Believe It: Robots To Replace Real Estate Appraisers…According to Bloomberg, lenders are finding that appraisals based on computer programs are ultimately as reliable as a typical live performance — and cheaper.
Real Estate Advice: A primer on appraisals
This blog post will be updated with other appraisal related news from time to time.
You may keep up to date on Appraisal News at the Appraisal Institute website as well: http://www.appraisalinstitute.org/ano/contents.aspx
5-28-2015: Drones/UAVs may be used for residential real estate appraisals in the next few years per an FAA announcement. Some drones have been used for aerial shots to advertise a home, but now that the FAA is more heavily involved with regulation of it, use of drones will be more controlled….unless China decides to unleash anthrax through the US using millions of drones.
5-8-2015: Federal financial regulatory agencies implemented minimum requirements for registration and supervision of appraisal management companies (AMCs) in every US state. This will result in extra fees and costs for AMCs and appraisers. Housing and Economic Recovery Act of 2008 required appraisers to be more independent from influence by other interested parties of a real estate transactions including lenders, realtors, and principals.
2-1-2015: Collateral Underwriter = proprietary appraisal risk assessment application used by Fannie Mae for appraisal quality Fannie Mae Collateral Underwriter. It should be used wisely to assess the risk or quality of an appraisal, but it is written by the same US Governmental Agency that wrote “Desktop Underwriter” used to approve loans leading up to the mid 2000s real estate mortgage market crash!
12-26-2014: Appraisers use the Uniform Standards of Professional Appraisal Practice (USPAP), which are the standards for the U.S. appraisal profession. They are bound by professional standards to remain impartial, objective (and limit subjectivity or pressure from other interested parties), and perform appraisal assignments without bias. Recently, appraisers have been getting a black eye by accusations of price inflation. Is that happening in your market? Source: http://www.nationalmortgagenews.com/news/commentary/appraisers-are-being-unfairly-targeted-1043455-1.html
12-10-2014: Appraisers were surveyed and about 40% felt pressured recently to increase appraisal values to ensure more home sales.
8-25-2014: How the September 1, 2011 new appraisal rules working? The changes, which took effect 9-1-2011, are being required by mortgage giants Fannie Mae and Freddie Mac. Under the new rules, appraisers must use a set of abbreviations to describe homes, and rate conditions through a system of numbers and letters. Some appraisers say the new format will be difficult for home buyers and sellers to understand. Real estate agents also must provide more information to appraisers, including whether kitchens and bathrooms have been remodeled, and when the work was done. Property conditions will be rated on a scale of 1 to 6, from new construction to buildings with “substantial damage’’ and defects. Quality also will be ranked from 1 to 6, with the top rating usually including architect-designed properties and the lowest level reserved for those lacking even plumbing or electrical outlets.
2-28-2014: Hey, can’t appraisers and real estate agents just get along? Many real estate agents fear appraisals to be the #1 concern for deals in 2014. Appraisers are bound to certain regulations and some may not be familiar with trends in local markets. It will take better communication between the two, but separation of influence will be tricky. Source: http://www.einnews.com/pr_news/175846014/improving-communication-between-appraisers-and-real-estate-agents-vital
9-18-2013: Are appraisals ruining 25% of real estate transactions? Source: http://mynorthwest.com/800/2355060/Appraisals-hamper-25-percent-of-home-transactions
2-11-2013: Drop in number of appraisers, volume of foreclosures/distressed sales, direction of market prices, and expansion of inexperienced pools of appraisal management companies are some of causes of low or poor appraisals. Source: Atlanta Business Chronicle, February 8-14, Page 3D
10-9-2012: Thanks partially to Dodd-Frank (the name of 2 Congressmen who should be in jail), appraisers are now underpaid due to AMCs, leaving the profession at 3-5% annual reduction rate, and in addition to USPAPs, there are state and lender constraints to follow after their pay has been cut in half. How would you like that? Source: http://hamptonroads.com/2012/10/appraisers-between-mortgage-lender-hard-place
2-23-2012: Sellers are now getting pre listing appraisals to see what the appraiser may think the house is worth and then compare the results with their listing agent so the home isn’t underpriced.
2-20-2012: Gone are the days of banks telling appraisers “what price they need to hit”, or are they? Higher costs for appraisals – appraisal management companies owned by some banks – and unfamiliar appraisers evaluating property values – all part of the attempt by US Government for more “fairness”, to be more transparent and less influential by banks? Right! Source: http://seattletimes.nwsource.com/html/realestate/2017336010_harney29.html
2-19-2012: As of September 2011 report, about 1/3 of all appraisals weren’t hitting their sales price – what’s happening today? Source: http://www.smartmoney.com/spend/real-estate/how-appraisals-are-derailing-home-sales-1320357466034/
1-20-2012: Appraisers must use foreclosures/distressed sales at times when warranted to value properties and hold their allegiance to lenders and protect their investment – not the Sellers’ or Buyers’ interests. Source: http://realtormag.realtor.org/daily-news/2012/01/20/appraisers-dont-blame-us
9-10-11: Besides these suggested ways to fight a low appraisal (if you get that far into a deal), you can offer the seller (reluctant to drop his price) to pay for an appraisal, from an appraiser acceptable to the lender, to show that their price is too high, especially if it’s been on the market a while and nobody has bid on it. The seller, in this case not a bank, sometimes needs a 3rd party to compare recent sales. I’ve done it and it makes the process a little smoother. Source: http://rismedia.com/2011-09-07/five-ways-to-fight-a-low-appraisal/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Rismedia+%28RISMedia+Real+Estate+News%29
9-5-2011: Ways to fight your appraisal are listed in this article, but would you really want to buy a house that is priced higher than the appraisal value? Unless your crystal ball is working properly, you might reconsider. Source: http://www.upi.com/Business_News/Real-Estate/2011/09/05/Five-Ways-to-Fight-a-Low-Appraisal/9321315243322/
9-1-2011: New appraisal guidelines for new conventional loans (i.e., those purchased by Fannie Mae and Freddie Mac) will require special codes for appraisers; property conditions will be rated on a scale of 1 to 6; and more detailed interior/exterior information from real estate agents about the property. These and other changes became effective today, September 1, 2011. Source: http://www.boston.com/realestate/news/articles/2011/09/01/changes_in_home_appraisals_raise_concerns/
8-26-2011: Appraisals are still coming in below purchase prices. This causes additional sluggishness in market, but it is what it is…at least depending on the subjectivity of each appraiser. I’m not sure of the percentage of homes in the Atlanta area that have come in below appraisal, but I do know of several homes purchased that were never appraised, but sold for cash. Prices were so low, investors felt confident in value. Source: http://www.homebuyinginstitute.com/news/appraisal-below-purchase-178/
6-19-2011: Apparently all the rules for commercial property appraisals are loose, and dependent on lenders demands for comparables, when trying to reach a appraisal value mainly due to lack of sufficient recent sales and comparables – some appraisers are going back years (which 3-6 months prior sales are typical on Residential real estate). But commercial real estate is a whole new animal than residential! Source: http://www.startribune.com/business/124099969.html
One interesting article on attack on appraiser income => http://www.bostonherald.com/business/real_estate/view/20110417lenders_still_making_big_money_on_home_appraisals/srvc=home&position=recent%20
Another interesting story about the appraisal industry => http://ezinearticles.com/?Who-Owns-the-Appraisal-Management-Companies?&id=3727433
I understand since the advent of the Home Valuation Code of Conduct (HVCC), deigned to correct abuses of large banks “influencing” the outcomes of appraisals by making them go through Appraisal Management Companies, and it subsequent “corrections” that appraisers may still be busy, but they are not getting paid for their work in many cases.
And to top it all off, some big US banks may also own these warehousing firms they can use for their appraisals – can you say “conflict of interest” or “screw HVCC”?
Now there are some unscrupulous lender and appraiser that try to force a deal to happen, just a there are appraisers who are not familiar with the specific, limited geographic market of houses – each one resulting in bad decisions – accepting bad loans o rejecting good ones.
See my blogpost on Electronic Appraisals too => http://abirenews.blogspot.com/2011/02/electronic-house-appraisals.html
References to products and services are not a specific endorsement, but the user must perform their due diligence and investigate whether the product or service is right for them. I welcome any or all comments that would help others.