AVM’s and the future of the Appraiser???

[Jay D. Greener]

As a registered appraiser who’s coming up on my 2000 hr mark, I’m more than just a little curious to hear what you more experienced appraisers have to say about AVM’s and the future of the Independent Fee Appraiser.

I’ve heard that we’ve got about 5 years left. I’d rather bury my head in the sand and believe that the industry will be around as long as I am, but my pessimistic survival mechanism is begging me to ask the question. What to you guys think? How long will the Appraiser be necessary? How long will this be a lucrative career field? Should I start on something else now? (I am speaking of the Single Family Residential world)

Thanks,

Jay

P.S. I’d also appreciate any links pertaining to this topic as I imagine it’s been heavily debated before I decided to post. Thx. J
:?:

 

[Mountain Man]

"I’ve heard that we’ve got about 5 years left."

Yeah, I remember the old stoggies mumbling something like that since Polaroid instant photos and typewriters. Even our own in house MAI :lol: I told 'em to quit reading the doom and gloom Journals.

I joined the family bizniz in the early 80's and have been hard at it since. Now out on my own, and I up hold true to my training of good morals, ethics, and standards...ALL of the lenders know that, and I have more work than 8O 8O . This month, of course, should be a record month, But I have always had a steady stream of work.

Kinda like Rush says, if you want to be sucessful, who are you going to listen to? The ones that tried, failed, and want to tell you how you can't do it?

Oh yeah, also forgot to mention tha like ALL businesses, you have got to be willing to adapt to changes and techical stuff. I know companies that still use an old DOS version of the same software I use. HELLOOOO... anyone home.

 

[jtrotta]

herd we were going out of business in 5 years, about 10 years ago, so I really don't know what to tell you.

Really is any job safe :?: :?: - my feeling, area's of the business always will need an appraisal, spread out and flurish.

8)

 

[The Bob]

I do work for a very large national lender, probably in the top 5. About half of their loans, both purchases and refi's, do not have a traditional (1004/2055) appraisal done as part of underwriting. They do an in house AVM, or a very limited inspection like a 2075. I think this trend will continue. If you look at the statistics, the number of loan originations has just exploded, yet the number of appraisals has not kept pace. Just look at the growth of loan activity compared with the number of appraisers in your own state.

From the banking industry's standpoint, the rise of AVM's is a no brainer. Most of the data we use is readily available to any one with a computer and modem. Also, the trend in underwriting seems to be less about the underlying value of the collateral and more about the credit worthiness of the borrower.

 

[aprazer]

I was recently looking for an article in my files, and I came across one from the NY Times on appraising and AVM's. It is 7 years old, and has a quote from an Appraisal Institute chapter president who predicted the industry would be obsolete in 5 years. I have not noticed a measurable decline in the amount of appraisers, but I believe there will be a gradual decline due to the AVM's.

JimBoB has it right. All major lenders are using them more and more. Especially if the pending legislation regarding loan fees is implemented. This will drive down fees for most loan related services, which is the intent.

However, there are some other factors. The market has always gone in cycles, and the next downturn could decrease the use of AVM's. Loans that go under with AVM's used as the value basis might make lenders reconsider their use. Especially if it is brought to to the publics attention as to how flawed they can be.

AVM's do produce estimates that are way off the mark, and a lender cannot manipulate avm's on a consistent basis to produce the desired number. I think the number hitters will continue to do well.
The more diversified communities become, it decreases tha accuracy of avm's. In my market, there are value ranges of $500,000 on the same street. Or higher. People are also borrowing more, and the higher loans get a higher rate of appraisals.

The bottom line is that there will be less use of appraisals, but no one can tell you where this industry will be in 5 years. More importantly, you should be doing what you like, as I think most appraisers do. There are a lot of good things about this profession and I can't imagine doing anything else. Good luck.

 

[Terry Russell]

Jay,

This link seems to be a fairly unbiased summation of the industry as of January 2002.

http://www.orps.state.ny.us/about/env_scan...ndustry2002.htm

As far as AVM's, I remember about 15 years ago applying for a no closing costs home-equity loan. The bank would use the tax assessor's value to determine the equity. I can't see a whole lot of difference between that and AVM's today.
I have been messin' in real estate for 17 years and do not think there has been a better time to become a professional real estate appraiser.
Go for it!
Terry

 

[Mountain Man]

As far as AVM's, I remember about 15 years ago applying for a no closing costs home-equity loan. The bank would use the tax assessor's value to determine the equity. I can't see a whole lot of difference between that and AVM's today.

Yeah, I didn't even think about that. When young, in school, and working as a go'fer, I remember making trips to the courthouse for the tax card, plat and deed.

 

[David C. Johnson]

<span style='color:darkblue'>Jay D. Greener,

As you are already aware, even well intentioned appraisers do not always agree even when looking at some of the exact same data. For example, Terry (atc services) writes:

"...This link seems to be a fairly unbiased
summation of the industry as of January
2002..."

And also:

"...(I) do not think there has been a better
time to become a professional real estate
appraiser. Go for it!"

I do not completely agree with either his analysis or his conclusion (while it appears he cites the correct date in his post with the possible exception of omitting a potential amending or updating of the writing by its author as indicated at the bottom of the website page).

I do not have time to explain much of my rationale for disagreement, but I would remind you that Data Verification -- including the probing of the motivations of participants -- is an excellent (and sometimes a very mandatory) appraisal practice. And, I might add, is one that rarely survives AVM practice.

Due to conflicting verification sources, often appraisers must ultimately apply their own best professional judgment (and also provide, or at least maintain, all pertinent supporting documentation).

In continuing the process for reaching your own prognosis regarding residential appraising as a long-term career choice, there may be additional information for you to consider. You may wish to contact the author partly to help you determine if there may have been any bias in the forming of any of his findings and opinions.

The following information from the following URLs may assist you:

Jeffrey W. Jordan MAI, SRA

The Upstate New York Chapter of the AI

Chief Appraiser
NYS Office of Real Property Services
16 Sheridan Avenue
Albany, NY 12210
Phone: 518.474.1071
jeff.jordan@orps.state.ny.us</span>

http://www.nationalwind.org/summaries/other/ny-pa/participants.pdf

http://www.nyappraisers.com/roster.asp

I commend you on your due diligence so far. Good luck to you.

Regards,

David C. Johnson
NC State-Certified General
Real Estate Appraiser

 

[Steve Owen]

If all it was all math it would be a no-brainer. AVM's would win hands down.

I suspect that AVM's will eventually be tuned to the point that they will lessen the need for some kinds of appraisals. I am not certain, however, that that has already happened. My experience with AVM's so far, as well as the experiences of several who have posted on this forum, seem to indicate that they are much less than accurate, as currently used.

The fact is, it is not all math. Appraiser's must weigh complex economic data and make judgements. No one has yet invented a machine that can think.

If you have good ethics and you have a brain, I believe you have a long and prosperous future as an appraiser. If you are lacking in either one, you may be replaced by an AVM.

 

[Ross (CO)]

Jay, .......Welcome to the Forum, as I see this is your first posting. Have you been lurking for a while ? The archives have many prior discussions on the subject of AVM's, so go back in time and look 'em up. The letters "AVM" are generally part of the title line. As you clearly know these critters have been programmed and fostered to short-cut the process and allow a machine to play with numbers and conclude a value. Much data within AVM's is flawed by the lack of verification of facts and garbage in-garbage out will perpetuate any inherent problems of mis-fact. They also are completely incapable of differentiateing the various shades of ugly as no human being looks at any properties. The factor of the property's condition, both exterior and interior, will be un-checked and I might think that the program takes actual age as a prime ingredient and probably notches up condition of older homes automatically on the assumption that "everybody updates everything, every 10 years". .....Yes, they are taking away opportunities for you, me and all of us. And, they are cheap and fast, and most clients just love...cheap and fast. I would think that there is NO way that the preparer of the AVM "report" could be held liable for anything, nor the person who ordered the AVM instead of seeking a local appraiser. Jay, get familiar with the term BPO as they are often related and used to back-up the AVM. One of my former clients has a nationwide network of Realtors who crank out the opinions of value, and, you guessed it......cheap and fast.