Hybrid Valuation: A Viable Alternative To Traditional Appraisals

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.


  1. 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.

    • 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 ?

  2. 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 report

    Also, would not the report require that the Agent be listed as a person that provided significant assistant in the
    work that was done to complete the report?

    I think I will stay away from this

    James the 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.

  3. 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 and you will get better appriasers working for you with faster turn times. The solution is not mass data driven products, but smaller driven data that is actually relevant to the subject.

  4. 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 can get on their panel in a given area just hoping to find the fastest and cheapest appraiser – regardless of their work quality. These AMCs are at the root of the issues, not the “lack” of appraisers. In these conferences I attend there is always a familiar discussion; that it is up to us to rid the industry of the “low echelon” AMCs who practice this way. There are several quality AMCs who do the right thing; require rigorous quality screening, assign orders on a rotation basis once the appraiser has passed the quality screening, and pay reasonable fees. These AMCs get priority amongst appraisers, and the turn times on a non complex assignment is always within 5 days of inspection… this isn’t just my company that does this, we are not special, this is something discussed at length during our conferences. The seasoned and well-versed appraisers simply are not willing to “prostitute” ourselves out to these low echelon AMCs anymore, so those companies that do this broadcast ordering are only getting the unseasoned appraisers who have not been properly trained – which of course leads to long turn times and poor quality assignments.

    I can not begin to explain how terrible of an idea the hybrid appraisal is… it’s unfathomable that any major lender would even consider this approach. The negative fallout will be substantial if this becomes commonplace. This method asks an agent, who is inherently biased – its the basis of their entire industry – to supply an appraiser with some of the most important data in an appraisal; quality, condition, utility, functionality… and then another biased party, the in-house appraiser also works on the report… and this is supposed to result in a credible appraisal assignment? No no no… for so many other reasons, no.

    Tightening regulations on appraisers not only in our work but in how we can train a new appraiser, along with the very poor practices outlined for some of the well-known low echelon AMCs are the root of the issues you have been discussing. Casting these low echelon AMCs in a “savior” light is yet another example of the inaccurate, misleading, and degrading information being thrown at appraisers these days.

  5. 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 jump through hoops for our clients – we love ’em.

    So, if you are a lender or an AMC and you can’t find an appraiser to complete assignments for you, you need to take a long, serious look in the mirror. The problem isn’t a shortage of appraisers. The problem is YOU. I’m not kidding. The problem is you.

    P.S. This is a lousy solution. If you are having to resort to this, maybe it’s time for that look in the mirror.

  6. 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 of my assignments there were an insufficient number of sufficiently similar properties to produce even the most basic regression models for use in the market reconciliation aspect of the report. This difficulty is further compounded when the markets are upper-tier in which there are few sales and even fewer similarities. If even a basic descriptive regression cannot be performed using the latest algorithms, what use would the computer serve? As algorithms can only analyze quantitative data, and barely reconcile qualitative data as a function of quantitative responses, human intuitive responses borne out of experience and familiarity with the market and property in question comes into play as being the only available source for the solution to the valuation problem. Shortcuts cannot be taken and hybrid approaches cannot be utilized as they do not adequately filter out the “noise” from the market so that a credible value emerges from the analysis. As far as a shortage of appraisers is concerned, the paltry fees are making a continuance on the career path increasingly in feasible. My banker saw how I broke even after reporting almost $50,000 in gross income. So the question remains, “What price risk mitigation?” If you want a repeat of 2008, go ahead and adopt your hybrid model with poorly paid functionaries and we will see whether any investors purchase the CDOs or CMOs your processes have produced.

  7. 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.

  8. 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 pool.”

    1) There is no shortage of appraisers in Colorado. Also, in conversations with other appraisers across the country, I am told that there is an over supply of appraisers. This seems to be especially true in Florida and California. I am in regular contact with many appraisers across the country. To illustrate this situation, from a lenders viewpoint, let us step into a business which most of us are familiar with; buying gasoline. There is, for example, no shortage of gasoline or places to buy it. However, using the AMC logic that is so prevalent, there may be severe shortages of places to buy gasoline at 30-40% below the prevailing market rates. Now, let’s jump back to the realm of appraising. I receive many requests for appraisal bids, as well as many appraisal orders which I can accept from LRES, weekly. I do not accept them. The offered fees for these appraisal orders are at least $200 less than orders I receive from other lenders and/or AMCs. That business model appears to be aimed for the newer, much less experienced, appraisers in my market. Just as the author of this piece is a vice president, the same applies to other professionals, i.e. appraisers. Appraisers, like vice presidents and CEOs, develop skills and evolve. I offer much more in the way of quantity, quality, and experience which can’t be matched by less experienced appraisers. I expect that to be recognized, valued, and appreciated by my clientele – and it is. However, even though I offer more than many appraisers, I will never be valued in certain segments of the market. This is due to market segmentation. There will always be, in any market, higher priced options, and low priced options. The AMC model dealing with appraising is most concerned with cost and speed. If every market worked that way, we would have a world populated by fast food restaurants, and everyone would be driving an “economy” car. And, most relevant, everyone would be living in a bare bones basic home of some kind, without the added space and amenities which the higher end homes feature. But, the world is not driven on price and speed much of the time. Real estate and cars are two obvious examples of this. The next time you are driving, see how many cars are “above average” that you see on the road. The auto makers are not in a race to the bottom to see who can make the cheapest car. And, although there are many available, I hardly ever see them on the road. Why is that? Are buyers easily manipulated into spending more money for things that are 30-40% overpriced? Or, maybe they are not overpriced, and people think that they deserve quality in the products and services they purchase? Some people are willing, and able, to pay more for the major purchases of their lives; and they certainly do. I have referrals from people that want me, specifically, to help with the valuation of a property they may be considering to buy – because they know that I can, and will, decode the market data for them, and potentially save them a very large amount of money. The never argue about price, and I believe they know that if they would offer me an insulting fee, I could likely refuse to work with them at all. In short – I receive a lot of admiration and respect for the skill set I have – even though everyone knows there are “dime a dozen” appraisers that they could “save a lot of money” with. But, they don’t even want to consider doing that. Interesting.

    2) As an appraiser, I am not overworked, but I do have somewhat of a backlog of assignments. That is not a negative thing – that is how a successful appraisal business operates. Unlike many AMCs, that believe an appraisal can be completed within a few days, because an appraiser is eagerly standing by and waiting for an order – most experienced appraisers build a lag time into their appraisals, and thus create a back log. This is to maximize efficiency by completing more than one appraisal inspection while on the road doing the “field work.” Traffic in medium to large cities in a factor that has to be managed on a constant basis, and by at least grouping appraisals in the same general area, much greater efficiency can be realized. Time is money.

    3) If an AMC wants to increase the “ever-shrinking appraiser pool” a sure way to do that is to create a hybrid appraisal product that pays a lot less than the standard accepted product in the market place. Like the automakers, appraisers do not generally realize more profit on the very low end of the market. Added to this fact, appraisers are generally loathe to add a custom report for a very small part of their customer base. Perhaps, most importantly, (but not realized by the less experienced appraisers) is the liability involved. For every appraisal which I undertake, I spend as much time creating it for *me* as I do for the customer. It is vitally important to create a solid and well supported credible appraisal which I can explain, and if need be, defend.

    In summary, the AMC appraisal model commonly proposed to appraisers is not attractive. Appraisers do not want to work fast, and they especially don’t want to work for discounted fees. Other, better paying clients, understand this and have more appraisers wanting to work with them than they can accommodate. Interesting.

    Perhaps, if the focus of a lot of AMCs were to change, the perceived severe shortage would vanish. In fact, I am almost certain it would. My clientele never has too much work that they cannot find appraisers to complete it. Of course, a large part of that reason is they pay a fee that reflects the quality work they expect to receive. All parties are happy with that arrangement, and it seems to work smoothly.

    Thank goodness we have more in the world to choose from than tiny cars and fast food restaurants. The same choices are there for every other service as well, including appraising. As you can tell by now, the situation described in this article is real, but the underlying story behind it differs greatly. Regardless of facts, most people will see only what they want to see, or what compliments what they are selling. For me, that’s very high quality appraisals. But then again, the Denver area market itself, is very high quality.

  9. 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 area.

    Appraisers do make use of real estate brokers and agents with the MLS listings of properties for the data that the MLS contains. The necessity of inspecting the subject would be required if there were no recent MLS listings of the subject.

    Essentially, a desktop appraisal without leaving the office is nothing new. The price is extremely cheap and very few appraisers are interested in performing them. Offering another cheap product to appraisers with the complication of involving a real estate person preforming the subject inspection and photographing concurrently with the date of valuation does not solve an appriser shortage produced by cheap fees.

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

  10. 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 the home? What about quality (is that stone or porcelain tile that looks like stone?). This type of arrangement will likely lead to delays when the appraiser has to pick up the phone and ask unanswered questions like these.

    The appraiser shortage is due to the high cost of entry into this profession (both education and experience), and the low financial payoff to existing appraisers of taking the time and effort to train an apprentice. This low payoff is due to the generally low fees paid by many appraisal management companies and the restrictions on the use of trainee appraisers, regardless of how competent the trainee is.

    Since as appraisers, we are liable for our work, we need to control the quality of our work product from start to finish. Bump up the appraisal fees, pass them along to the consumer. Appraisers need to make their voices heard in Washington about regulations that hinder the use of trainees. That will help develop the next generation of appraisers, insure the integrity of the appraisal process and speed production.

    Lets fix the problem instead of creating a new set of problems related to appraiser liability and appraisal quality.

  11. 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.

  12. 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 property. Your business plan can only attract a real estate agent that is failing to list or to sell. This service provider will have a short life and you struggle to secure another service provider for photographs.

    • 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.

  13. 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.

  14. 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.

  15. 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.

  16. 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 big to fail national or foreign banks and reinsurers. Make such securities exempt from all SEC regulations too. Same with FDIC. IF we are going to have them then cut out ALL pretense of meaningful oversight.

    INVESTORS that buy (bulk) loans securitized by mortgages and property have always required the assurance by uninvolved, independent third parties that what FNMA and others are trying to sell them is actually worth the purported cost. With the proliferation of insured loans, investors are less cautious but the insurers still require reliable appraisals.

    The problem is that the people that sell securitized mortgages want the window dressing or security and pretense of valuation quality that an appraisal gives to the investor (without actually doing the things that result in a reliable product).

    My favorite example was a product called PACE PRO by it’s purveyors (that also owned the number two provider of appraisal software). IF filled out only per the form provided, the product would have cost any appraiser signing it their licenses. It was intended to hit the market at a cost of about $75.00 per report.

    For $75 you can have thirty minutes of my time professionally (except in court cases). Based on experience alone, I can render an unsupported opinion of (presumed market) value or apparent value by so called comp check that will likely be from 90 percent to 100percent accurate about 50 percent to 75 percent of the time in my market area. I’ll beat Zillo or Trulia every time.

    IF all I have to do is say probably around $275,000 without defining my market area; or support opinions about its trends; specific sale issues, any site conditions at all, offering Highest and Best use or verifying zoning opinions; condition issues or even addressing specific ownership interests or burdens that affect value and or marketability; and if we ASSUME condition is always average for the subject and comparable sales; pretend land value and depreciated improvement values are meaningless and above all do not hold me responsible for showing or supporting any adjustments, or for providing a meaningful reconciliation, or certifications I CAN provide a hybrid product that will be honest and about as good as such a hybrid can get for the $75.00 noted for 30 minutes of my time.

    Obviously it would not include an inspection to verify if the property exists or not. What’s the point? In the described hybrid it wont be a factor anyway! Like everything else we’ll just assume its there.

    MY statement of limiting conditions would necessarily disclose that the report is essentially useless in about 25% to 50% of the cases due to property conditions that don’t fit the assumptions. Further it will indicate its use for any purpose absolves the preparer from any and all professional responsibility or recourse.

    I’m not being facetious. THIS is what hybrids are, for the prices offered. ALL efforts to expand them or pretend they are anything different should be labeled for what they are: Future-F R A U D !

    The small print in these forms saying the appraiser MAY amend the report IF they feel its necessary will not change that-offering grossly inappropriate fees by itself solicits accomplices to assist in fraudulent mortgages. The small print is to pass the buck for product responsibility.

    A fully USPAP compliant appraisal takes from 8 to 12 man-hours in most instances. You will not get that paying from $6.25 to $9.38 an hour for hybrid-frauds. Not while plumbers earn $100 an hour and national movements are underway to assure $15.00 and hour wages (with benefits) for McDonald’s workers.

    I challenge ANY software vendor or lender in the USA to send me a sample of their proposed form formats; engagement letters that would accompany it; scope of work requirements and proposed fee for an honest and unbiased critique of there hybrid product or idea.

    Let’s see how many will want their firm’s name associated with such products. There is a reason these proposals are always brought up by lobbyists out of public view or by umbrella trade groups speaking in generalities rather than specifics.

    I guarantee not one will take me up on the offer. Not one.

    Mike Ford, General Certified Real Estate Appraiser and Realtor (r) :VP/Chairman, National Appraiser Peer Review Committee, American Guild of Appraisers, OPEIU-AFL-CIO. (714) 366 9404

  17. Not surprising comments coming from an AMC.

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

  18. 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.


  19. 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 smaller. We need fresh, qualified blood. I know are market is an extreme case but we need help to get loans out the door in a timely fashion without sacrificing the quality of the work.

    • 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 young analytical college types coming into the party late, telling us what needs to happen. As you can see by all the comments here, that solution is dead dead wrong.

      Now you’re going to live with the market until it fully recovers. I doubt that will ever happen as far as appraising goes, because there are so many easy desk jobs in this business – like making loans, or running an AMC, or selling title insurance – to name just a very few. Who would want to drive all over and spend 9 to 12 hours typing an appraisal report? There are just so many other options.

      Here’s the funny part – I don’t know any appraiser, myself included, who even wants to remain an appraiser forever. But they do it because it is the lessor of evils, many times. When there are a couple feet of snow on the ground, or the weekend is coming up – especially a three day weekend – think of the poor slobs working at McDonalds making almost nothing – and the appraisers – sacrificing/selling hours and days of their lives in exchange for the pittance pay that is only now rising to reasonable levels. Sure, it took almost two – wait for it – decades… but it’s here.

      Welcome to the world – I sure didn’t make it this way, I only live in it. (I believe Andrew Cuomo would be a good place to start looking where things went bad, and stayed bad for a very long time. And ever since then, many of the Lenders and their AMCs have tried to control and milk the system for all it’s worth.)

  20. 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.


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