A “hybrid” appraisal is a new name for where the property inspection is separated from the analysis and appraiser’s certification. It is faster and cheaper and. . .
This is Part 5 of a (soon to be, so far) six part discussion of Hybrid Appraisals. Part One, Two, Three, and Four are behind these links.
Many years ago, I had several trainees, and as each gained experience and competence going out with me, I first let them inspect homogeneous neighborhoods, with me driving by on the outside to check on locational and optimal use issues. In time, they did complete appraisals on their own (although I always internally reviewed and signed). Both the appraisers and I learned more and more about the markets and how features related to each other and needed adjustments.
An important part of appraiser training was the field work. The most important part of the training was there, in the field. Looking at a house is quite different from looking at a checklist box on a Fannie Mae form. Driving a neighborhood is quite different from statistics describing it. Both are needed.
Today.
Today we are told that the inspections can be performed in a “robust and precise” manner by “highly trained inspectors.” But no one seems to know how this training magically appears.
The essence of data science, and EBV (Evidence Based Valuation©) is that 80% of the needed effort and expertise is getting the data right.
It appears to me that those who care about collateral risk should care the most about the data. The data that matters the most is on each individual property, and proximate influences, and pricing indexes and forecasts. Do they? Or do they care the most about making the deal, the commission, the salary bonus for volume on short-term profit maximization, rather than long-term benefit to shareholders, consumers, and the overall public trust?
The illusion of public trust was shattered ten years ago. And twenty years ago. And every ten to fifteen years back at least to the Great Depression of the 1930’s. Homes sat vacant. Foreclosed. Families lived in cars. Driving west to the next greed-induced crash. No problem.
No problem. It’s only a few hundreds or millions of families damaged. A lost sense of safety in young people. Distrust. Emotional and psychological damage. Carried forward. No problem. It’s just consumers who lose their homes to overvaluation pressure. No problem it’s just consumers who pay the taxes. The taxes easily bail out the system. A failed system.
The system also fails to provide the greedy “sufficient” gain. The darn government keeps trying to impose rules and regulations to protect the consumer. And the system gets worked. Every time and this time.
This time, let’s get those pesky appraisers out of the way once and for all. Let’s put trained and robust and precise inspectors out there. Then have the “appraiser” fill in the form. In fact, no need for a form. Data is data. We got it. Problem solved. No more pesky appraisers blowing up sales commissions and bonuses and salaries. No more appraisers with the expenses of license fees, MLS memberships, professional dues, appraisal software, records verification, and state-approved classes. Super savings all around.
Then comes the next economic meltdown. We must fix the cause.
Let’s license the house inspectors. . .
March 27, 2019 @ 7:52 am
There is no such thing as a “hybrid” appraisal or valuation. They adopted that word for something to call it. It’s not a hybrid. It has all the same elements as traditional and most, MOST, still utilize the &%#!’n grid, so nothing new there. A real hybrid would consist of new elements to produce a value assessment. We chase these points like a dog I had that couldn’t not chase the stick. She’d hide the stick when she got exhausted. We never get too tired to put the process under a microscope and delve, rehash and pontificate on the fine points – and none of them matter. He’s a work that gives an overview to what we are engaged in daily: http://uncyclopedia.wikia.com/wiki/Bullshit_theory_of_value and here’s how the body of us appraisers comes off to me: https://www.youtube.com/watch?v=7E_8EjoxY7Q Conferences, Buzz’s, panels, INNOVATOR OF THE YEAR, associations, forums, endless debate and discussion ALL WITHIN OUR RANKS… it’s a multibillion dollar transmission industry (in addition to our pay-per-play fees) Get off the merry go round and see outside our self important corral: we have the issues under a microscope and they dont matter. So now one person measures up the house and another fills in the forms and grids up a few “comps” of their choosing and to support their POV, and nothing new. Meanwhile, we have a new USPAP every 2 yrs with shined up, reworded same o same o…. Im too old to do something else, and have made it work for me, still have a license after 21 years and have learned how to work the system using it’s own standards, guidelines and arbitrary parameter impositions. Many times they have to go find a prostitute because the answer is :”no solution” like the quadratic, and I pass, burt someone “makes it happen”. Im just no good the the BS method. You know what the score is by looking at the market numbers of a given search- c’mon, yes you do. And BTW, my values are good. I make less money than some, but I actually do all the crap we fuss about and know it takes more time and resources than can be done for less, so I know it’s not getting done even by the virtue nazi’s- you arent doing it, you like to play the BS game. … and the whirld goes around and around…
March 27, 2019 @ 6:06 pm
Yes George… it’s wrong.
Only when appraisers stand up and say
“I’m not signing my name” will this stop.
To many skippys…. not enough appraisers with “huevos”
To all you wimps who take these assignments. fu.
March 27, 2019 @ 7:14 pm
Britt,,, you said it, Mon!
March 28, 2019 @ 11:21 am
My small little company will refuse to do these assignments. Never have done one, never will. It’s my belief that the inspection of the property and driving the comparables is the cornerstone to understanding the nuances of an individual market and subject’s place in it. A computer or G.P.S. will never be able to do this. Never!. Think about that for job security. Rural market areas will never have a computer spit out prices. All properties are different. Now, take-away the inspection and driving of the comps, and well, it’s just a waste of time to drive the comps, “Trust me, I know the market!.(We hear that all the time)… The bottom line is, if an inspection and driving of the comps is not required to be part of the appraisal, then why hire an appraiser? A staff person at the bank, lender, or AMC, can do it themselves, for half the cost… It’s always about money…appraiser’s cost money!!
April 11, 2019 @ 3:18 pm
I just commented on the fallacy of hybrid in the “Is there art in science” post. Talk about a valuation mis step….hiving off the appraiser’s ability to understand the area, the market segment and the subject property is essential. Do robots or algorithims buy houses? Underwrite loans? (maybe) so why is it “ok” to delegate the valuation to such a sketchy process. I agree with Jerry.
November 4, 2019 @ 5:53 am
I agree wholeheartedly with the objections noted above. Those and more.
But, the fact is, it is no longer (in the eyes of the industry drivers) about the individual property. It is about their infinite wisdom and compiled data from the millions of appraisal reports with verified comparables and farm lists. The breadth of the data – the multi-million of data points – they believe will offer the macro-market protection from global failure – even if a few individual loan decisions are completely botched.
What they fail to see is that is just the path of circumvention taken in decades past. They, too, thought they were too smart to be beaten. They too thought they knew a better way because of mathematical probabilities or technological achievements.
They, too, were wrong. Their hubris cost the public.
Next thing you know, somebody’s gonna hire Franklin Raines to accelerate the devolution of our industry. I’m sure it’ll go better this time.