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[J Grant]

If the AVM is the wonder product, and they are, in their own way, able to produce a value in seconds using algorithms and statistics, etc, then why not have the AVM value be the value estimate in a WAIVER? This is a rhetorical question - and I will answer it from my perspective. AVM's, as amazing as they are, are still no guarantee of any perfect, accurate, absolute value estimate. Therefore they have a confidence range around the point value.

The point of a WAIVER is not to replace an appraisal point value with an AVM point value. Because an AVM point value can run into the same problem an appraisal opinion of value has - the AVM point value might be lower than the target value for an LTV% approval in a refinance, or lower than a SC price in a purchase. Both are "deal killers."

Therefore, because it also can be a "deal killer," the advanced tech AVM point value is not used. The AVM range is used to allow a borrower or lender (vested-interest parties) to estimate a property value. Fannie stated that the value estimate in a WAIVER/value acceptance might not represent the property's value.

From an appraiser's perspective, our appraisal opinion of market value is not being replaced by a "better" high-tech point value estimate generated from an AVM. Our opinion of MV has been replaced by a lender- or borrower-generated estimate that hits the target needed, or the SC price is the property value.

From the point of view of a lender who wants more deals to close, that is "better."

 

[George Hatch]

The lenders are in business to do legitimate deals on a reasonably safe/sound basis. They are not in business to manage the pricing trends.

If an applicant is looking for a $300k loan but the AVM output would support a $295k loan or a $305k loan the lender's end is covered. That's all the precise the AVM has tp be in order to satisfy the lender's expectation.

 

[J Grant]

The lenders are in business to do legitimate deals on a reasonably safe/sound basis. They are not in business to manage the pricing trends.

If an applicant is looking for a $300k loan but the AVM output would support a $295k loan or a $305k loan the lender's end is covered. That's all the precise the AVM has tp be in order to satisfy the lender's expectation.

What do you mean by the AVM output? There are value estimates and value ranges from an AVM.

They are not using an AVM point value in a WAIVER. They are using the borrower's point value estimate or the lender's point value estimate or the SC price as the property value, as long as it fits in the AVM range.

You gave a nice tidy example of a tight range of value - 295k-305k. What if the AVM value range is very wide - 280k-330k, and the loan is made at 330k?. The MV of the house might be 300k. That was my point; we do not know how big the AVM range is or where the MV is in relation to that.

 

[George Hatch]

It appears I have misjudged you. I'm going to stop doing that.

 

[Vermonter]

Just the improvement of the quality and availability of the data has enabled some of this evolution. The tech cannot compensate for inadequate data quality/quantity.

Agree. The tech to collect and analyze that data is what I was referring to.

 

[alebrewer]

An AVM has a confidence score (typically) about the value estimate, so even the tech of the AVM is warnignt atht it is not 100% accurate or infallible.

Is your premise that, since appraisers appraise to point values, their opinions ARE 100% accurate and infallible?

 

[J Grant]

Is your premise that, since appraisers appraise to point values, their opinions ARE 100% accurate and infallible?

I never said or wrote that in any of my posts. I do not personally believe it either. No value estimate from any product nor a market value opinion from an appraisal is 100% accurate and infallible. It is not possible. That is why an AVM value has a confidence range.

The appraiser's point value is supposed to be credible and meet the standards of development. The appraiser stands behind their MVO with their signature.

In an appraisal, a client or user can read the report and follow the steps to see if the logic, reasoning, and comp adjustments make sense. That is not true of an AVM. The AVM is not seen in a waiver by outsiders. Most users and readers can not figure out how an AVM did its computations or what data it used (typically). An appraisal is a report that can be read and understood.

In a WAIVER, the person who estimated the value, the lender or the borrower, does not take responsibility for the value. Appraisers take responsibility for their value.

I read a Fannie statement that the value estimate in a waiver might not represent the value of the property. Even they admit it!

 

[alebrewer]

The appraiser stands behind their MVO with their signature.

you gotta tell me where you get your analogies. This is pure gold.

I read a Fannie statement that the value estimate in a waiver might not represent the value of the property. Even they admit it!

You do know that an appraiser's opinion of value may, or may not, represent the value of the property either, right?

 

[J Grant]

Is your premise that, since appraisers appraise to point values, their opinions ARE 100% accurate and infallible?

Would you agree that no valuation point value, including the best appraisal from an SRA or MAI, can be 100% accurate and infallible? USPAP states that perfection is not possible. A value opinion allows users to make informed decisions about a property- whether to sell, buy, or lease it, whether to lend on it, and for how much.

I believe that lenders can loan on a property over its appraised value, but very few, if any, choose to do it - because then they would be responsible for lending on the overvaluation.

It seems a solution, which would also make WAIVERS not necessary, would be for the GSEs or a PMI company to offer relief to a lender for lending within 5% (for example) up or down from an MVO. That would take away the enormous consequence of an MVO "killing a deal." Tack on more interest to the loan, or PMI, if a buyer wants to overpay. If the buyer would rather the deal not go through or the refi be turned down if there is not enough equity at the MVO, let the borrower exercise that option. If the borrower agrees they are overpaying or overborrowing in a refi, let them pay for it.

 

[alebrewer]

Would you agree that no valuation point value, including the best appraisal from an SRA or MAI, can be 100% accurate and infallible?

I'd go even further than that - I don't think a point value exists for a property. I believe a property will ALWAYS exhibit a range of value, as the motivations of individual buyers are all different.

I believe that lenders can loan on a property over its appraised value, but very few, if any, choose to do it - because then they would be responsible for lending on the overvaluation.

Remember: the value expressed on the appraisal is only relevant if the loan fails. They could (and I'm sure would) do a 200% (or even 500%) LTV if they could guarantee that the loan wouldn't fail.

It seems a solution, which would also make WAIVERS not necessary, would be for the GSEs or a PMI company to offer relief to a lender for lending within 5% (for example) up or down from an MVO. That would take away the enormous consequence of an MVO being a bit under- or overvalued, "killing a deal." Tack on a bit to the loan in interest or PMI if a buyer wants to overpay.

It certainly would be a solution to continue to require appraisals - even when the market has determined that they're not necessary. Which I guess would appeal to a certain contingent of this forum.