Don’t Fence Me In

We truly live in an incredible world.  The age of information and technology has given us more freedom than at any other time in the history of mankind.  Just in the last few years, the mobile office has become a reality in such a way that it would be nearly impossible for our clients to know much about our physical office at all.  Since most of us have little to no walk-in traffic, running an appraisal office from a spare bedroom at home or even from the lanai of your Belizean condo is not out of the realm of possibility.  

 

Technological advances in VoIP phone systems, high speed internet, cloud storage, and lightweight laptops allow for a professional office to be controlled and managed from just about anywhere in the world.  A few weeks ago, I assisted a new neighbor as he moved into our subdivision.  Naturally, I asked him what he did for a living and what brought him to Podunk, Idaho.  He informed me that he was a staging manager for a team of trainers.  In other words, he helps with the logistics of setting up and running business conferences.  He went on to say that just a few years ago, he had to live and work in the city where his company’s corporate offices were housed.  Due to the incredible advances in technology however, he can now live anywhere in the world as long as he has high-speed internet and is not too far from a major airport.  My good friend recently told me of a man heappraiser telecommuting knows who just moved his entire family to Puerto Rico.  His job is the same, but he now does it from a lovely tropical island.  

 

Yet, as appraisers, we are fenced in geographically in many ways.  Due to the fact that our job requires a physical inspection by the licensed appraiser, we are mostly confined to the areas in which we live and work.  Or are we?  

 

Most of us are fee appraisers.  Most of us get the majority of our appraisal work from AMC clients.  We do a lot of what we do for federal financial transactions.  Due to the current makeup of regulations, we find ourselves somewhat stuck geographically.  For most of our clients, we – the licensed or certified appraiser – must be the one to physically inspect the property.  I have written before about how a change in this one regulation could be the thing to turn our profession around.  Yet, it continues to be the climate we live and choose to work in.  That does not mean we all have to work in that environment.

 

There is nothing in USPAP or the state laws that I am familiar with that require the signing appraiser also be present during the inspection.  For many of you, having someone else do the inspection is not good business sense, but it is not illegal.  I personally believe that most thinking adults can be trained in and do effective work as on-site information gatherers (including notes, pictures, and sketch) in a fairly short period of time (usually 2-3 months or 100-150 supervised inspections).  Using today’s technology, that information can be relayed reliably to the appraiser in a Caribbean island (or just back at the office 20 miles away) almost instantaneously.  Body cameras could also be used to assist in the process so oversight by the signing appraiser could be improved even more.  

 

In today’s environment, this kind of setup  is only possible if you do mostly non-lender work or choose to  work for a company (such as Red Sky Risk Services) who allows those, other than the appraiser, to do inspections.  Now, if we could just get other lenders and AMCs to follow suit.  My condo in Belize is waiting.  

 

26 thoughts on “Don’t Fence Me In”

  1. Pingback: Don’t Fence Me In - Appraisal Buzz

  2. Pingback: Don’t Fence Me In | Appraisal Buzz

    1. Hi Dustin, we used to do this with 704 drive bys pre USPAP and with the advance knowledge and consent of our clients. We used trained ALTA site inspectors working off a checklist and that underwent ongoing appraisal training. Also, lots of pictures. Writing up ten to fifteen of the old style 704’s was common. My ‘record’ was 29 in one day. Its a model that worked for the intended purpose, but it was not foolproof. Where we could not see enough of the main improvements I recommended full appraisals-clients always screamed in protest due to added cost. It COULD be done today; and frankly IS being done (illegally-with unlicensed people) by an awful lot of those claiming they do two or three a day. Word gets out when appraisers do this. I’m ok with the model as long as clients know and accept it up front and recognize ‘exceptions’ may be unavoidable. I don’t know of ANY GSEs that allow this though. IF they did, trainees would come back into the field and prices could remain in or near the current less than C&R typically paid by AMCs. I’m not advocating for it though. I think appraisals field inspections SHOULD be done by licensees whose experience is commensurate with the difficulty of the work and you already know my views on C&R. http://mfford.com/html/c___r_fees.htm

  3. That’s when I’ll start hiring trainees again!!! I’ve always wished there was a way to do this as I am ready for Cost Rica or Puerto Rico myself!!!

    1. Thanks for another fantastic post. Where else could anybody get that type of information in such a perfect way of writing? I’ve a presentation next week, and I’m on the look for such info.

    2. “Nejdřív si pÅ™iÅ¡li pro Židy a já neříkal nic – protože nejsem Žid. Pak si pÅ™iÅ¡li pro komunisty a já neříkal nic – protože nejsem komunista. Pak pÅ™iÅ¡li pro odboráře a ja neříkal nic – protože nejsem odborář. A pak si pÅ™iÅ¡li pro mÄ› a nezůstal nikdo, kdo by se ozval!”Pastor Niemöller

  4. “Problematic” means difficult or impossible to solve because the problem itself is not well-defined. Were someone else driving by the comparables, and measuring and photographing the subject, and talking to the owner/property-manager, I would not get the flavor of the property and how it fits into the neighborhood. The appraisal would become problematic, whether or not I realized it, because I would be receiving only the information I instructed my minion to gather, rather than the full serendipitous experience of a personal visit.

    If I get my boots dirty yet still miss something, I have at least demonstrated due diligence in my inspection; .. have you? Appraisals you would be generating by this process could as easily, and with the same tunnel vision, be generated by a well-written software program getting the same inputs your foot soldiers are gathering “at the front.” Clients are really wishing they could get appraisals of equivalent quality from automated processes (e.g. Zillow) as they get from cantankerous, schedule-phobic real live appraisers. Don’t cheapen your product and give them grounds to press for automated products; produce, yourself, a quality product at whatever fee you feel you need to do the job and feed the family. Otherwise, you weaken the appraisal, the market, and the appraisal environment.

    1. Bill I agree that quality and ultimately our profession would be destroyed by this. Human nature being what it is, people usually seek the easiest and or cheapest route. A HUGE part of our profession is ethics & integrity. How many times out in the field have we all been tempted to not drive around the block only to do so and realize their is either commercial, industrial or other externalities there? Hopefully we all learned properly from good trainers ourselves and don’t give in to the temptation to short cut. How soon after the ‘trainee’ inspector model is adopted will it be before the comps are not even inspected? I mean so many are behind gated walls anyway, right? We have to use MLS pictures to fully understand their sites and inherent quality and condition anyway, no? I think progress is a good thing, but it does not replace the need for all traditional methods. Google Earth cannot drive the neighborhood for me. I can get an idea of what’s there visually, but I cannot tell if the industrial noise is heard on site; or if the factory / auto body shop nearby produces VOCs that can be smelled on site at a subject. The practice ALSO leads to lower fees. I hear such appraisers say “$350 is not so bad. I pay the inspectors $100 each which leaves $250 ‘for the house’. I am ALWAYS suspicious this is taking place when people tell me they routinely ‘do two or even three a day’. I’d probably be pretty happy with $500 per day just to sit, research, analyze and type.

    2. Grrrrrrrrrrrr. Wanted to argue with you Bill re feasibility but your larger point overwhelms any argument I could possibly have. You are 100% correct imho.

  5. I got into this business because I love looking at houses, meeting the people on site, learning why they spent money on this item or that upgrade. Sitting somewhere pecking away on a computer, whether in my office or on the balcony of a condo in Key West, doesn’t change that much except for the scenery. Though the latter is a bit more bearable…and expensive.

  6. In rural America, that would be a great solution as many of the trained and professional appraisers already know the defined neighborhoods very well in which they cover. In other places, that might not be the best practice due to the need for a personal perspective of the locations.

    BUT – Regardless of who does what, the professional appraiser is 100% liable for his/her work. It would seem to me that if I’m liable, then I should be the one who decides what methods are best used in my firm. I think most grow tired of reading what the appraiser “must” do in an engagement letter or in an article, written by people who aren’t in the business or who have no clue as to the appraisal process at all. Some wish to tell me how to run my practice, while taking no liability for anything that comes from my practice.

    Let me train my trainees in the manner that best works in my practice and in the areas I cover. If I have an assignment involving a property I’ve appraised within the past couple of years, what would be the real danger in allowing my trainee to inspect it for the new assignment? If their inspection reveals something of concern, or if something has changed, the appraiser could always do a second inspection. What would be wrong with that? And honestly – Why do I have to driveby the comparables for a picture, when I’m very familiar with those properties already? Most engagement letters, along with various opinion articles, say the appraiser must do it all. If our counterparts in the legal or accounting professions followed that rule of thought, we would never get anything done across the isle.

    Just my opinion, of course… Good article Dustin. Always enjoy reading your musings.

    1. Dale, the “why” to all of your questions is because things change. How many of the assignments have you actually done previously? 10%? 20%? have they remodeled? Was there a fire? Did they rent the place out and have bad tenants that tore it up? Did the creek in the back rise up and flood the cellar? Did Farmer Smith sell his cattle grazing land to a pig farmer next doo to the subject? Look IF your client AGREES in advance and is fully aware of the limited scope work you are promoting, then Im fine with that. On the other hand if they are expecting your personal inspection and field analysis per SOW and you send trainees, or don’t inspect comps then you are violating USPAP (misleading report). If you also charge lower fees because you can now afford to because YOU do LESS than your competition, then you have an unfair advantage over competition based on what’s an illegal practice in most states. When FNMA or the feds clearly state that GSEs are NOT required to have the signing appraiser inspect and the report CLEARLY identifies who did what, then I am ok with what you propose. In the meantime I still see appraisers trying to parse the language so that the outright lie about personal inspection can be side stepped.

  7. I could go on a long time on this subject, but I agree with the Coach. Modern appraisals are in my opinion, very outdated. The methods we use could stand some serious modifications. Available technology and wisdom are the why (wisdom because we have had enough time to analyze our methods for strength and weakness). For you reviewers, how often do you read a truly great reconciliation? I don’t even write them myself. Why? First because no one else does it and second because I spend too much time working other aspects that are “required”. There is and will always be only so much money spent on appraisals in the mortgage industry. That’s a point I bring up often, yet few grasp it and what it means. I think we place our energies in the wrong places and could produce more credible reports for less money. Getting FNMA/Government to make changes however, well that’s a fight I don’t have the will to take on, nor does it seem anyone else does either. If you’re reading FNMA, you should hire me as a consultant to revamp the entire process. I could deliver a new method that would be better, cheaper and still keep the thousands of valuable appraisers employed and doing what they do best, delivering non-biased, credible and supported opinions of value. I’ll do it for one years salary and deliver it in three months. In the vein of this thread, the experienced licensed appraiser would not need to leave their office if they chose not to with what I have in mind.

    1. Gee “M”, ZAIO already tried that one. Technology does NOT equal wisdom. Im tired of having every new appraiser with less than two years experience (not you per se) come in and tell us how to reinvent the business model to make it more profitable. Lets clarify something that even the AI appears to have forgotten. Principles do not change. Think about that.

      Our core techniques and methods may take advantage of technology but lets stop short of super imposing technology into areas where it CANNOT replace human observations. Otherwise, why bother with interior or onsite inspections at all? Lets all just do drivebys from now on. in fact, lets skip that inconvenient part completely. Lets just use the agents mls pictures, or Google where there are no agent pictures right? Im sure they’ll show the foundation cracks or four courses of shingles on the roof. The spongy ground in the back yard from the leaking septic tank? Not a problem. we’ll just add more disclaimers. Ever tried to identify expansive adobe soil from pictures? Know what happens to a pool in such soil when the coping seal is old and worn? How abut the concrete slab floor eight feet away with the sticky sliding door and a crack running across the floor under the carpet (which can be felt by walking over it)?

      The MORE assumptions we employ, the more we become like Zillow. An interesting novelty but proof positive that technology is not up to the task yet…unless 95% unsupported claims of accuracy 40% of the time is acceptable; or 80% accuracy 80% of the time is. That ‘missed’ 20% may be important to the borrowers or sellers. Heck, most homeowners are put out if value is “missed” by 2%!

  8. Agree with almost everyone here. In my market driving comps is an absolute waste of time. I can and do learn 10x more about a property via MLS photos and google maps/earth than driving a comp. As was stated we are stuck in a profession that is dominated by functionaries that don’t get paid or promoted for thinking outside the box. FNMA etc. and it may never change.

    1. Imagine how much MORE you could do combining mls photos; Google and DOING YOUR JOB! Reread USPAP. “ALL” available information. If you want to ‘think outside the box’ then just DISCLOSE THAT IN YOUR RREPORT!

  9. Something has to give. AMCs and the lending/regulatory complex that supports them demand lots of unproductive busy work, rock bottom prices and a plentiful supply of appraisers ready willing and able to eagerly perform the assignments. The problem is not USPAP which is plenty flexible. The problem is client demands and the fees they are willing to pay. The latest trend is to bypass appraisers entirely and create a parallel collateral valuation system that uses BPOs, databases, etc. to save money and time. It is a cruel joke on appraisers that clients, having set up an elaborate valuation system to ensure appraisers are competent and ethical, now often bypass that system because of cost and time, and chose an alternative they have made it impossible for appraisers to participate in. Personally, I like inspecting houses and do not feel values will be accurate if the appraiser does not perform a physical inspection, but it is clear that value accuracy is no longer a priority in obtaining “the number” for many lending transactions. In the end, we appraisers are perfectly capable of supplying as poor a job as the client is willing to accept. Just give us a chance!

  10. My guess on what is or might be occurring. The lenders are getting to the point where they can sort out cookie cutter from other jobs. That leaves the ones that need to be inspected for a through job. I am seeing fewer appraisers in the biz whom have been bombarded with changes in scope of work over the past 5 years. If you talk to the long term appraisers, the number at the bottom has not changed, but the methodology/information needs have increased. Thus, if the bottom line has not necessarily improved; what have the bells and whistles accomplished? False sense of security? Better written forms?

    1. It used to take bureaucracy at least ten+ years to conveniently forget the lessons of the recent past. Now through the use of “mega data”, snake oil salesmen with IT degrees and false claims of magical algorithms can cloud their judgment in less than five!

      “Ain’t progress wonderful?” By the way, anyone out there still ‘making big money’ off your ZAIO franchise zones?

  11. Hi, I think that the AMC’s should get drones to do the drive by’s. Raise the De Minimus to $500,000 and eliminate all those appraisals that involve property that is too inexpensive to worry about. But, charge the home owner for the work.

  12. Sounds like lazy “appraising” to me.

    Either you are “on vacation” or you are doing appraisal work by actually looking at the property and comparables. “Old school” appraising is still the best way for most ethical and professional appraisers I know. “Desktop”” appraisals are worth just about what most clients pay for them, less than $100.

  13. Prem’s!!!Trop d’info tues l’onfo, heureusement vous soulevez d’autres thèmes que Toulouse, même s’il y a un certain nombre de marroniers dans les vignettes (c’est pour ça que ces sujets sont sous l’encre?)Bon week-end et bonne dédicace

  14. cool post! can I steal this tuesday top ten?! what’s the difference between greek yogurt and regular plain non fat yogurt?? I always hear about greek yogurt how its good for dieting but I’ve never tried?!I use both pencil and powder for my brows, best of both worlds lol! pencil for shape precise-ness then powder to fill in for a more natural look lol

  15. Great posts! I’m with Mike when it comes to inspecting the subject property. Just too many potential issues that can create a huge liability. For all you drone enthusiasts the average price agents pay for drone photos is $500 per shoot. Drone pilots must have a FAA license, business license and insurance. The big problem here is the Bankster lenders are not held responsible for loan quality. Why worry about collateral? Not one lender was held responsible for massive lender fraud during the subprime crisis. The goal for mortgage lenders is the least path to profit. That means do all you can to water down the underwriting regs and get rid of that dam appraisal. Technology to the rescue! Regression Analysis will solve all our problems! If we continue back on the subprime path I guarantee the bank CEOs will get mega rich and America will once again visit the Great Depression of the 30’s only much worse. Lets all get together and kill (or inflate) the golden goose that lays the golden eggs, the Single Family Home.

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