HOT APPRAISAL TOPICS FOR 2020
November 1, 2019
Northwest Real Estate Services
One of the hottest topics is the roll-out by Fannie Mae, Freddie Mac, and AMC’s of hybrid appraisals and bifurcated products. These have been in discussion and development for years. Now appraisers are being asked to prepare these products.
A bifurcated appraisal report is an appraisal product where the credentialed appraiser does not inspect the subject property, and the one doing the inspecting may or may not be an appraiser. Data gathered from the inspection is then summarized and provided to an appraiser, who then completes a desktop appraisal report with reliance on this data. Fannie Mae and Freddie Mac have both stated that the data collector could be an appraiser, a real estate agent, a home inspector, or someone specifically trained to be a collector.
A form for this desktop appraisal, the 1004P, is still in testing and is readily available to appraisers in their appraisal software’s forms list. In other cases, AMC’s are designing their own forms. In some cases, these forms not only populate the data into the report form, but may supply the appraisers with possible comparable sales. With a key-stroke, these can be downloaded and used in the appraisal report.
This new product changes an appraiser’s scope of work. It also can create risk as appraisers try to determine if the product is USPAP compliant, and if not, add commentary so that it is. Concern is rampant about possible increased liability with reliance on a stranger’s data. Further, some states have already voted in legislation requiring property inspections to only be performed by a credentialled appraiser, effectively shutting out other “property data collectors”.
To further cloud the picture of the future for appraisers, they are already getting requests for “Evaluations” and other “alternative appraisal products.” These products are not well-defined and often are interpreted only as shorter and cheaper appraisal reports.
The biggest concerns for appraisers going forward
- Geographic competency, required by USPAP
Rumors are flying that appraisers are providing valuation services far from their normal territory; yet this work is not a “desk-top review” of someone else’s work. Reviewers from far away routinely look over reports for credibility and support of values. That is not the case here, where the appraiser is providing valuation services. Keep in mind that an appraiser is responsible for geographic competency when it is a consideration in an appraisal assignment.
- Fees offered vs. time spent
Companies offering these assignments may provide estimates of the time required to produce the product. They need to convince an appraiser to consider taking on this workload. They may maintain that the fees are the same or better than full appraisal work, based on an analysis of fees earned “per hour”. Only an appraiser can determine if this work is worth their time, based upon the scope of work that is requested.
There is a reason that lenders or AMC’s may request these products from appraisers – they still need an appraiser’s signature. It is the responsibility of the appraiser to determine their exposure. A chat with your Errors and Omissions carrier is appropriate to see if an appraiser’s routine coverage will extend to these products.
When FHA guidelines shifted in past years to include attic and crawl space viewing, many appraisers voiced concerns over the increased liability that they felt they were taking on. A decision to decline the work, or to incorporate this larger scope of work into their assignments had to be made. This scenario is no different than this one, with regards to liability concerns.
- USPAP compliance
Beyond geographic competency, the appraiser must consider if USPAP compliance is an issue and react accordingly. A brief form or a few pages may not follow the requirements of Standard 2 in USPAP. The scope of work must be detailed enough to provide a credible value, with the burden on the appraiser to decide if this is true.
There is no question that it is appealing to many appraisers to avoid field work, as trekking through snow to measure homes or sweating in an attic may not be fun. For others, with an aging appraiser population, it’s a health consideration – and leaving behind hours in their car would be a plus. Careful consideration is advisable for appraisers who would like to provide alternative appraisal products, so that they are comfortable with scopes of work, fees, and liability. All this will continue to be discussed in the coming year.