Originally posted by @Greg Moore:
@Merritt S. For me this thread is to see if there are likeminded investors who believe a revolution is due that can result in an improved, predictable, objective data-driven (sorry, I know that phrase is redundant) Appraisal process we can consistently rely on for a fair market evaluation of real property.
Outstanding. And why wouldn't all investors and all people not deserve just that if at all possible?
Again you are confused, or at the very least combine two things that ought not be combined. I'm sorry, but if you don't understand the foundation behind appraisal in the first place, your little conversation here is nothing more than entertainment and will not be productive whatsoever, ever.
Mortgage appraisals are for the use of the bank to assist them with regards to making a decision concerning a mortgage loan transaction. Please read that until it sinks in, using the most literal, word for word translation you can. Here is the language you will find in the URAR 1004 form used by FNMA, the most commonly used form in mortgage appraisals from all lenders. You will find similar language in all written appraisal reports and nearly identical language in all mortgage appraisal reports. I wonder if you have ever taken the time to read any of this sort of language, usually making up half of the report, as it is more important than the valuation itself. The reason it is more important than the appraisal itself is the appraisal can be misleading if the appropriate context is not defined.
INTENDED USE: The intended use of this appraisal report is for the lender/client to evaluate the property that is the
subject of this appraisal for a mortgage finance transaction.
INTENDED USER: The intended user of this appraisal report is the lender/client.
(from Appraiser Certifications:)
20. I identified the lender/client in this appraisal report who is the individual, organization, or agent for the organization that
ordered and will receive this appraisal report.
21. The lender/client may disclose or distribute this appraisal report to: the borrower; another lender at the request of the
borrower; the mortgagee or its successors and assigns; mortgage insurers; government sponsored enterprises; other
secondary market participants; data collection or reporting services; professional appraisal organizations; any department,
agency, or instrumentality of the United States; and any state, the District of Columbia, or other jurisdictions; without having to
obtain the appraiser's or supervisory appraiser's (if applicable) consent. Such consent must be obtained before this appraisal
report may be disclosed or distributed to any other party (including, but not limited to, the public through advertising, public
relations, news, sales, or other media).
23. The borrower, another lender at the request of the borrower, the mortgagee or its successors and assigns, mortgage
insurers, government sponsored enterprises, and other secondary market participants may rely on this appraisal report as part
of any mortgage finance transaction that involves any one or more of these parties.
All appraisals are developed according to the intended use and the intended user. Each appraisal is unique to those two things. Possession of a report does not equal right of use, and those granted permission to rely is not the same thing as the intended use, though it is easy to confuse that fine line. Because most people have never experienced anything other than a mortgage appraisal, they unwittingly assume all appraisals are similar to mortgage appraisals when that could not be more false.
Mortgage appraisals are the very worst of all appraisals in terms of quality (not including the nightmares known as AVM's like Zillow). However, the bank only needs a certain quality to make their decision concerning the loan, and so therefore the current level of quality is acceptable. All mortgage appraisals are written to satisfy the banks needs and concerns, with zero consideration of the borrower.
Banks (FNMA), not appraisers, developed the form format for all mortgage appraisals - they wrote it. If you don't agree with the methodology and reporting, you need to take that up with FNMA, right behind an endless line of appraisers doing the same, and who have been doing the same for a very long time, with almost no results.
It is very important for FNMA and all lenders to have a uniform appraisal. URAR is an acronym for Uniform Residential Appraisal Report, just like USPAP is an acronym for the Uniform Standards of the Professional Appraisal Practice - emphasis on the word uniform in both cases.
Armed with a uniform report format developed by appraisers beholden to a uniform code of conduct, lenders from CA can obtain an appraisal from a property in WI and make a decision on the value without wondering what the particular appraiser is attempting to communicate - in other words there is a very real need to keep it simple so the whole machine of lending across state lines goes smoothly. Borrowers have been enjoying this benefit for a very long time, but as they say, what have you done for me lately?
Lately borrowers seem to think they have a say in how a mortgage appraisal ought to be done. And why not? They paid for it. However and again, that is an issue you need to take up with the bank as a consumer, after convincing you to purchase something for them. Can you think of anyone besides your family and friends for whom you might purchase something as a gift? Pretty much unheard of in business. Yet, because borrowers want to borrow, they pony up and pay the banks expense. Did you know that some banks skim the appraisal fee?
Now that we have talked about mortgage appraisals to the point of nausea, I would love to talk about how a better appraisal could be done.
Better appraisals are in fact being done everyday. However in small numbers, because instead of people purchasing these better appraisals, they instead decided to rely on the one they purchased for the bank, that they don't have a right to use anyways outside of a warm fuzzy when they get a loan.
I had been providing these better appraisals to people for a very long time, in small numbers as I already stated. Those people made very informed decisions and the amount I charged them for the service was really no more, and even less in many cases, than the typical fee for a mortgage appraisal.
Appraisal is an art, not a science. Until you wrap your head around that, I won't waste my time with you any longer. Maybe you we're hoping I'd come to that about 4 posts ago - lol.
Enough. Time to get my fishing gear set and launch the boat.
You go ahead and plan out that revolution of yours. Let me know how it all works out.