You should know, I have opened up a special folder for all of your hate mail that will surely come after you read this post. It is round and has a plastic liner for easy take out. Though I fully expect to be vilified, I would ask that you have an open mind to what I am about to say.
Let’s start first with a few anecdotes. Last summer, I went to the dentist and got a checkup. X-rays were done on my teeth (a very important piece of information for the dentist to have, I would suppose), but they were not taken by the doctor. Three weeks ago, I turned in all my receipts, financial statements, and W-2s to my CPA. I did that. Emailed them myself. Finally last year, I had lunch with a truck-driver friend of mine. As part of the casual conversation, he said he never loads his own truck, but he is 100% in charge of making sure it is done correctly. For someone driving an 18,000 lbs missile down a public road, I think he ought to make sure it is done right. I assume I could make similar statements of relying on others for important tasks, data, and information on just about every profession out there; attorneys, electricians, teachers, retailers, pilots, politicians, journalists, software engineers, real estate agents, and even scientists.
I realize the target I am paining on my back by daring to question the ‘normal way of doing things,’ but I believe the daggers being thrown are by scared and insecure appraisers who do not value themselves or understand what value they personally bring to the table.
Let me establish a few facts; first, USPAP does not require an inspection be done by the appraiser of the subject property. In fact, USPAP does not require an inspection at all. Second, USPAP says nothing of comp photos. Finally, contrary to popular belief, not even Fannie Mae requires comp photos. It’s true (Reread Scope of Work number 3 on the URAR – but read it carefully – if you don’t believe me).
As I write this, we are in the midst of a global pandemic. Many states have “stay-at-home” orders and, for a large number of assignments, the scope of work is being modified to change how we gather subject and/or comp data. This change to the way we normally do things is causing some heartburn among a minority (though very vocal) number of my peers. I have heard the argument 1,000 times; “Dustin, if we change the SOW now, it puts us on a slippery slope to the ‘new normal.’ When this is all over, we will not be relevant because our clients will realize they can get data from other sources.” To this argument, I say “Good!”
Stick with me.
For good reason, USPAP does require we have good data to analyze and make the conclusions we make. Credible data is the key to a reliable appraisal and subsequent appraisal report. Remember where all this ‘normal’ came from in the first place. It is the clients who, over the years, have increased scope creep and put us in a little box where it is accepted practice to personally inspect each subject property and take real-time photos of the comps we use. And, if I dare say so, it is about trust. By and large, our clients (at least in the lending world) do not trust us. Fannie Mae asks us to drive the neighborhood and comps, but the client says, “take a picture so we know you actually did it.” Frankly, it is insulting.
Are there good arguments for the appraiser personally seeing the inside of a property? Of course there are; REO and luxury properties come to mind, for examples. Are there insights to be gained from driving comps? Naturally; a subdivision just outside of Jackson, WY might be a good example, where values are impacted by placement on the hill and the types of views (incidentally, the neighborhood is gated and cannot be accessed legally anyway). The point is not to say an appraiser should never need to inspect a home or drive a neighborhood. Perhaps in the majority of instances, those might be wise, but shouldn’t that be the valuation expert’s call?
Due to health and safety concerns during the Covid-19 pandemic, many provisions are being made to change scope of work protocol. Some are ignorantly defending inspections and comp photos – not as being important to the appraisal process – but as a defense for why appraisers are important to the valuation process overall. In other words, I hear many crying, “If the lenders allow appraisers to get information from another party, perhaps they will not see the value of having appraisers at all!” To that I say, if the integrity of the appraisal process is not harmed by outsourcing some of these aspects (or eliminating them all together), I’ll raise a glass. I am reminded of The Broken Window Fallacy by Frédéric Bastiat (look it up if you have not recently read it).
Again, I am not saying we should never inspect homes or drive comps. I am making the argument that the appraiser – the professional – should be allowed to make that call. Afterall, they are in the best position to know whether or not it is warranted for each assignment. Think about how it is with private appraisals. Sometimes I do a desktop. Sometimes I do a drive by. Sometimes I send an assistant to do a walkthrough or take comp photos. Sometimes I do it myself. The point is, each assignment is unique and the professional makes the call. For more information on this topic, see The Appraiser Coach Podcast #338 with Ernie Durbin.
Last night, I took my beautiful bride of 24 years on a “date.” With the shutdown, the night on the town consisted of calling ahead, picking up our food, and eating it in an abandoned mall parking lot, but at least we were able to spend a few hours away from the kids. As we were leaving our neighborhood, I noticed a man taking photos of one of our neighbor’s houses. “Looks like an appraiser,” I said to my wife. When we returned from our spectacular dinner-date, I noticed a for sale sign in that neighbor’s yard. So, it wasn’t an appraiser afterall, it was a Realtor; or was it? The name on the sign was that of a female neighbor who is an agent and lives across the street from the home going up for sale! Even though she lived 12 steps from the house she was listing, she outsourced the photos to another individual. Her time was better spent marketing the property, not taking photos. She gets it.
Appraisers, we are professional analysts not data gathering interns. If you are worried about your job being outsourced to technology or other individuals, stop looking at it as your ‘job.’ You are a professional and this is a profession. Professionals focus on where they are most needed and can contribute the most value to the process and delegate the other important roles to well trained employees/contractors or modern technology.
In conclusion, let me share with you two stories. On Thursday, I received an email from a borrower detailing the specifications of her home. She also included 3 pictures showing all sides, the shed, and every room inside (from different angles). Using her words, photographs, an expired MLS listing, county data and some carefully worded assumptions, I was able to complete a 1004 desktop for a client.
On Wednesday, I spent just shy of two hours driving around Salmon, Idaho getting comp photos for an assignment. I ended up with six pictures of mailboxes, driveways, and No Trespassing signs and ended up supplying the client with MLS photos so they could see the homes I used as comps. The worst part was, I knew that is what I would get before I even started my journey.
So, what is your point, Dustin? Glad you asked. If we want to be viable now and into the future, let’s spend our energy promoting our true worth. We are professionals. If we want to be seen as such, let’s focus on the part of the process that sets us apart from AVMs, BPOs, and Zillow. By and large, what we offer to the valuation community is not data gathering. Before you get too defensive of your inspections and comp photos, consider what your real value is to the process.
Though your weight and blood pressure is important data for a doctor to know, the doctor doesn’t weigh you or put the cuff on your arm.
For more information on this subject, please download and listen to The Appraiser Coach Podcast Episode: 528 During a Pandemic, Are Comp Photos And Inspections Necessary