So you want more Tech? It should go both ways

We have all heard the stories of delayed appraisals and the shortage of appraisers. With these stories came the most amazing arguments from lenders and AMCs:      “We need appraisal waivers and we need better technology. We need to embrace technology and use it in any way we can.”

While there is no shortage of appraisers and there is no need to waive appraisals, lenders and their AMCs have created one of the biggest ghost stories in the history of the appraisal profession. What’s even better, while they’ve created this story—and claim the need for faster and better use of technology—they’ve failed to apply technology in their own right.

Again, according to the AMCs and lenders they need faster and cheaper products. These companies spout off about the need to have technology be more involved in the appraisal process. The concern is not about the quality of an appraisal, rather how fast they can get an appraisal to their client. An AMC’s client is the lender. If they don’t meet the demands of the lender, they lose that client and the money that comes with it. Hence most, if not all, AMCs try to find the appraiser who will work FASTEST and CHEAPEST (hence, the “best” appraiser for the job).

It’s all about them and their bottom line. They spout off saying we need more TECHNOLOGY to make things better and faster. They will reference Zillow which we all know is so accurate (sarcasm), reference tax records, and now want NON-licensed people inspecting properties to speed up the appraisal process. Yes, these non-licensed “inspectors” are coming to your home, pretending to be an appraiser, gathering data to send to an actual appraiser in order to make things faster and cheaper.

Let’s have more TECHNOLOGY, they say. Things will be better and faster, they say. Technology is the wave of the future, they say. Is that it? Yes, let’s listen to the lenders and AMCs who have only themselves in mind; lenders only looking to close loans and AMCs who are looking to please their clients any which way they can.

Technology is the one thing these AMCS and lenders have hung their hat on. They continue to push for more data, more computers, and less expertise. They want things done fast, however they will not pay someone to do it properly. Instead, they’ll push to find someone cheaper, less experienced, and willing to do anything to stay in the AMC’s good graces to continue to get work.

Technology is what they want. They want new ways to do things, more computer driven models/AVMS to spit out faster decisions without any regard for the quality or accuracy of the data presented. Technology….

Appraisers constantly hear about technology from AMCs or lenders and how it will benefit the appraiser and the consumer, but we NEVER hear about how technology could be used by AMCs to help in another area: how appraisers can be paid on time, faster, and more efficiently.

AMCs typically pay appraisers by check 30-90 days from the day they completed the report. I know. Pretty insane. There are some that pay faster however they are few and far between. So these same companies that want faster and cheaper in the lending process, take weeks if not months to pay the appraiser for their services. These same companies pushing technology can’t seem to use it themselves. Is this because they skim a portion of the fee off the top of the appraisers fee? Might they have an account earning the AMC money while the appraiser’s money acquires interest? Valid questions.

I don’t know the precise answer here, but I do know that a private party who calls me to do an appraisal PAYS me at the time of the inspection. Sometimes even before hand. And yet these companies can’t pay the appraiser ASAP at delivery of the report? Are they too waiting to get paid by the lender? Many AMCs collect fees directly from the borrower without the lender being involved, while many as well get their money via the lender. Yet they need to stall 30-90 days to have the appraiser’s check signed and mailed? Am I missing something here? AMCs want advances in technology yet still pay by paper checks?,

The same companies that want faster and better still rely on ancient methods of payments while they cite technology as the way to go forward. So by their standards they want fast and more but cannot even pay an appraiser in less than 30 days?

AMCs are proving more and more each day why there is a backlash amongst appraisers for them to be involved in the appraisal process. They want technology advancement but can’t seem to figure out how to pay an appraiser in under 30 days? Making a bad situation worse, AMCs like Appraisal Loft, Coester VMS and some others, have gone out of business owing millions to appraisers who never see the money they’ve earned and who are left to suffer the consequences of greed and poor business practices. 

AMCs contract with lenders to deliver an appraisal. Some lenders collect payment and send it to the AMC to pay the appraiser. Some contracts allow the AMC to collect, payment from the borrower without the lender being involved, so it should be easier for the AMC to pay the appraiser quickly. Instead, we are all left waiting until that check is written and sent. This in turn has created the ghost story that there is an appraiser shortage. See there is no shortage of appraisers, only a shortage of appraisers who are willing to put up with the cheap fees offered by AMCs, the lack of timely payments by AMCs, and the ongoing lies and deception the AMCs provide. (NOTE: Not all AMCs operate this way however most do. We are speaking of the exploitive majority of AMCs.)

Back to Technology… what a great word. You want to talk technology, lenders and AMCs? Lets talk. VENMO, PAYPAL BUSINESS, ACH/DIRECT DEPOSIT, ZELLE, SQAURE, QUICKBOOKS, STRIPE and others. This is technology that allows you to PAY your appraisers at the moment you receive the report. Your lenders pay you for your work before you even make an appraisal assignment. The moment the job is done, an appraiser could be paid from funds you’ve already collected.

It’s tiresome to hear that you haven’t received payment yet from the lender or consumer. That’s NOT our issue. Don’t feed us the “we only cut checks every 2 weeks to 30+ days” story. You scream everyday you need a rush job done, or need someone to complete a report and can’t find anyone, however you never follow through with your part and pay us the way we should be paid. We are independent contractors. Not employees.

Technology. It’s a powerful word that you Lenders & AMCs throw around like it only matters to you. How about this….When you accept technology and decide to pay appraisers FAST and pay them customary and reasonable fees, maybe, just maybe, you too will have a valid point. Until then, stop it. I challenge all AMCs to USE the technology of which you speak, and if you use it correctly to pay Appraisers, I’m sure your ghost story of a shortage of appraisers will disappear.

Do you know what you are getting into?

I have written many blog posts here, mainly for the consumer to read and understand what is actually happening in the world of Real Estate Valuations. My blogs range from being overcharged for appraisals so the middle man (the appraisal management company or AMC) can make money, lenders still pressuring appraisers to hit a value, and now having untrained and unlicensed people perform inspections (see my last blog entitled “Deception”).   

Well. This blog is for the Appraiser as well as the consumer.  I hope you read it and understand the extreme importance.   

Recently, as we all know, the new “Hybrid appraisal” has come onto the market. Fannie Mae has developed the 1004P form.  Lenders and AMCs have developed their own products as well, with false information claiming appraiser shortages, claiming they will be faster and better, and claiming they can still be done accurately saving consumers hundreds of dollars.  First thing, we all know that there is no shortage.  Secondly, there is no proof that these are faster and better products, and thirdly, where is the proof it’s saving them money?   

There is proof all over that AMCs are charging consumers outrageous amounts of money for a full appraisal, only to find the cheapest appraiser so they can make a bigger profit and pad their pockets. (Read my blog entitled “What’s Not In Your Wallet”). Who’s to say they aren’t charging the consumer the same or close to the same fees for these so-called faster Hybrid products?  

If you are still in your basement or even have no internet access, then you should know what this product is. If not, here is a quick synopsis. The definition of Hybrid: A thing made by combining two DIFFERENT elements.    

Elements of a Hybrid Appraisal: 

1) An inspector to gather data, take pictures and measure a home

2) A licensed or certified appraiser to complete the valuation

So what’s the problem here, you might ask?  Well, let’s just point out the main issues.  

1) Using an unlicensed and or untrained person to collect the data, measure the home and pretend to act like an appraiser. Appraisers have had to endure years of training under a supervisor, pass state tests, take continuing education, and make sure they abide by USPAP and state laws. The non-appraiser inspector?…a couple hours of training, if that! Hell, they don’t even have to be background-checked or carry any type of insurance. Seriously? Lenders, AMCs and the Government are ok with having just anyone out there with a heartbeat come to your home and gather data, and take pictures. (Yes. Appraisers have ethics and rules they’re bound by, so you never know what these unlicensed and non-background checked people will be taking pictures of and putting all over the internet.)   Maybe it’s worse. Maybe the non-appraiser person who comes to your home just got out of jail, maybe he/she is a pedophile, or worse, maybe a rapist or paroled felon.  Are you okay with this?   

2) Appraisers are in place to ENSURE THE PUBLIC TRUST!!!!  TO PROTECT THE CONSUMER. This isn’t something that just happens overnight. Years of training and supervision plus education and tests have to be overcome to gain the title of Certified Appraiser. Appraisers have the experience to note that a home has polybutylene plumbing…that “salt” on the block basement walls is a sure sign of past or current water intrusion issues, the ability and knowledge to look for things NO ONE else would even think to look for, to correctly measure the home for proper livable square footage and basement square footage per correct standards, to correctly judge the quality and condition of the subject by observing all aspects of a home upon inspection, and in the end be able to combine that inspection knowledge with market data to accurately value your home. Appraisers have to follow USPAP (Uniform Standards of Professional Appraisal Practice), which if you don’t know what that is, it’s pretty much the Bible and laws for appraisers.   

The non-appraiser inspectors:  Well, they don’t have any rules to follow, they aren’t trained to see the things appraisers are, they don’t have to have the extensive education or practical on-site knowledge and training. They just get paid to take pictures, take notes, and check off boxes on a sheet. Do they know the different types of plumbing? The differences between a bi-level home or a split level?  What is considered a basement and what is not?  The different types of home siding?  The quality or condition of a house in its current state? If I had to bet, I’d say no.   

All this leads me to this point: Recently, an AMC named Clear Capital, who has already been known to put out a bad Hybrid or desktop product. I have seen where an investor bought a townhome in Atlanta Georgia based on the output of this particular product. The appraiser was licensed in Georgia, however resided in a different state some distance from Georgia, and a third party non-appraiser inspector visited the property. Upon refinancing this home, a real, true and detailed appraisal was done by an appraiser who valued the home way lower than the Clear Capital Clear Val Hybrid desktop appraisal result. We won’t talk specific value, but it came in WAY less. Reasons? The Clear Val comparable sales used had been very inaccurate. Comp 1 sold as a 3-unit block, Comp 2 sold as a 4-unit block and comp 3 sold as a 2-unit block.  To value a townhome. This was never addressed in the Desktop appraisal. Well, needless to say the buyer got a terrible, over-valued product that he relied upon.   

Ok so where am i going…HERE.  Clear Capital recently sent an email to appraisers on their panel. Go ahead and read it….

  

Back? I hope you read what I just did. They are NOW telling appraisers that the Quality and Condition ratings, WHICH ARE TWO VERY IMPORTANT ASPECTS of an appraisal, will now be left out by the inspector so that the appraiser can make their own judgement. Wait. What? The appraiser should make his/her own judgement on pictures that may or may not be taken properly & an observation by Johnny Superstar Inspector who may have missed many things due to having no training or knowledge?  

But wait there is more….

The AMC goes out of their way to have you consider language they came up with for your report. First they have determined the scope of work for you. Secondly you are agreeing to this scope of work and that the third party inspector is sufficient enough to collect the data to comply with the Scope of work. HUH?

Now they have also admitted here that these inspectors were previously offering appraisal opinions via Quality and Condition ratings. Say what? They also state that there are many other areas within these reports that are also appraiser opinions that are being given by non appraisers. Makes sense right?

What purpose does this serve for the Consumer? Seriously. I know I am sick and tired of these AMCs and lenders taking advantage and spewing out garbage to pad their pockets. As a consumer, I would be livid if I found out that the person in my home is NOT qualified to do what they’re doing. The person in my home has no knowledge, training or even a background check. The person in my home measured it incorrectly. All of which adds up and can lead to major valuation issues. Sure, the appraiser is there in the end and doing the valuation on your home, however if they get bad data from these so-called inspectors, then that data is going to lead to a bad valuation of your home. Just to save a couple bucks on your biggest asset. What a shame.   

So consumers, be aware of what you are getting into and make sure to find out if a licensed expert is coming to your home and not Johnny Superstar Inspector. Make sure you get all the details and make sure they do things properly.   

Appraisers,one word: LIABILITY. Inspectors have 0% while you have 100%.  Can you really afford to risk your career over $50-$100??   

Of note, this how I see this playing out. 

Consumer: “You valued my house wrong as you stated it was in below average to average condition.”  

Appraiser: “Based on the information I had, that is what I determined.”

Consumer: “Well you weren’t here and didn’t see everything and have no idea what the quality and condition are.” 

Appraiser: “Correct. I based it on the information and photos the inspector sent me.” 

Consumer: “Well it’s incorrect and I will be filing a complaint with your state board and possibly looking to sue you!”   

In the end…Crickets…Can’t blame the unaccountable inspector since, well, they have 0 liability. Sorry, real estate appraiser. You’d better hope your E&O will cover you.   

A Little Push Can’t Hurt Right? Wrong!!

Well, here we go again.

In my previous blog posts titled “Round and Round” and “Pressure My Story”, I spoke to examples of how lenders and/or AMCs have been pushing and pressuring appraisers to hit certain values on transactions. If an appraiser did not hit these numbers, or make changes to make the transaction work in the lender’s favor, the appraiser would be threatened with non-payment, removal from appraiser panels, and/or blacklisted. If you haven’t read those blog posts, feel free to go back and have a look. This post, however, is about another issue that has recently come to light.

Let me set this up for you. A consumer is looking to refinance their home. They get everything set up on their end and ready to apply for the loan. But as the process with the lender gets going, they get a letter like this one below from the loan officer or banker:

I don’t know about you, but in my opinion, this violates Dodd Frank, Appraiser Independence. It clearly shows that issues of the past are still being presented today, just in a different way. It’s not necessarily the lenders that are directly trying to influence values (although many still act as described in previous blog posts), but they are instructing the homeowners to exert influence, and as this person said, “PUSH” the appraiser for a certain value because the lender is prohibited from doing so. The very person the consumer is trusting to do what’s right on their loan, is now instructing the prospective borrower to “SELL YOUR HOME to the appraiser” to achieve the magic number that will close the loan. Forget ethics, forget trying to do what’s right, and forget the risky position foisted on the consumer by the loan officer. Have we as members of the national economy not learned anything from ten years ago?

Since the crash, laws have been put into place to protect Appraiser Independence and YOU as the consumer. The Dodd Frank law specifically spells out what must not happen among lenders, AMCs and appraisers. 

The following is directly from Dodd Frank:

Dodd-Frank and discussions between appraisers and agents

The Dodd-Frank Wall Street Reform and Consumer Protection Act (“Dodd-Frank”) prohibits “any act or practice that violates appraisal independence…” It also states:

It shall be unlawful, in extending credit or in providing any services for a consumer credit transaction secured by the principal dwelling of the consumer, to engage in any act or practice that violates appraisal independence as described in or pursuant to regulations prescribed under this section.

For purposes of subsection (a), acts or practices that violate appraisal independence shall include—

‘‘(1) any appraisal of a property offered as security for repayment of the consumer credit transaction that is conducted in connection with such transaction in which a person with an interest in the underlying transaction compensates, coerces, extorts, colludes, instructs, induces, bribes, or intimidates a person, appraisal management company, firm, or other entity conducting or involved in an appraisal, or attempts, to compensate, coerce, extort, collude, instruct, induce, bribe, or intimidate such a person, for the purpose of causing the appraised value assigned, under the appraisal, to the property to be based on any factor other than the independent judgment of the appraiser;

‘‘(2) mischaracterizing, or suborning any mischaracterization of, the appraised value of the property securing the extension of the credit;

‘‘(3) seeking to influence an appraiser or otherwise to encourage a targeted value in order to facilitate the making or pricing of the transaction; and

‘‘(4) withholding or threatening to withhold timely payment for an appraisal report or for appraisal services rendered when the appraisal report or services are provided for in accordance with the contract between the parties

Now that you have read the above excerpt from Dodd Frank, notice that in #1 the word INSTRUCT shows up twice. The example provided here appears to be a clear violation, by the loan officer, of the law as it’s written.

Now read #3 again. Yet another clear violation of the law as it’s written. This is a perfect example of the collusion that still goes on today, besides other indirect ways that lenders influence value and violate appraiser independence.

Consumers already face many challenges when obtaining a loan. They shouldn’t have to face another with loan officers’ unethical and illegal practices. Influencing a value just to make a loan is not protecting you the consumer. The consumer shouldn’t be directed to influence the appraiser in order to get a professional opinion of the value of their home. The loan officer shouldn’t have to instruct the consumer to influence the value because he “can’t talk to the appraiser.” If the value is there to make the loan, then great. If it is not, the lender should move on to the next loan and the consumer should move on to their own next step. 

This is why appraisers exist: to provide an unbiased and honest opinion of value of a property. Where are the ethics and laws to protect the consumer from these types of lenders? Today’s lenders want fast and cheap and will do anything they can to close a loan. They will use desktops, appraisal waivers (which the consumer should never agree to without an independent appraisal as well), AVMs, and yes, they will do exactly what this person did in the example above. Is the consumer protected? Does the consumer’s confidence in the integrity of the loan process improve because the loan officer is asking them to press the appraiser for a value? My answer is NO

The only unbiased part of the process is the Appraiser and it should remain that way. The Appraiser should not be influenced in any way at all in order to give you the consumer the best professional opinion of your home as possible. The Appraiser has no interest in the transaction, is the expert when it comes to the valuation process and is bound by USPAP (Uniform Standards of Professional Appraisal Practice) as well as state and federal laws. Consumers should remember this and remember that Appraisers are not trying to screw you out of a loan or make things difficult for you. Appraisers are there to protect the public trust, you the consumer and provide the lender with an accurate opinion of market value.

I suggest to any consumer reading this to remember that your home is most likely your biggest asset and that obtaining a loan based off an overvalued valuation set forth by influencing the professional appraiser may come back to bite you in the end. All because you were instructed to do so by the loan officer or others wanting to make your loan close and pad their pockets. Do you really want that issue later on?
Think about it…

Planet Of The Cheapskates

Where to start with this? Do I have to refer you back to my past articles like “What’s Not in Your Wallet or Appraisers Outraged?” Where do we even begin….

We begin here. Another story of an Appraisal Management Company going out of business owing tons of money to appraisers for services they provided. Coester VMS that was once one of the biggest players in the game closed its doors recently. They closed them leaving appraisers with thousands of unpaid invoices for services that who knows if they will ever be paid for. As stated in previous blog posts, these amcs are acting as agents of the lenders that choose to use them. The lenders sign contracts with the AMCS to provide a service to them in order to help keep Appraiser Independence as stated in Dodd Frank legislation. So who is really responsible for payments to appraisers. The Lenders? The now out of business AMCS? Who? Who do appraisers turn to when the AMC goes out of business owing them money? Many states but not all require a surety bond in order for an AMC to do business in that state however as was the case in NC, the bond amount was only $25,000.00 and appraiser claims exceeded the amount in 4 days leaving most appraisers to be paid on a pro rated basis. So who else is responsible? Maybe you the Borrower? Do we really know? The laws are so vague it’s actually quite disturbing.

So lets start with a good story. A story of a lender named Sierra Pacific out of CA that has been bombarded with requests from appraisers to pay fees owed due to the now defunct Coester VMS appraisal management company. Sierra Pacific was the lender using Coester VMS as their AMC. When Coester decided to close its doors and leave appraisers unpaid, Sierra Pacific stood tall and has since been doing the right thing. They are paying appraisers for work done for them even though Coester VMS took the money from borrowers and ran. They have stepped up to pay appraisers for fees owed to them for prior appraisals. So bravo to you Sierra Pacific. We thank you for doing the right thing. See the letter below and know that Sierra Pacific is a quality Company.

Now we get to Planet Home Lending.

This was another company that had entered into a contractual agreement with Coester VMS. They are the Lender that hired Coester to be their agent and provide a service to them. Appraisers have contacted Planet Home Lending demanding payment for appraisals done for them. Unlike Sierra Pacific, Planet Home Lending decided to take a different route as seen below:

So what does this all mean??? You have one lender paying appraisers due to their admission they used a deadbeat AMC to represent them and want to do what is right. Yet another flat out states they don’t care nor will they pay due to not having an agreement with the Appraiser directly.

Here is the ultimate question? Who is responsible? The lender doing the loan or the AMC representing the Lender? Does it matter If the lender collects the fee for the appraisal from the borrower and passes it along to their agent to pay the appraiser or if the agent or AMC charges the borrower the fee directly? Good question. Why? Because this is the only profession and industry where there is a third party making contracts, taking payments on behalf of others, and making decisions with your bank or lender, while the actual entity that performs the service is left out. So another question? Why are AMCS taking payments directly from the borrower? What about Escrow accounts like Realtors have to use or how about the borrower pays the appraiser directly. We are in a day and age where borrowers can pay the appraiser directly via numerous avenues due to technology, Apps on devices, PayPal, credit cards or yes even cash or check. Why for the nth time do we have to have appraisers go unpaid for services due to an AMC failure? WHO MADE THESE TERRIBLE AND RIDICULOUS LAWS? You guessed it. Our government, who is indifferent to small businesses, the backbone of the economy but they sure will support the banks and lenders.

Enough is enough and as consumers you should be outraged as well. You could one day wake up with a lien on your home. Maybe a lien on an investment property? Maybe you just get calls from the appraiser who wants his payment. Are you ready for all of that?

Your money is not going where it should but instead enriching the lives of others at the expense of real estate appraisers and small business owners due to these poor laws, legislations and the blind eyes not paying attention.

It’s time for a change. It’s time to have lenders pay AMCS separately from the appraiser . Its time for TRANSPARENCY and ACCOUNTABILITY! It’s time for appraisers to be paid fairly, rightfully and on time. It’s time to change the poor laws.