appraisal? Or say that that appraiser is geographically competent?
15. The Appraisal Foundation’s public statement about bifurcated appraisals being USPAP compliant is misleading. While bifurcated appraisals are not specifically prohibited under USPAP, it’s becoming apparent that many appraisers are not understanding their USPAP requirements as it relates to these things. Get ready state appraisal boards…you’re going to be SUPER BUSY with complaints about bifurcated reports. These things can not be compared to a regular “desktop appraisal” or a “drive-by appraisal”. We all know that.
16. The purpose of pushing these “products” is nothing more that an attempt at removing the ONE PERSON that keeps everybody honest…the Professional Independent Appraiser.
17. Everything about bifurcated appraisals leaves room for abuse at every turn. The housing industry plays an important, integral role in our nations overall economy. So this isn’t just about Appraisers being afraid of “change” or afraid they’ll be put out of business. Geeezz.
18. If this becomes “the norm”, get ready folks…we’re all in for a bumpy ride indeed.
-by Howard Bouchard
Would a surgeon preform heart surgery based upon a lawyer’s medical opinion. Some Realtors only tell you what they think you want to hear. Just another better bad idea.
-by LaydeeTee
What Howard said ↑
-by Tom Bonne
We’ll see how long bifurcation lasts if we stick with our current fees! I’d just as soon get out of my office and into the sunlight to see a property (aside from the fact that I know what to look for). If not I guess I’ll go for more FHA and non-lender work.
-by Michael Ford, American Guild of Appraisers
I don’t find it necessary to lower my standards or those of USPAP to match FNMA and MISMO’s desires for automation. My business will do just fine without FNMA.
So too will appraisers that make the most important change. That of dumping FNMA work for non-GSE and non-transactional lending appraisal work for clients that still require competently performed, credible valuations.
-by Candy
That “Change” analogy doesn’t fly in this case. You are asking appraisers to accept
-the “Trojan Horse” again.
by jaydee
This can end quickly. Don’t take this kind of work on.
-by LaydeeTee
Ditto what Jaydee said ↑↑↑
-by Mike
The persons that are doing this are criminals at best and should be in stocks in a public square. My fav part is all the defeatism then turn right around and say “hey come do this course to make your appraisals better”. Why? If it’s all over, then why even bother? Fact is you get what you pay for. So it costs typical 300-350$ for a standard drive by, now what’s the cost for an untrained and/or biased monkey to do an inspection? Then have us do a partial appraisal based on their limited inspection? Seems to be about the same for 1/2 less quality… I dunno just food for thought. If it’s my money and I was the banker, I would be firing a lot of these “I have a bright idea” kind of idiots who want an appraisal at the order clown head window and then have it done by the 2nd drive thru window.
-by Ron Maloney
Enjoyed it. Thanks David.
-by Brad Bassi
Hello David, I have no problem with change. What I disagree with is that I am only worth $85, but yet I assume all the responsibility. You pay me for that responsibility and my expertise and I have no issue. But this isn’t about change for the sake of change it is about getting me to cut my fee and still accept all the responsibility. When I can write the scope of work, the report, add my expertise and get paid for it, then we can discuss my need to change or move my cheese.
-by Eric Kennedy
Tri-furcation is a desperate and stoopid attempt to correct what the AMC business model broke. Adding a third layer of crap to an already overbudend process will only create an UN credible product that is not worth the pdf it is printed upon. In 2007 they were raising the standards to become an Appraiser due to an oversupply. Why?? Because the business model worked.. however the Regulators did not work and too many “Appraisers” went undisciplined for breaking the rules. There were plenty of rules in place in 2007, but nobody was Enforcing them. AMC’s were supposed to be “management” companies – not Appraisers. Just move the TIME and RESOURCES back to the Appraiser and you will find things to be done timely – and Credibly.. assuming the Regulators do their jobs this time. Tri-furcate?? No thanks but if you must… PAY ME!!!! Sincerely – Fee Appraiser.
-by Deborah Biehl
And will David Brauner pay the Appraisers fine when the bifurcated appraisal turns into a Big Problem for the Appraiser? After all the Judge just needs to say “Who has the License?” End of story. And I’m sure OREP will love charging the appraiser more for not doing it all themselves. And how about Insurance for the non licensed folks doing the “Inspection”? And who is going to work for less than they do now?
-Cannot make a full time living and support a family now. Imagine when the fee is $50.
by LaydeeTee
Agree with Deborah ↑↑↑
-