Appraisal Scope

We have been trying to go “paperless” which is a funny concept for an appraisal office, since what we produce is a written report of a home’s value. But in an effort to streamline business, cut costs, and befriend the environment, we’ve thrown ourselves fully into this endeavor. Ironically, we have started the process by purging vast amounts of paper from our filing cabinets (yes we are recycling them) and by increasing costs (temporarily) by adding a second monitor at each work station.

In the process of ridding ourselves of mounds of paper, Niki came across an article from the San Francisco Chronicle, dated April 1, 2001, (and no it is not an April Fool’s day article) entitled, “Freddie Mac to Forgo Some Appraisals.”

Let me share a few statements from the article:

…Beginning April 8, Freddie Mac, the giant home loan investor, plans to change one of the oldest rules of the real estate game. On certain “low-risk” mortgages it finances, Freddie will no longer require a formal appraisal…In place of the mandatory appraisal Freddie will perform an electronic “collateral assessment” on the home to determine its approximate market value...Patricia McClung, Freddie’s vice president for loan origination, says electronic valuations allow (Freddie) to give on-line applications approvals within seconds… Not surprisingly, Freddie’s plan has upset the appraisal industry. A spokesman for…the Appraisal Institute called the impending program “irresponsible” and “sleight of hand.” Don Kelly, the institute’s vice president for public affairs, said the new concept “adds significantly” to Freddie’s potential risk of financial loss in the event of economic downturn…

Wow, Don Kelly you are a modern day soothsayer!!! While not wanting to retype the whole article, let me summarize who was eligible for an AVM (AVM is the modern day version of electronic collateral assessment) rather than an appraisal in 2001: purchase loans up to $275,000 for single family homes (no condos) with 20% down and good credit. I don’t profess to know how the program manifested itself over the years since 2001, but perhaps there is a lesson to be learned…