An AVM Tale

[Mztk1]

Tons of work is lost and is still being lost more now than ever. In a declining market the AVMs are above value most of the time. I know several of my lenders are loaning on them regularly. Why not? It will be the next crisis to hit and if anyone had a half a brain in government or at the Fed now that the Fed is dictating a bunch of new rules to Fannie and lenders, they'd put a stop to it as quickly as possible.

 

[EveInColorado]

Thank you, Cindy, for letting us know.

 

[Steve Metz]

This is very timely. I did an appraisal today, my value $180,000. House was purchased last year for $175,000 in an rural area with a stable market. The lender said that the AVM they got said the value should be $248,000 and why was I so far off in value. The AVM is getting the comps from a gated golf community about 12 miles away.

 

[Bama Bayou]

AVMs can actually be a very good tool. At least when they are used by an appraiser who inspects the property and knows the strengths and weaknesses of the model.

Nothing like using your brain instead of a computer to determine market value.

The use of an AVM without an inspection just boggles my mind. It is also boggleing Fanny and Freddys stock right now.

 

[Kevin Mc]

Could not even tell you how much appraiser business is probably lost today because AVM's come in higher than appraisers.

Who says the lenders need skippy. These products seem to do the job just fine. There have been folks on the forum touting the accuracy of AVMs over actual inspections. Yeah, sure.

 

[Mark to market]

One of the many dangers of AVMs is that they allow a few major companies to control the value on an ever-increasing ratio of loans.

Letting companies use AVMs to get a large number of loans thru the primary and secondary market without the oversight of an independent appraiser visiting the property is a bad idea.

Letting companies that have reputations for accounting malfeasance, data manipulation and the ability to transfer risk to the public use AVMs is an even worse idea.

It is interesting to note that three of the largest proponents of AVMs in the country (Fannie, Freddie and Indy) have fallen in the past week. Considering the amount of pain these three companies have caused, it is time the regulators found out what role AVMs have played.

 

[Bama Bayou]

One of the many dangers of AVMs is that they allow a few major companies to control the value on an ever-increasing ratio of loans.

Letting companies use AVMs to get a large number of loans thru the primary and secondary market without the oversight of an independent appraiser visiting the property is a bad idea.

Letting companies that have reputations for accounting malfeasance, data manipulation and the ability to transfer risk to the public use AVMs is an even worse idea.

It is interesting to note that three of the largest proponents of AVMs in the country (Fannie, Freddie and Indy) have fallen in the past week. Considering the amount of pain these three companies have caused, it is time the regulators found out what role AVMs have played.

My bold and you are right on. I will be glad to be their first witness. I left an AVM company when they started talking about "tweaking the model". I still don't understand why appraisers are being thrown under the bus (well, many should be) while the "tweakers" get a free ride.

Tweaking for dollars may have been 100 times more destructive than dialing for them. Nobody knows the answer, but the regulators running Indy may get a damn good idea real soon. I would love to get get my hands on the AVM values in their files and compare them to actual sales price. "Oh look honey, the bank said we were getting such a good deal we can close on a HELOC at the same time as the purchase and buy that fire engine red Hummer. This sure was easier than that FHA loan we got back in 92 for our first house. Remember that pesky appraiser that said it had to have a new roof because it had four layers? Everybody knows more is better".

 

[Alison Swain]

I had a lender call me all variations of the word "crook" a year or so back based on my value vs. their AVM. Their five sales were all 700 - 800 sq. ft. smaller than the subject --- I never would have even considered them as "comparables" due to size difference.

 

[INSPECTOR]

Automated or Animated?

The more I learn about AVM's, the less I like them. I can't imagine anyone really putting any stock in them. Appraising is just too subjective to allow a bell curve to spit out numbers and call that reliable. Some have said in a gated community or certain PUD's they can be used...I disagree. Even in a community where there are only say half a dozen models (which is rare) there are so many options and variables that no computer program can replace feet on the ground and eyes in the field. I'm sure every County Property Appraiser's office on the planet would be using an AVM if they were reliable. They are not. I, as several other posters have said, would love to see the number of failed mortages backed by an AVM. It would be interesting to see public reaction to the number of loans being made based on a computer model. This sounds like a job for Action 9!

 

[xmrevned]

AVM products are the enemy!

I really would like to know if banks collect a fee for an appraisal & then run an AVM. That would be a great way to make money for the bank by keeping the difference between the cost of an appraisal and the fee that they collect.

Bank owned AMC's appear to charge $400 for an appraisal and then pay $275 to the appraiser. I don't know why they wouldn't try the same thing with AVM products.

What really makes me angry is companies like AppraisalPort. They collect data from appraisals and then resell it in the form of their AVM products. So appraisers are basically providing the information for a product that is
competing with them & is marketed for lower fees.

That makes just as much sense as buying oil from someone who gives money to groups that want to destroy us.