AI Agents and Appraiser Oversupply

[J Grant]

Huh? I literally have no words to respond... Of course lenders engage in cost reducing activities - EVERY...SINGLE...DAY. If a lender does 1k units a month and can cut $500/loan from their costs, then they've generated an additional $500k in revenue in a month.

Do you even think about what you're saying, J?


Wow - just wow. The valuation is such a small part of the overall cost of the loan - yet in J's world, the valuation is the ONLY meaningful part of the loan transaction.


Money can be made two ways - increasing volume or reducing costs. You're being duplicitous if you assert that the money taking that was done in 20-21 was anything other than volume.

That is the exact opposite of what a market is. Markets are organized and driven strictly by the behavior of buyers and sellers. Regulation is the antithesis of market forces. Regulation is government intervention into market activities. That said - it is my personal belief that some level of regulation is necessary to preserve the 'free' nature of markets (contract enforcement for example), but even that is anti-market behavior.

LENDERS DO NOT PAY FOR THE APPRAISAL THE CONSUMER PAYS FOR THE APPRAISAL

Since it costs the lender zero for the appraisal, whether the consumer is charged $100 or $500, the lender has not saved anything on cost.

The valuation of our business was discussed because it is our end of the business. I am aware of it, and it is mentioned that the consumer pays thousands in points and loan fees. AI seems better suited for underwriting and other financial diligence for a loan, and if that increases their efficiency, good -it wo n't generate more loans, but it can save a lender's costs.

Regulation is at the behest of people, particularly in a market like RE where entire life savings are tied up in it and the taxpayers underwrite the risks of res and - thus, both regulation and lack of regulation become part of the market. When you reduce safeguard regulations, you increase predatory lending and fraud in every part of the transaction, and that distorts the market and causes great economic harm. (though the players and hustlers make bank before it all crashes)

 

[J Grant]

The most likely scenario is that AI will force appraisers to get better. It will be very easy to run your report through an LLM to see if it meets the USPAP, Fannie/Freddie guides, and lender overlays. To the appraisers who think it's bad that the GSEs are now requiring you to summarize your support for market conditions, things could get a lot worse for you in all directions.



Yep, it's right here. We went from 40,000 down to 29,000. That is a massive drop. I could see dropping another 50% in 3-5 years.

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AI and AVM's are used by the entities to track values and QC appraisal reports, I understand the need and application of t on that end.

The probe is when they expect an appraisal report to conform to a generic standard - yet they need benchmark standards too - hopefully, the balance is a positive net result. I have no problem with the GSE's asking to summarize support for market conditions. What I object to is that the churn and burn crowd will end game that as well, dropping AI generic content into it or running a program and dumping the result in without seeing if it makes sense. Do the GSE's QC auto reviews pick up on that?

 

[alebrewer]

The valuation of our business was discussed because it is our end of the business. I am aware of it, and it is mentioned that the consumer pays thousands in points and loan fees. AI seems better suited for underwriting and other financial diligence for a loan, and if that increases their efficiency, good -it wo n't generate more loans, but it can save a lender's costs.

AI is best suited for what it's users decide it's best suited for. Just because J is afraid the appraisal industry might go away doesn't mean that AI isn't suited for extracting efficiency gains. To CG's point - we've experienced significant efficiency gains through the years due to technology (digital photography, PDF, XML, internet, etc.). These have all been momentous changes that introduced significant cost and time savings into the appraisal process. They are, however, nothing compared to what is coming.

Regulation is at the behest of people, particularly in a market like RE where entire life savings are tied up in it and the taxpayers underwrite the risks of res and - thus, both regulation and lack of regulation become part of the market. When you reduce safeguard regulations, you increase predatory lending and fraud in every part of the transaction, and that distorts the market and causes great economic harm. (though the players and hustlers make bank before it all crashes)

You're still confused. Regulation is NOT the market - it's the opposite of the market. The market is simply the interaction of buyers and sellers. Regulation is the constraints put on the market by those who have the authority (and power) to do so - typically governments. And I've already stated that I agree that some level of intervention is necessary. They are not the same thing, though. They are opposites.

 

[CGinMN]

Some of that decline is attributable to the big reduction in transactions, much of which was driven by the increases in mortgage interest rates. I'm seeing datasets where the number of sales in 2023-2024 have been down by 40% when compared to previous periods.

Yeah, the majority of it is reduced demand for mortgages. I don't see any trend of retirements in the 2017 to 2021 span that weren't offset by replacements/new entrants. The reduction happened in 2022 as volumes fell off a cliff. If we go through another 2-year licensing cycle with low mortgage demand, plus "new forms," I don't see any recovery in these numbers. And I don't see a compelling need for these appraiser numbers to recover.

Imagine going full steam ahead with PAREA under these conditions. They should really cut their losses ASAP.

 

[J Grant]

AI is best suited for what it's users decide it's best suited for. Just because J is afraid the appraisal industry might go away doesn't mean that AI isn't suited for extracting efficiency gains. To CG's point - we've experienced significant efficiency gains through the years due to technology (digital photography, PDF, XML, internet, etc.). These have all been momentous changes that introduced significant cost and time savings into the appraisal process. They are, however, nothing compared to what is coming.


You're still confused. Regulation is NOT the market - it's the opposite of the market. The market is simply the interaction of buyers and sellers. Regulation is the constraints put on the market by those who have the authority (and power) to do so - typically governments. And I've already stated that I agree that some level of intervention is necessary. They are not the same thing, though. They are opposites.

Regulations are part of the market because they affect activity. Whether you think that makes the market free or not is beside the point. We live in a nation of laws that have some regulations, and when they are loosened too much, it causes loss and damage - we've seen it numerous times in the financial market and in the RE market.

 

[J Grant]

Yeah, the majority of it is reduced demand for mortgages. I don't see any trend of retirements in the 2017 to 2021 span that weren't offset by replacements/new entrants. The reduction happened in 2022 as volumes fell off a cliff. If we go through another 2-year licensing cycle with low mortgage demand, plus "new forms," I don't see any recovery in these numbers. And I don't see a compelling need for these appraiser numbers to recover.

Imagine going full steam ahead with PAREA under these conditions. They should really cut their losses ASAP.

Seems not many younger people re naive enough to actually take the offering of PAREA - they do have access to the internet and can read -

 

[CGinMN]

Most appraisers will never concede that technology could replace them. There's a lot of ego tied up in that belief. AI could never do as good a job as me, look at all the mistakes it makes. The problem with that thinking is that appraisers as a group also make a bunch of similar mistakes and errors. Individually, you don't know you are making mistakes because, like the AI, you are the one making the mistake. Unlike the AI, rather than self-correct when it is pointed out, many are rigidly hardwired toward self-preservation. Some will kick and scream and never make the decision to improve. Even if the elite appraisers will always be better than AI - say those in the top third of their profession, including everyone here, of course - that means AI is beating 70%, and on the whole, it is better than humans.

 

[J Grant]

Most appraisers will never concede that technology could replace them. There's a lot of ego tied up in that belief. AI could never do as good a job as me, look at all the mistakes it makes. The problem with that thinking is that appraisers as a group also make a bunch of similar mistakes and errors. Individually, you don't know you are making mistakes because, like the AI, you are the one making the mistake. Unlike the AI, rather than self-correct when it is pointed out, many are rigidly hardwired toward self-preservation. Some will kick and scream and never make the decision to improve. Even if the elite appraisers will always be better than AI - say those in the top third of their profession, including everyone here, of course - that means AI is beating 70%, and on the whole, it is better than humans.

We will see- AI can do certain tasks and not others and the errors AI makes are very different than that of an appraiser

Per a number of books I am reading by experts in the field. I see it more of an assist with appraisals but whatever - we will see.

 

[alebrewer]

Per a number of books I am reading by experts in the field. I see it more of an assist with appraisals but whatever - we will see.

just out of curiosity - what books are you reading on the topic? What drove your decision to read books on AI instead of deciding to learn some of the tools? Or are you doing both?

 

[Vermonter]

Most appraisers will never concede that technology could replace them. There's a lot of ego tied up in that belief. AI could never do as good a job as me, look at all the mistakes it makes. The problem with that thinking is that appraisers as a group also make a bunch of similar mistakes and errors. Individually, you don't know you are making mistakes because, like the AI, you are the one making the mistake. Unlike the AI, rather than self-correct when it is pointed out, many are rigidly hardwired toward self-preservation. Some will kick and scream and never make the decision to improve. Even if the elite appraisers will always be better than AI - say those in the top third of their profession, including everyone here, of course - that means AI is beating 70%, and on the whole, it is better than humans.

100% agree.

I've always poo-pooed the doom and gloomers on this site. Not that they were wrong about the industry not needing appraisers anymore, but that the danger was imminent. The past two years watching AI evolved has changed my mind and the past few weeks only confirmed it.

I don't think the industry will be gone tomorrow, but it has been declining for the past couple years. That decline will rapidly increase as AI changes the entire lending pipeline and risk evaluation process.

Per a number of books I am reading by experts in the field. I see it more of an assist with appraisals but whatever - we will see.

Those books were outdated by the time they were published. That's how this is different. The speed of this tech is not something we're not going to be able to adapt to