Avm Risk? Avm Accuracy Above That Of Appraisals

[Michigander]

https://www.garp.org/#!/risk-intelligence/technology/all/a1Z1W000004BL0MUAW

Interesting read. We are certainly going the direction that Canada has done in their mortgage market. Wondering how successful theirs has actually been. Do we have any Canadians here that have really studied that?

 

[Joe Flacco]

There are periods in time when collateral risk is higher and there are periods when collateral risk is lower. In recent history, collateral risk was low following the crash but that was when lenders action and behavior suggested that collateral risk was high. Now with prices in many areas a new highs or substantially higher, collateral risk is higher than it was before but it does not mean that collateral risk today is too high.

They need to do a better job of determining if collateral risk is low or high at a moment in time. I think corelogic is attempting to do that.

 

[Joe Flacco]

In some markets and/or segments, collateral risk might be higher or lower than other markets and/or segments at any moment in time.

I don't think that a policy change to using AVM's all the time is wise. If they can be very good at determining if collateral risk is high, low, or average or a property at a certain moment in time then that would be great for safe and sound banking practices as well as consumers. That means there might be a time when AVM's are used heavily and there might be a time when AVM's are fully avoided. Recent history just shows that the banks were not very good at making that determination so I don't know.

 

[George Hatch]

The trick is to isolate the data qualification process from the valuation process.

If all the title companies did the site inspection of the properties as they were being sold and they all dumped that qualified data into a single database the subsequent analyses of that data would be a cinch. Even a calculator could do it. The key would be the use of a consistent format and standard for rating quality, condition, features and appeal. Performed by an inspector who isn't using that data.

If the inspector uploads their data while still onsite the valuation would be completed before he/she/it started their car to drive away. These lenders could get their same-day service.

 

[Joe Flacco]

The trick is to isolate the data qualification process from the valuation process.

If all the title companies did the site inspection of the properties as they were being sold and they all dumped that qualified data into a single database the subsequent analyses of that data would be a cinch. Even a calculator could do it. The key would be the use of a consistent format and standard for rating quality, condition, features and appeal. Performed by an inspector who isn't using that data.

If the inspector uploads their data while still onsite the valuation would be completed before he/she/it started their car to drive away. These lenders could get their same-day service.

That data is not enough data to reliably value residential properties. Even you know and have said that comparable selection is the most important part of reliable valuation. Comparable selection is the most important part because selecting of the most similar comparables takes into account the hundreds of other differences that could exist for which data is not collected and databased.

 

[ucbruin]

The trick is to isolate the data qualification process from the valuation process.

If all the title companies did the site inspection of the properties as they were being sold and they all dumped that qualified data into a single database the subsequent analyses of that data would be a cinch. Even a calculator could do it. The key would be the use of a consistent format and standard for rating quality, condition, features and appeal. Performed by an inspector who isn't using that data.

If the inspector uploads their data while still onsite the valuation would be completed before he/she/it started their car to drive away. These lenders could get their same-day service.

I'm not getting into the philosophical portion....
I'm not agreeing or disagreeing with you or Joe...
I'm just commenting on the last portion of your post....
Amrock wants data collectors to complete inspection "form" on-site and submit either using borrower's private Wi-Fi or go to Micky D's to submit via Wi-Fi....
I find that cumbersome....

Again just talking Amrock data collection....

 

[Terrel L. Shields]

Do we have any Canadians here that have really studied that

Ask Ross Kay

 

[George Hatch]

That data is not enough data to reliably value residential properties. Even you know and have said that comparable selection is the most important part of reliable valuation. Comparable selection is the most important part because selecting of the most similar comparables takes into account the hundreds of other differences that could exist for which data is not collected and databased.

The number of variables used in a property rating protocol could be quite extensive. And subject to modification over time as such a system evolved. Just because there are so many variables out there doesn't mean they're all significant to the valuation of a "typical" property. And as for the ones that aren't typical? That's where having additional alternatives in a valuation provider's menu of services comes into play.

WRT how much data is necessary to run an effective AVM, I would guess that the answer to that is probably nowhere near 100%. Let's say you had a database where 70% of the data was adequately qualified; wouldn't that help you better understand the probabilities of the other 30%? Whether that "better understand" would be sufficient is probably a question the quants have already answered for themselves.

As for "picking comparables" that's one of the steps of both model specification and model calibration regardless of which model we're talking about - whether it's the Fannie grid or some Corelogic blackbox model.

 

[George Hatch]

I'm not getting into the philosophical portion....
I'm not agreeing or disagreeing with you or Joe...
I'm just commenting on the last portion of your post....
Amrock wants data collectors to complete inspection "form" on-site and submit either using borrower's private Wi-Fi or go to Micky D's to submit via Wi-Fi....
I find that cumbersome....

Again just talking Amrock data collection....

Cell phones work in most locations; I don't know why another connection would be necessary. The process would be cumbersome for an appraiser only because we're doing a lot more than just inspecting a subject. But if someone's job was specifically limited to inspecting properties and they weren't doing anything else then it would probably be a different story.

It's hard for me to see how a large scale inspection program could be initiated so that's probably not a imminent threat to appraisers. But if I were an AVM vendor I'd consider taking a small metro area like maybe Spokane or Boise and hitting up the title companies to add that service to their menu. Or maybe hit the MLS boards up to gain access to the properties as part of the listing process. Test it out and see if it works.

 

[ucbruin]

Cell phones work in most locations; I don't know why another connection would be necessary. The process would be cumbersome for an appraiser only because we're doing a lot more than just inspecting a subject. But if someone's job was specifically limited to inspecting properties and they weren't doing anything else then it would probably be a different story.

Sketch, notes, photos....
Sketch would be tough on a flip phone....

Amrock required some type of tablet to be used....
Instead of just allowing appraisers to data collection and complete/submit from their home office....
But as I said before, the last email I received from Amrock was the program was on hold....