Hybrid Valuation: A Viable Alternative To Traditional Appraisals

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BLOG VIEW: Most mortgage professionals are acutely aware that the lending industry is currently struggling with appraisal delays due to a shortage of qualified appraisers in some market areas. This challenge has resulted in forward-thinking appraisal management companies (AMCs) developing solutions that make the most of available resources to expedite the appraisal process through hybrid products that combine elements of a subject field inspection and a restricted desktop appraisal.

For certain conditions, restricted desktop valuations can offer a lower-cost alternative service when compared with traditional, full appraisals. They also offer faster turn time solutions. A traditional appraisal in challenging states can take a week or more, whereas the average turn time for a restricted desktop appraisal is less than five business days.

Lenders also want the confidence of knowing that a subject property is in a marketable condition. In order to accommodate this need, we have combined the restricted desktop appraisal with a subject field inspection by a real estate professional. When you marry the two services together, the lender receives a best-of-breed product that provides the convenience and quick turn time with the additional accuracy of a visual confirmation of subject condition.

The hybrid valuation product is the result of a joint effort between real estate agents and appraisers effectively working together while, at the same time, independently focusing on their particular contribution to the product. Here’s how it works: When a valuation assignment is received, the AMC then delivers the assignment to its panel of real estate agents, who provide the interior and/or exterior site inspection and current subject photos, thus leaving the comparable analysis and local market analysis for the appraiser to research. The real estate agent will not include a value or conclusion on the report. Once the necessary data is reflected in the report, the agent submits the information to the AMC, which then delivers the report to an in-house, state-certified appraiser, who reviews and analyzes the report and may use additional data to then procure a final, value conclusion.

It is important to note that there is absolutely no value sharing between the real estate agent and the appraiser. The appraiser simply uses the data aggregated by the real estate agent to establish a final value.

By utilizing both real estate agents and appraisers, the industry speeds up the appraisal process, which results in an overall faster lending process. In states such as Colorado, Washington and Oregon, there is a severe shortage of appraisers. And the licensed appraisers who are working are heavily overworked, each with a backlog of assignments. By adding real estate agents to the mix, lenders are not limited to an ever-shrinking appraiser pool.

Lenders now have options available to expedite the appraisal process. This hybrid product may just be the solution to end their frustrations.

Audrey Clearwater is vice president of operations at LRES, offering valuations, real estate owned asset management, homeowners association and technology solutions for the mortgage and real estate industries.

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Bifurcate ThisHayk SSTEVEN KOTOWSKIAppraiserRick Stillman Recent comment authors
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Bifurcate This
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Bifurcate This

Bifurcated appraisals? Let the next mortgage meltdown begin. Why wouldn’t I choose to use my license to certify property data provided by an off-duty Uber Eats driver. Or even from a real estate broker who thinks ANSI is the name of prospective buyer. What potential conflict of interest could ever arise from broker involvement? I also have a broker’s license and most brokers are clueless on correctly measuring a house by the full and true standards. Loan originators, they of the brilliant no-doc loans, have come up with yet another hair-brained scheme. Fannie Mae, they of massive bankruptcy, knows no… Read more »

Hayk S
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Hayk S

Yes, It could be true that the appraiser workforce is aging. It is also true that there is a shortage of appraisers.
However, this proposed solution is like putting them in a situation that they can longer choose what to do.

Full Time
Guest
Full Time

The Big Data got the 2016 election right……..NOT

Rick Stillman
Guest
Rick Stillman

Excellent point. I will be using that nugget of information for a very long time!

jeff nunley
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jeff nunley

As an Oregon mortgage professional I do believe WE have an appraiser shortage in our market. I can’t speak for the rest of the country but here it’s not uncommon to have an appraisal take three weeks or longer. We also pay our AMC a $1000 or more for every appraisal we order of which $875 or more goes to the appraiser. I don’t think this is the right solution. We need to find new ways to train appraisers and encourage people to become qualified appraisers. Like nearly every part of the industry the appraiser population is aging and growing… Read more »

Rick Stillman
Guest
Rick Stillman

Yes, Jeff, what goes around comes around. The question is why is that the case? Appraisers have been regulated and pummeled to death for almost a decade. Now, when we are needed, why have the glut of appraisers left? Because they could. We would have all left, if we could have. Not all of us had gold plated options – but enough of us did, and so they left. Some of us could have written an article like the one attached to these comments – as we know the business inside out. But, instead of that happening, we have some… Read more »

James Scholl
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James Scholl

Please read the NAR’s Danger Report. The National Association of Realtors is extremely concerned about the quality of agents and their ethics.

Agents are already giving “values” on home equity loans and for foreclosed homes using mere bpo’s. Now you want to hand over the appraisal inspection of the home to them? Again, please read the NAR’s danger report.

inman.com/wp-content/uploads/2015/05/DANGERreportMay2015.pdf

Jeremy Bennett
Guest
Jeremy Bennett

Not surprising comments coming from an AMC.

Audrey if you could just walk an inch in our shoes you would be a changed person.

Mike Ford, AGA, CA AG, GAA, RAA, Realtor
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Mike Ford, AGA, CA AG, GAA, RAA, Realtor

Others have more than adequately addressed the deliberate misrepresentations about there being an appraisal shortage. Lets focus on what an appraisal is and a ”hybrid-appraisal’ isn’t. A USPAP compliant appraisal is required for federally regulated institution’s transactions (FRTs). USPAP represents the MINIMUM ACCEPTABLE standards of performance and quality. Hybrids do not. If they don’t meet the minimum standards then just what DO they meet? Im perfectly ok with sub standard products if that is what the market wants AND “the market” ceases the pretense that these are reliable appraisal alternatives. Remove the US taxpayer from ANY future liability including too… Read more »

JamesCAppraiser
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JamesCAppraiser

With all due respect Audrey, you have no idea what youre talking about.

There is no shortage of appraisers. Myself and my peers just choose not to work for chop shop AMC’s.

Harold
Guest
Harold

Here in Chicago, there is no shortage of appraisers. Only a shortage of appraisers willing to work for your low fees.
Pay us more and you see how our numbers miraculously grow.
You get what you pay for. Your cheap appraisers might be giving you the fast appraisal at value that youre looking for, but thats a recipe for disaster.

Mark Anderson
Guest
Mark Anderson

The takeover of the valuation business by the AMC’s as facilitated by the gov’t has been a sad and sorry affair. Initiated by Andrew Cuomo to help line the pockets of his buddies, the HVCC model as codified by Dodd-Frank inserts a middleman into the valuation business much like the “tin men” of the 60’s. Let us hope the current administration sees the injustice and rectifies it. Clearly a dark period and injustice brought on by well intentioned but ill informed government representatives.

Kevin A. Spellman
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Kevin A. Spellman

In your AMC world, you believe enrichment can be achieve by using artificial intelligence at the expensive of skilled labor. A skilled real estate agent does not need $15-$25 photography assignment. They will concentrate on listing and the selling. Those are their duties. You are assuming a real estate agent will cooperate and will contact their competitors for interior/exterior photographs. There are MLS rules the can stop this practice. The real estate world does attract people who fail at other careers and this true for the AMCs. Audrey your office does not help procure a listing or a sell a… Read more »

Mike Ford, AGA, CA AG, GAA, RAA, Realtor
Guest
Mike Ford, AGA, CA AG, GAA, RAA, Realtor

Real estate agents were the ones doing $90 BPOs before the crash hit all the way! How did that work out? The ones in our offices used to ask ME for my comp check opinions…which I always declined. The people they will get are the brokers that are used to the software doing their CMAs.

John Humbergh
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John Humbergh

There isn’t a shortage of appraisers. There is a shortage of appraisers who no longer accept work from AMC’s who broadcast bidding emails and offer lower than Customary and Reasonable fees with faster turn times and rediculous ‘requirements’. Appraisers are getting wise to the low tier AMC model and finding other clients who pay reasonable fees with reasonable turn times and these clients in turn are getting a superior product.

Richard Van Wickle
Guest
Richard Van Wickle

It is true that the appraiser workforce is aging. It is also true that there is a shortage of appraisers. However, this proposed solution is like putting a band aid on a wound that needs 100 stitches. Most appraisers I know spend about 10% of their time on actually inspecting properties and a much greater proportion of their time analyzing market data and producing appraisal reports. Having someone else that is not an appraiser inspect a property is not helpful. The appraiser still has to inspect the photos. Did the real estate agent accurately communicate on the functional utility of… Read more »

RANDOLPH KINNEY
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RANDOLPH KINNEY

I don’t agree that having a real estate agent inspect and photograph the subject property will save that much time in the entire appraisal process. For example, if an appraiser hired an unlicensed person to do the inspection and photographing, that would accomplish the same. If I understand the article, no one inspects and photographs comparable properties or drives the market area for neighborhood influences (positive or negative). Yet, the appraiser is charged with selecting comparable properties for completing the hybrid appraisal along with market analysis. This short coming could be overcome if the appraiser regularly performs appraisals in that… Read more »

Mike Ford, AGA, CA AG, GAA, RAA, Realtor
Guest
Mike Ford, AGA, CA AG, GAA, RAA, Realtor

Agree.
No appraiser will volunteer to be held accountable for conditions beyond their direct control or scope of work beyond reasonable compensation.

Rick Stillman
Guest
Rick Stillman

I have been a full time appraiser in the Denver Colorado market area for over 15 years. I also am on the LRES panel of appraisers. By deconstructing the following commentary, the situation described below can be readily analyzed. The results, however, may be astoundingly different from the article they were taken from. “In states such as Colorado, Washington and Oregon, there is a severe shortage of appraisers. And the licensed appraisers who are working are heavily overworked, each with a backlog of assignments. By adding real estate agents to the mix, lenders are not limited to an ever-shrinking appraiser… Read more »

Mark W
Guest
Mark W

The only appraiser shortage is one of appraisers risking losing their license for instant turn times at extremely low fees.
There is no severe shortage.

You have 3 choices-pick 2.
Fast.
Cheap.
Good.

Steven Davis MRICS
Guest
Steven Davis MRICS

The author points up the advantages of Big Data and how multivariate regressions could replace the appraiser, especially with the algorithms being developed in the wake of IBM’s Watson that that result in what is being described as “Artificial Intelligence” that replicates human reasoning. While such algorithms are indeed applicable to mass markets of homogenous products in which a sufficient number of similar products and similarities exist for inferential regression, The Real Estate is disorganized, individualistic, and barely allows for descriptive regression. I subscribe to Gandysoft.com’s multivariate regression platform ad include its regression analyses in my reports. In the majority… Read more »

Bill
Guest
Bill

There is no “shortage of appraisers”. There IS a shortage of appraisers who will work for difficult clients. Our clients get reports – including VA appraisals – in 5 business days or less. They get top quality reports, just the way they want them, and when they want them. BUT, we restrict our practice to those clients that have short or non-existent “stipulation lists”, pay promptly, and leave us alone to do our jobs. Each month, we sit down and look over our client list. We eliminate those that are difficult to work for, or pay slowly. And we will… Read more »

PNW Appraiser
Guest
PNW Appraiser

Audrey, Your article was an interesting read. Unfortunately much of your information is substantially incorrect. I do realize, given the company you work for, that you have a biased interest in the validity of the article. However, it simply is not accurate. There is no shortage of appraisers in Washington. I attend local and regional appraiser conferences quite often, and it isn’t a lack of appraisers that is causing issues. Certain AMCs are, actually. There are several AMCs, not unlike LRES, who send out broadcast appraisal orders with very low fees and incredibly short turn times to every appraiser they… Read more »

Spencer Paul
Guest
Spencer Paul

You have to understand there is not an appriaser shortage in the industry. You have to note there is a shortage of appriaser’s willing to work for cheap clients with extensive supplemental requirement that DO NOT aid in the value opinions of the appriaser. How could you sit there and discuss there is no conversations regarding value when the agents are handing the appriaser comparable, or better stated, property sales to support the sales contract and not necessarily the market value of the subject. Raise your fees and let the appriaser do thier job with out the nonsensical supplemental requirements… Read more »

James the Appraiser
Guest
James the Appraiser

Ok, my view here is that Appraisers need to stand together and just say NO to this If I follow this then the appraiser never even has to see the subject property Let me know if i missed some thing here If that is the case then I do not think that the report meets USPAP requirements but you may know better than I do I see this as a way to get an appraiser to sign the report and dump the responsibility on the appraiser even if the Agent did the work that lead to the over-value on the… Read more »

Appraiser
Guest
Appraiser

USPAP does not require an appraiser to make any sort of visual inspection from the street or onsite appraisal inspection. The forms and what is in the “Engagement Letter” dictates this. Review USPAP.

Peg
Guest
Peg

The notion that there is a shortage of appraisals is a total fallacy. There is only a shortage of appraisers who are willing to do the kind of work entailed in a good appraisal for the peanuts that many AMC’s are willing to pay. Many of us stick to our guns and ask for the fees we know we deserve. There are a lot of good companies willing to pay those fair fees.

STEVEN KOTOWSKI
Guest
STEVEN KOTOWSKI

I work in Maryland. I have AMCs telling me my market only pays $300 for a full appraisal.
Can you believe that ! I don’t. I am still looking for better fees from AMCs. I need at least $350 to make it worth my time and effort. Can you recommend some good AMCs ?

Julie Friess SRA
Guest
Julie Friess SRA

No shortage. Just a lot of cheap and fast bottom-feeders looking for garbage to paper their loan files.