There's a New Kid in Town

Don't be surprised if you've never heard of a "Hybrid" Appraisal.
Another term is "Bifurcated" Appraisal.

Note; The following is based on a true story. The names have been changed to protect the innocent.

bifurcate

verb bi·​fur·​cate | \ ˈbī-(ˌ)fər-ˌkāt , bī-ˈfər-\ bifurcated; bifurcating
: to divide into two branches or parts

There's a new trend going around. Lenders are using hybrid appraisals in place of a standard appraisal. These products are being marketed as an "alternative" to a full appraisal. They are being touted as faster and cheaper than a full appraisal. Some areas of the country are claiming that these products are necessary as they have a "shortage" of appraisers and need alternatives. They say that they have a hard time finding enough appraisers to take the work and appraisers are taking too long to complete the appraisal reports. They say this is causing delays in closing times and that this is causing appraisal fees to go up too high. So, the hybrid appraisal is the answer.

I'll outline how this works and let you see if you think they're an alternative.

1. ABC Bank hires an XYZ Appraisal Management Company (an AMC) to take care of the appraisal ordering process, and tells XYZ they don't believe they need a "full appraisal". (Maybe it's a refinance and ABC Bank believes the loan to value ratio will be very low.)
   
2. XYZ then sends out a mass email to "data collectors" on their "list" asking for someone to perform a "property inspection" on the subject property. This person is NOT a licensed appraiser. They are NOT supervised. They are NOT regulated, as Appraisers are through the NC Appraisal Board. AMCs claim these "data collectors" have been trained virtually by viewing training videos online and that they are given a checklist of things to photograph and make note of while at the property.
   
3. The "data collector" then contacts someone for access to the property. It may be a real estate agent, it may be the homeowner. When they call, they may say something like..."I'm calling to come out to the house for the appraisal."
   
4. The access appointment is set...maybe the home is occupied, maybe it's vacant.
   
5. The "data collector" comes to the house, takes measurements and takes photos. They may make notes / comments as to the homes construction quality and it's condition. They upload this information to the online portal of XYZ. 
   
6. XYZ reviews the data and may add additional data regarding the homes market area, it's appeal, the area's marketing trends and times, the area's supply and demand analysis, whether values are increasing or declining, etc. This analysis comes from gathering data electronically from various sources. In other words, this is an Automated Valuation Module analysis, AVM, provided by ABC Bank or by XYZ, the AMC.
7. After all of this info is uploaded to XYZ's online portal, they then send out another mass email...this time to appraisers. They say they have a hybrid appraisal assignment, and the majority of the work has already been done. All the appraiser has to do is;  log in to their portal, look over the photos provided, look over the sketch provided, put some comparable sales in the form, make some quick adjustments if needed, arrive at a final value, sign the report and submit it back to XYZ, who in turn submits it to ABC Bank. So typically, the report is due back the same day it's assigned to the appraiser. The appraiser never leaves their computer.
8. And, so XYZ says, all this takes is about 30-45 minutes of the appraisers time. Easy peasy....Winner, winner, chicken dinner.
   
   The fee for all this? $20-$25 to the "data collector"
                                   $60-$85 to the appraiser
                Sub Total = $80-$110
               AMC Fee  - $50-$150
   Total to the Borrower = $130 - $260
   
   
   • Because of this process....
   • ...the appraiser doesn't even have to be located in the same STATE as the property being appraised. They just have to have an appraiser's license in the state of the property. Like many states, North Carolina has a process whereby an appraiser licensed in another state may apply for a reciprocal license. There are reports of appraisers holding reciprocal licenses in 17 different states.
     
   • ...the appraiser never actually sees the subject property or the comparable sales.
   • ...the appraiser has no way of accurately verifying the data provided to them by the "data collector". (there have been reports that the photos provided to the appraiser were actually of the wrong house)
     
   • ...the appraiser may or may not have access to the local MLS system where the property is located. (there have been reports of the appraiser using sales data from Zillow for the appraisal)
   • ...the appraised values from hybrid reports may be significantly different that the appraised value of the same property when a standard, full appraisal is performed. (there are reports of upset borrowers / homeowners ordering their OWN full appraisal, which comes back tens of thousands of dollars higher than the hybrid appraisal)
   • ...the unlicensed "data collector" given access to your home is most certainly NOT subjected to the same screening process and/or scrutiny as a Licensed Appraiser. AMC's are saying they are "screened" and given a background check. So what? How will that help when a "data collector" accidentally on purpose leaves a back door unlocked, only to have their "friends" return later to clean the place out?
     
   • ...when a "data collector" calls to set the appointment, if they are identifying themselves in a way that presents them as the appraiser, THAT'S against NC Law under the Appraisers Act.
     
   • ...some AMCs are claiming they only use real estate agents as "data collectors". Seriously? For $20 each real estate agents are lining up for these? In addition, many agents actually HIRE APPRAISERS to measure their listings. So why would they want to measure houses they're not listing? In addition, there's a question as to whether real estate agents are able to perform services related to "the appraisal process" under NC law, so there's THAT.
     

   So...now that you've heard what a hybrid appraisal is...would YOU want to use one as the basis for your mortgage loan?