Will Appraisal Integrity Be Negatively Affected by Data Collectors
In the world of real estate, appraisals play a vital role in determining the value of a property. However, in recent years, the rise of data collectors has brought into question the integrity of modern appraisals. Today I’m gong to discuss the concerns surrounding data collectors and their impact on the real estate industry.
Data Collectors: Who Are They and What Do They Do?
Data collectors are individuals or companies who collect information on properties, such as their size, age, and location, and then provide this information to appraisers who use it to provide opinions of value. These value estimates are used by lenders and others to make important decisions about the property.
The Lack of Regulation and Training for Data Collectors
One of the primary concerns with data collectors is that they are not as well-trained or regulated as certified appraisers. Appraisers must meet certain education and experience requirements to become certified, and they must adhere to strict ethical and professional standards. In contrast, there are no formal requirements for data collectors, and anyone can become one with little to no training or experience.
The Potential for Inaccuracies in Data Collection
This lack of regulation and training can lead to inaccuracies in the information that data collectors collect. For example, a data collector may not be aware of the hundreds of items that an appraiser observes during an appraisal inspection. They may not notice the multitude of items that a trained appraiser checks during one of their appraisal observations. They also may not take into account the unique features of a property that could affect its value. These inaccuracies or lack of complete information can be passed on to the appraiser which can then lead to estimates that are significantly different from the actual value of the property, which can cause problems for lenders and borrowers alike.
The Potential for Bias in Data Collection
One reason I have heard that data collectors are being used is to reduce potential bias problems. A question I ask is “could the data collector not be biased as well”? Their information could also be biased or influenced by outside factors. Real estate agents can also be data collectors and if they have a financial interest in the property their data may not be 100% accurate.
Certified Appraisers: The Importance of Expertise and Attention to Detail
In contrast, certified appraisers are required to adhere to strict ethical and professional standards, which helps to ensure that their appraisals are fair and unbiased. They are also trained to identify and report features and physical attributes of the property that influence value. This level of expertise and attention to detail is crucial in ensuring that appraisals are accurate and reliable.
The Role of Data Collectors in the Real Estate Industry
Despite these concerns, data collectors are starting to be used more and more in the appraisal process. This is in part due to the growing demand for cheaper, faster, and more efficient appraisals.
Data collectors are typically paid by the Appraisal Management Company (AMC) that is managing the appraisal process. Rather than pay the appraiser a full appraisal fee, which includes the property inspection, the AMC will hire a data collection company and pay them far less.
The only problem with this is you get what you pay for. The long-term potentially negative effect of providing sketchy property data to the appraiser is yet to be seen. Even with the possible negative consequences this process is appealing to lenders and borrowers alike.
Changing Attitudes Towards Appraisal Inspections
Another trend that has emerged in recent years is the changing attitudes toward appraisal inspections. In the past, lenders were often hesitant to allow an appraisal trainee to perform an appraisal inspection, as they were seen as less qualified and less experienced than a certified appraiser. However, in more recent times, lenders have become more accepting of hybrid appraisals where the property was inspected by less qualified data collectors.
This shift in attitudes towards appraisal inspections is concerning, as it suggests that lenders may be placing less importance on the accuracy and reliability of appraisals. While data collectors may be able to provide cheaper property inspections the quality of the information may not be the same as a trainee or certified appraiser who has more training. The data collector may not have the expertise and attention to detail necessary to identify all of the factors that can affect the value of a property.
Conclusion
While data collectors can be a useful tool in the real estate industry, their lack of regulation and training brings into question the integrity of modern appraisals. As the demand for faster and more efficient appraisals grows, it’s important for lenders and borrowers to consider the potential inaccuracies and biases that may arise from using data collectors. Additionally, the importance of certified appraisers and their expertise and attention to detail cannot be overstated. Ultimately, the goal of any appraisal should be to provide an accurate and reliable estimate of a property’s value, and it’s up to all those involved in the real estate transaction to ensure that this goal is met.
If you are concerned that the person visiting your property or listing to collect information may not be an actual appraiser you can always ask for their license information issued by the state. By providing this information you will know they have met strict state requirements to be an appraiser. If they do not have this information you may not be getting the best appraisal.
If you have any questions about this topic feel free to contact me and as always thanks for reading.
Can the buyer, seller, or Realtor refuse this type of data collector inspection and require that the property be inspected by the certified appraiser who who will be signing the report?
Great question, Chad. I guess it would depend on the policy of the bank or lender. I think it is worth a try especially for the buyer since they are the customer of the lender and are paying for the appraisal including the expertise of the appraiser in the appraisal inspection process. If the data collector misses something about the property that a certified appraiser would have noticed the buyer is not really getting what they paid for.
I’ve wondered why appraisers aren’t being considered for data collection. This is what appraisers do. I imagine some other appraisers would do data collection for a property they are not personally appraising. I’d love to hear the rationale on this if anyone knows.
That is a good question, Ryan. I would think part of the reason would be the low pay. Data collectors who are not appraisers and do not have licenses do not have anything to risk should their information be wrong, leading to an inaccurate appraisal. I think most appraisers do not want to risk their license for such a low fee because if there is a problem with the appraisal they can be pursued legally more so than a person who has no license.
Great article! And how about safety? Who are these people they are hiring to inspect homes? Appraisers are finger printed and registered with the Dept of Public Safety, are these other people? We get background checks every year. As a female appraiser, many times I am asked when setting the appointment if it will be me doing the inspection, and being told they are glad that the appraiser is female. Many times it is a female homeowner at the property. It’s not comfortable to let a complete stranger into your home but at least with an appraiser ( male or female) – we are registered, licensed, their lender knows exactly who is being sent to the property and all of their contact info. I think safety is a huge concern for everyone these days.
Thanks, Michele for sharing your thoughts. I totally agree that safety is a huge factor but a lot of times the agent or the seller/homeowner is not even told that the person inspecting their home is a data collector and not a certified appraiser. I think getting the word out about what is going on will help in educating the public about what is happening.
Amen to this Tom and for those Appraisers who will rely on these Data Collectors information tread lightly because the APPRAISER not the DATA collector will be the one who is sued if value is at issue. I will never do these Hybrid reports….Ever!
Thanks, Mary. I agree, the appraiser has a lot more on the line than the data collector. I believe that the data collector needs to have accountability. They need to be regulated and trained appropriately, like the appraiser.
I did an one of these appraisals – the previous owner had taken in about 1/2 of the garage to be used as a den, heated/cooled, but left the garage door that could open, but put a wall – so that half was storage. The data collector barely mentioned this set up, and took 1 picture. The realtor took great pains to photograph and detail what was going on – Odd set up to say the least. I had to use the realtors remarks and photos – if the realtor had been slack – I would have had a terrible report.
These are the types of things I am hearing. The attention to detail for the data collector is not the same as the appraiser because their license is not on the line. Thanks for sharing your experience.