“Change is the law of life. And those who look only to the past or present are certain to miss the future.” – John F. Kennedy.
Recently Fannie Mae created quite a stir in the appraisal community by announcing their policy regarding Value Acceptance (Appraisal Waiver) and Value Acceptance + Property Data options. Based on several webinars I attended shortly after the announcement, eligibility for these options is small. Using the previous year as a barometer, the number I heard is 3% – 4% of all loans.
The Fact Sheet associated with this announcement has a lot of information, focusing primarily on the Value Acceptance (Appraisal Waiver) and Value Acceptance + Property Data alternatives. A much smaller portion is dedicated to a 1004 Hybrid appraisal option. This option is only available under special circumstances. A loan must initially qualify for Value Acceptance + Property Data, and the Property Data must already be complete and confirm property type eligibility. Only at this point is the 1004 Hybrid an option if the loan loses Value Acceptance + Property Data eligibility due to changes in qualifying loan characteristics. Under these circumstances, given the 3% – 4% estimate based on 2022 data, the number of 1004 Hybrid assignments that will be ordered under this announcement is nominal.
That said, much of the concerns voiced by appraisers have to do with the 1004 Hybrid option. Many appraisers have expressed that they will never sign a report they didn’t personally inspect. My response to this concern is, why? Why will they not consider these assignments? Appraisers use third-party data in every report they complete. How do appraisers verify the data from MLS and public records? What are the qualifications of the individuals that collected the data for these sources?
The Appraiser’s Certification section of the 1004 Hybrid report states – “After examination of the data and data sources, the appraiser has used only the data he or she considers reliable. The appraiser assumes there are no material omissions and makes no guarantees, express or implied, regarding the accuracy of this data.” This language isn’t a get-out-of-jail-free card. If a data collector has a photo of an 8/4/2.1 2-story with a 2-car garage and reports the GLA at 1,000 sq ft and the design as a ranch… that data isn’t reliable. An appraiser will be liable if they use that information to complete a report. If, during the process, the appraiser has a reason to believe they can’t produce credible assignment results with the information provided, they need to change the scope of work or turn the assignment down. It is a simple “out” that already exists.
While I have yet to see a third-party property data collection report produced for Fannie Mae’s specific collection process as outlined in their published Property Data Collection User Guide, I have been able to review property data collection reports for other products, and most of them are pretty impressive. The technology being used to generate the floor plan alone is far superior to the sketches I find in appraisal reports. In addition, there are numerous interior and exterior photos from multiple angles, and some include what is essentially a virtual walkthrough of the property. Some of these products even report the number of windows & doors, room square footage, and the ceiling height for each room.
At the heart of these changes are consistency and standardization. In short, the data collected needs to be uniform and not be any different from one collector to another. Facts are facts. The technology used to drive this process is designed to produce consistent results. They should be the same despite who is operating the tool to collect the data.
Can mistakes be made in these processes? Of course, nothing is perfect. Do appraisers sometimes need to correct their property data collection? I know I have. While his approach isn’t the best for every assignment, it is often more than acceptable in many cases.
The retail industry has undergone a remarkable transformation over the past century. At the heart of this change lies the transition from catalog-based businesses like Sears & Roebuck to e-commerce giants like Amazon. The Sears catalog and the Amazon e-commerce models succeeded by offering customers various products through a single platform. In the early 20th century, Sears dominated the retail market with its mail-order catalog that allowed customers to order items conveniently from their homes. Similarly, Amazon offered customers the same shop-from-home experience by leveraging new technology. Amazon’s rapid rise to the top can be attributed to its continuous embracement of technology and changing market landscape. In contrast, Sears lagged in adopting new technologies and adjusting its business model to meet changing customer preferences.
Change doesn’t require throwing out the good and replacing it with something new just for the sake of change. Keep what works but look for ways to make that process better and more efficient. Amazon wasn’t the first to deliver the products we want to our doors. They recognized what the market always wanted, an easy shop-from-home experience. They updated it to modern-day standards and expectations.
Don’t be left behind clinging to the “this is how we always did it” mentality. Amazon didn’t start out of the blocks selling everything under the sun. In the beginning, it was just books. They had to learn to walk before running; I’m confident the learning is ongoing. Likewise, while the number of 1004 Hybrid reports being produced under this announcement is expected to be minimal, this option will grow and become more standard with time. This is only the beginning, and change is inevitable.
What do you think? Please leave your comments, and let’s start a conversation.