AVMs and UAD

[lefty2cox]

I hope you're right Michigan. But I guess if I did own a book store, I would hope I would not be labeled paranoid for not handing them my stock and customer list free of charge.

 

[J Grant]

lefty2cox, by the time they go thorugh all that trouble, alogrithms to update the data etc, they might as well order an appraisal!

Will the reialbility of said model increase with better data? Not necessarily, becuause of all the odd kinks and changing conditions of real estate.

If someone enters data that a condo has an ocean view, and next year a building gets erected that blocks the view, the "data" can't know that.

There are too many changing variables in nieghborhoods and market conditions, imo, to rely solely on data without human input .

 

[lefty2cox]

Trust me, a programmer's salary will not break the bank when compared to all the money saved on appraisal fees. Not to mention the elimination of bias and human error.

And that will be the appraiser's diminished role. The 2075 pandemic. If something has changed, an appraisal will be ordered. Gee, I don't even think you need to be an appraiser to do that work. There's no value opinion. Someone just needs to drive by and check things out? Maybe check for permits in and around the subject property, search the internet, online building records. In Boston, where I work, they scan and post every permit issued, which is accessible for free on their site. But most likely they will use an appraiser for that. I'm not sure what those fees will look like. If a 2nd story has been added or a new building erected potentially obstructing view, then a new appraisal it is. Remember, most lenders don't make money selling mortgages. They make money selling risk to investors.

 

[NC Appraising]

But the data still gets dated. If we enter a code for kitchen updated 1 year ago, then what happens 3 years from now? The evil company stealing our data updates the kitchen to 4 years ago remodeled, if they need to do an evaluaion in 3 years?

I guess of all the things to worry about, I can't worry about it, at least not that much!

As for comparable data in the reports, they will be up to date. I can't see the AVMs, UW using old comparable data.

As soon as the appraisal report is uploaded, it's fresh data unlike the tax records that can be two weeks to 24 years old.

Now, thanks to our appraisal report, they will have up to date data as of the effective date of the report. I cannot see that big of a data lag.

As the head guy at Fannie said, in the future, appraisers and everyone else will be able to use the data from the UAD. Not a bad thing. Appraisers will have more data, pics, square footage to confirm, and other data that is not in the MLS.

 

[Pittsburgh Pete]

Fritz,
I don't mean to beat up Pete but he's an employee. He's trying to justify to himself why he continues to walk blindly down the path that his competition is leading him and assuming they're benevolent. Or he's a mole. Have the admin check his credentials.

Do you do stand-up on the weekends? You're a funny guy!

Actually I'm an employer and have been for 25+ years. You may be right, however, you can easily be replaced by a computer. Not sure the same can be said for the industry as a whole, but clearly you bring nothing to the table that a computer doesn't. Mores the pity!

AVMs will continue to fill a role. However, the subtle nuances evident in most markets will make their applicability limited, no matter what quantity and quality of data they amass.

Given you've read the handwriting on the wall, perhaps its time for you to move on to another career. Good luck!

 

[J Grant]

More data and more information is available to everybody than ever before in history. But when it comes to human behaviour in real world situations, does it matter?

For example, take the problem of addiction. There is now more data, more 12 step programs, more information availabe to addicts then ever before. Does it change an addict's behaviour, the fact that they can look up on the internet the exact effects of cocaine on the heart? It doesn't change their behaviour. They want the cocaine and will get it unless on their own terms they are able to stop.

The behaviour of buyers and sellers of real estate is not cold and rational or even numerically driven. Though they may make a budget and have to qualify for a mortgage with income and debt ratios, the decision of what to buy and what to pay for it is often emotion driven. And the behaviour of sellers, a lot of their behaviour is "masked" in a deal and needs to be verified.

Appraisals, and AVM's are a way to quantify numerical amounts of the results of emotional decisions of market particpants combined with outside market forces. A "real" appraiser in tune with the market can do this better than an AVM. Whether lenders and users of appraisals will value the advantage a "real" appraiser can bring is another story.

I am convinced it is not all fee driven. Appraisal fees are not that "high". Especially if a good appraisal is done and can save a lender or buyer from a costly mistake. If the value of appraisers is eliminated or lessened, it will be for other reasons than fees, but fees will be trotted out as the excuse.

 

[lefty2cox]

Pete, I love your summary statements at the end of your posts, spoken without any foundation, data or knowledge of the area you speak of. You sound like you're quoting from an article you read on FNMA's or some management company's site. Why would they tell us anything that would hurt their interest and help ours? Right?

And congratulations on your tenure. I've done the same stretch. I'm better looking too. Has nothing to do with it though...right? I'll show you 10 appraisal company owners who made over 1 million in 5 years who barely made it out of high school. But when I said you were an employee, I meant figuratively. You know, the employee mentality? The crowds at my shows would have gotten that.

Maybe you can give me an example of one of these subtle nuances in the single family residential market, that is prevalent, that you will have not quantified with the UAD. Remember, prevalent.

Because if you think that every appraisal done for single family mortgage requires the personal touch of an appraiser, you're vain. Otherwise, there would be no such thing as an AVM.

Are you're telling me that your opinion has never aligned with an AVM, ever? I'm not saying that you're not a talented, knowledgeable appraiser and that said knowledge is not valuable. I'm simply saying that the market share you lay claim to now will narrow as computers gain access to important data they never had in the past. Data that you seem to have no problem giving to them.

And yes, I have diversified my entrepreneurial portfolio in case my expertise becomes less needed in the marketplace. That's what business owners do, they adapt.

Employees with no ability to do so go into denial and say...that will never happen though.

My whole point from the beginning was that the UAD quantifies huge amounts of relevant data in a way that is unprecedented. Furthermore, it encodes it. So just don't sign an agreement with a company, having a vested interest in the development of a super AVM, that relinquishes your intellectual rights to the content. I can't believe you're arguing against that. Can anyone else? I'm sorry for calling you a mole. You're obviously an appraisal instructor. You have to have some sort of interest in playing down potential threats with rhetoric you've read in magazines and online articles. Magazines, most likely, owned by companies that have an interest in appraisers being complicit in this paradigm shift.

 

[Pittsburgh Pete]

Lefty, you're right, residential appraisers are screwed! There is no hope for the future as within one year of implementation of the UAD all residential appraisals for mortgage lending will be done by AVMs.

Would love to hear more but I have to leave as I'm appearing as an expert witness for the Commonwealth in an eminent domain case this afternoon. Fortunately for me and my company we do little residential work for mortgage purposes. We rely upon commercial work for banks, government entities, and individuals for our livelihood--all of these users acknowledge the need for a well-reasoned and thorough real estate appraisal. Your sky is falling but mine is looking higher and higher.

As to the nuances that a computer will not be able to quantify or address, how about location, location, and location. Traffic patterns and locations on the street have a signficant impact in many areas we appraise. But then again, I'm sure some computer geek can address that. The end is near--glad for you that you have "diversified."

 

[lefty2cox]

JGrant,

I can't argue against many of your points. I never meant to. Let's assume that AVM's only improve 5% with this quantified, encoded data. Why would we grant to a company, that is not our client, permission to use this newly quantified and encoded data? This was my point. The only reason I've gotten into playing point, counter-point with Pete, which appeared like I was defending AVM's, was because after my post, he took a shot at me with his passive aggressive comments. And after getting into it, I realized his bases was..."because I said so". He has no bases for his argument, which frustrated me more. I have plenty. Just look at the market share taken, over the past 10 years, by management companies and management companies with AVM alternatives for their clients. Or AVM's alone for that matter. What makes everyone think that an improvement in the quality of the AVM won't result in a gaining of market share? And who, including me, really has any idea what these AVM's can do with the right data? To make comments like..."avm's have and will continue to play a role but can never replace and appraiser", when one has no knowledge of an AVM's ability, is naive.

 

[lefty2cox]

You're so witty Pete,

But here's where your lack of knowledge shows. Factors like location, view and traffic patterns WILL be quantified to an extent that they have never been before. Since you don't work in the residential appraisal field for mortgages, I wouldn't expect you to know that. Try not to talk about topics you have little knowledge about today in court. They frown on that.

And that's great for you. You don't do any residential work for mortgages. And let's forget about me because you've already voiced your opinion on what I can add in terms of expertise and knowledge. But where do you think all the qualified appraisers doing mortgage work are going to go to look for business if and when the AVM gobbles up a huge market share. Well they're coming after your clients. I know I will be. They'll be willing to do it for less money too.