20 Minute AI Appraisals Are Coming

[glenn walker]

Buyer's using an appraisal contingency of course should pay for a full appraisal and on waivers the borrower has the option of NOT using the waiver and paying for a full appraisal.

For the others on purchases no appraisal should be required. The buyer and their agent and their home inspector knows the condition etc. Todays buyers and sellers are pretty good at narrowing final prices down to reasonable ranges of value say 2% to 5% or less.

That's also because today buyers have access to comparable homes interiors on sites like Zillow Red- Fin and others so today it's a much more informed buyer and seller than ones 10 to 20 years ago.

In summary outside of custom or complex properties, most don't need traditional full appraisals. A menu of waivers, desktops, AVM, and full 1004 should be selected by the borrower's
and the lender to see which fits best.

 

[RCA]

You as an indivaul can pay whatever you want
An appraiser is supposed to derive market value. If that differs from a SC price, so be it. Have never read in UPAP where it is about a sale prices being "supported," -

If you are estimating market value, you are estimating the average expected net sale price from a random selection of buyers in the market as of a certain day. Your market will have a mix of buyers in terms of their interest in the subject property. For some buyers the subject will be a good match for others not so much. At the same time, there are likely other properties competing with the subject. Buyers look very carefully at features they're interested in; especially if there are alternative homes and they are having a hard time deciding which to buy. This means that details could be important. Also, you don't know who exactly who the potential buyers are going to be. These aren't the only problems, there are many more. So, you need a detailed price model that covers all features that are significantly important to the potential buyer pool. The best evidence you have are property characteristics and past sales. The best tool around for extracting this information is MARS. ...

 

[J Grant]

Buyer's using an appraisal contingency of course should pay for a full appraisal and on waivers the borrower has the option of NOT using the waiver and paying for a full appraisal.

For the others on purchases no appraisal should be required. The buyer and their agent and their home inspector knows the condition etc. Todays buyers and sellers are pretty good at narrowing final prices down to reasonable ranges of value say 2% to 5% or less.

That's also because today buyers have access to comparable homes interiors on sites like Zillow Red- Fin and others so today it's a much more informed buyer and seller than ones 10 to 20 years ago.

In summary outside of custom or complex properties, most don't need traditional full appraisals. A menu of waivers, desktops, AVM, and full 1004 should be selected by the borrower's
and the lender to see which fits best.

I personally do not think Zillow and Red Fin have made buyers smarter, since both those sites were around during the boom when people paid crazy prices for homes - the borrower does not choose the valuation, the lender does - if a borrower pays cash they can pay whatever they want and do whatever they want.

 

[J Grant]

In the future, and perhaps near future , AI can integrate with applications in sections for analysis, which would be a plus. The programmer would have to teach AI what pattern to look for in data,- not an easy task since data changes constantly and is different in each apprasisal.

 

[J Grant]

If you are estimating market value, you are estimating the average expected net sale price from a random selection of buyers in the market as of a certain day. Your market will have a mix of buyers in terms of their interest in the subject property. For some buyers the subject will be a good match for others not so much. At the same time, there are likely other properties competing with the subject. Buyers look very carefully at features they're interested in; especially if there are alternative homes and they are having a hard time deciding which to buy. This means that details could be important. Also, you don't know who exactly who the potential buyers are going to be. These aren't the only problems, there are many more. So, you need a detailed price model that covers all features that are significantly important to the potential buyer pool. The best evidence you have are property characteristics and past sales. The best tool around for extracting this information is MARS. ...

I respect what you are doing with MARS. And entrepreneurs keep coming out with all kinds of statistical programs.

But the best tool around is the person- the appraiser who has the market knowledge and field experience and can apply it to the appraisal process. No tool can replace what a human brain was engineered to do - synthesize various moving and at times contradictory elements, analyze, and think a problem through. No machine can think;like a human, not even AI trained to replicate thought.

MARS or other programs are superior in their ability to quantify larger data sets. For qualification, of the data, a deep dive into the comps and motivations of parties, a knowledgeable person does it best because a person is going to use the product and take out the 400k loan or lend the $ on the collateral. Markets are comprised of buyers and sellers, some honest, some not, some well informed, some not, some rational, some not, who make decisions that become the various prices.

The reason appraisal is an enduring product is that the MV definition cancels out the noise of the various individuals out there who arrive at different prices. We use their prices of course, but filter it through the assumed hypothetical model "Sale" as of X date. How close that most probable price is to MV is the result of the appraisal opinion -