Harold Huggins Realty, et al v. FNC, Inc.
Posted by Jonathan J. Miller -Tuesday, March 1, 2011, 7:00 AM
2 Comments
For the nitty gritty on this case, check out the always informative Appraiser Active blog by Francois Gregoire – he links out to the primary resources in the case.
Several residential appraisers filed a class action lawsuit against FNC a technology firm seeking damages for negligent misrepresentation, misappropriation, breach of implied contract and other charges.
Most appraisers, including my firm, use their AppraisalPort product to get and send appraisal assignments to our banking clients. They act as the toll collectors, charging us a fee for each report we send through the system. (In the early days of pdf report delivery my firm created our own secure report delivery system, dangerously named “MillerPort” which worked well but wasn’t to generate revenue and has long been put out to pasture.)
I’ve had a good relationship with FNC over the years even though I have an issue with the farming of appraisal data. At one point FNC was interested in co-developing a co-op analytics database with us. I’ve done podcasts with two of their founders:
- Robert Dorsey, Chief Data and Analytics Officer, FNC Co-Founder
- Bill Rayburn PHD, Co-founder, Chairman & CEO, FNC
Both are smart guys and I appreciated their candor in the interviews. Bill has always been a polarizing personality in the appraisal profession, namely because he is perceived as trying to run it over. Bob is the behind the scenes analytics person.
A circular reference….
I have always had an issue of institutions using without compensating the “value ad” that the appraiser contributes to the raw data. Once the appraisal is completed, it is not raw data anymore since information has been confirmed, filled in and expanded by the market expert. I feel this is the proprietary “secret sauce” culled from years of experience that is owned by the appraiser and should be compensated for. The current fee structure does not factor this in since the appraiser’s own data is being used to create alternatives for the lenders to compete against the usually unwitting appraiser who is providing the expertise.
FNC is actual providing value to their own investors first and foremost by pushing the envelope on this very question. If they win this case, it ensures that this practice will continue.
Like the era of pre-Lehman lending, the reality is that the average appraiser is under represented and doesn’t have the resources to protect their livelihood. The decision for most appraisers is to either capitulate to the lenders or shut down. Not much of a choice.
However, I don’t want to make FNC the fall guy for our industry problems. We are our own worse enemy.
Stay tuned.
Thanks for the link! Hopefully, folks will take a little time to listen to the oral argument. If you keep it in the background, I guarantee you will need to rewind in several sections because the words coming out of the defendant’s counsel test the limits of belief.
An anonymous commenter writes:…FNC represented to the appraisers that it was not building a database with or otherwise using the data the appraisers transmitted via AppraisalPort. The plaintiffs allege that these representations induced them to provide FNC with data from residential appraisals they had performed. The plaintiffs also allege that these representations were false. As FNC’s chief executive officer stated in an October 2005 interview, “when an appraisal is transmitted to the lender [via AppraisalPort], we are able to pop it open and suck all the data out.” According to the plaintiffs, FNC has access to the appraisal data that is transmitted through AppraisalPort, has been copying and warehousing this data, and used it to build the National Collateral Database. The National Collateral Database is an electronic real-estate-valuation service, collecting appraisal data and other information about residential real-estate properties and making it available to lending institutions as an alternative to paying an appraiser to perform an appraisal.