• Welcome to AppraisersForum.com, the premier online  community for the discussion of real estate appraisal. Register a free account to be able to post and unlock additional forums and features.

Big Data > End Of Residential Appraising

Status
Not open for further replies.

hastalavista

Elite Member
Joined
May 16, 2005
Professional Status
Certified General Appraiser
State
California

I tend to agree with Brian Weaver, although the situation isn't as dire as "end of residential real estate appraisers".
One thing we (as appraisers/valuation experts) should be cognizant of is that while the article refers to Zillow as an example, the automated valuation analytics available for lending collateral-valuation are much more sophisticated. Zillow is just a brand name the public is familiar with. So, it would be a mistake (IMO) to disregard the article because the Zillow Brand is referenced.

Coincidentally, I was just talking about this subject with Howard this morning (without knowledge of this article). I don't want to misrepresent what his view was, but I'll represent what my view is (and it is not new; I've said it before on this forum).
A. Residential appraising is alive and well.
B. Residential mortgage-finance appraising is changing; and the rate of change is accelerating.
C. The primary payback source for a residential loan is the borrower's ability to service the debt; this is true regardless of what the LTV is (ergo, while there are loan programs .. usually a 1st & 2nd... in excess of 100% LTV which we've seen in the not-to-distant past; recognizing that the collateral will not payback the loan is nothing new).
D. The Collateral value is the last source of repayment and everyone knows (and we echo it all the time here) that the collateral value is only valid at one point in time; what the future will hold is unknowable. So, the appraised value has always been viewed in that context (limited duration of validity; used in conjunction with servicing of the debt to set the loan amount).
E. In high-credit score/low LTV lending decisions, the value of the collateral is not a significant factor in the lending decision; it is primarily a compliance issue; but whether the LTV is 30%, 40%, or 50%, it doesn't change the repayment-risk profile of the loan. These are the loans with the lowest interest rates because they reflect the lowest repayment risk.
F. In lower credit-score/higher LTV lending decisions, the value of the collateral takes on more importance; not because the validity of the valuation is any higher or will last for a longer duration, but because the default risk is higher and the collateral value importance increases because the chances it must be used to repay the loan is higher. These are the loans with a higher rate because they reflect the a higher repayment risk.
G. As the analytics improve, the necessity for an appraisal for the low-repayment risk loans is diminished. It isn't important now and won't be important in the future as far as pricing the loan; if it isn't important, then is an appraisal really necessary (the answer: like it or not, is "no").
H. As the analytics improve, the validity of its single-point-in-time value will also improve. It stands to reason that some that the risk-threshold (appraisal or no appraisal) will move upward as those analytics improve.
I. Analytics require data. Some markets are data rich, some markets are data poor, and the quality and quality of data needs to be considered. Rural residential appraisers will always be in demand. Suburban residential appraisers (like in the markets where I practice) will see a decrease in demand.
J. While the volume of residential mortgage appraisal assignments will decrease, they will never disappear (regardless of market-type).
K. There is an entire universe of appraisal work outside of mortgage lending. Appraisers who recognize the above dynamic can take steps to position themselves to take advantage of that opportunity as residential mortgage volume declines.
L. All of the above argues against lowering educational and experience requirements of appraisers. The so-called "shortage" (real in some markets, but not universal in all markets) of residential mortgage appraisers will be offset by the increased role non-appraisal valuation tools are used. Indeed, those residential mortgage assignments that do not fit the alternative-valuation tool would (presumably) be those assignments that are more complex. Complexity argues for a higher competency standard, not a lower one.
M. In the end, there is nothing surprising here (IMNSHO) but there is opportunity. This is not the end-of-the-world for residential appraisers. It is part of the continuation of the decreasing need for residential-mortgage appraisals under certain circumstances. As an appraiser, if I recognize that dynamic, I can plan accordingly.

:)

A good link to post, Greg- thanks!
 

Ken Masla

Junior Member
Joined
Jul 17, 2006
Professional Status
General Public
State
California
I tend to agree with Brian Weaver, although the situation isn't as dire as "end of residential real estate appraisers".
One thing we (as appraisers/valuation experts) should be cognizant of is that while the article refers to Zillow as an example, the automated valuation analytics available for lending collateral-valuation are much more sophisticated. Zillow is just a brand name the public is familiar with. So, it would be a mistake (IMO) to disregard the article because the Zillow Brand is referenced.

I agree. Zillow is a website aimed to sell advertisement to Realtors. It is a not a company who is focused on entering the valuation business.

The problem I see is regulation. Once they allow a tech company to disrupt the valuation industry, the take-over can be very quick. Within years. The only thing holding silicon valley from entering is all the red tape.

Residential appraisers will always have a place, but to speak realistically, it isn't looking good for most (who do lending appraisals).

I posted something similar a couple of weeks ago and was met with some hostility (guilty of some myself)
https://appraisersforum.com/forums/...st-another-cycle-your-opinions-please.216998/

The Appraisal Institute in my opinion has a naive outlook on it.
 
D

Deleted member 134708

Guest
Only non-internet appraiser I know that does desktops got this, this AM. He says he has never seen so many desktops in all his years of appraising coming from just normal lenders. He said they were always sparse and usually for monitoring portfolios. This year says flood of ref-/purchases. (he's in San Diego if that matters)

$55-$75 a pop w/ E&O required. Step 1, industry switch to desktops for 90% of work. Step 2 will be a few years off.

1.PNG
 
D

Deleted member 134708

Guest
Things come in 3's. Expect 1 more.

Same friend, different AMC email within hours of each other. This email was all about, faster, faster, faster.

1.PNG
 
D

Deleted member 134708

Guest
That is a one day turnaround for a drive-by? What photos?

Realtors or just warm body's take 1 exterior photo and a street for $15-$25.

Then appraiser gets the pics and does desktop (no leaving house) for $55-$75.

There's so many appraisers doing these Red Bell (a desktop company) won't even take new appraisers on their panel cause so full.

Red Bell has a product appraisers do for $15. No clue what it is, never seen it before but friend said they have it. It's for value too.
 

Ken Masla

Junior Member
Joined
Jul 17, 2006
Professional Status
General Public
State
California
Realtors or just warm body's take 1 exterior photo and a street for $15-$25.

Then appraiser gets the pics and does desktop (no leaving house) for $55-$75.

There's so many appraisers doing these Red Bell (a desktop company) won't even take new appraisers on their panel cause so full.

Red Bell has a product appraisers do for $15. No clue what it is, never seen it before but friend said they have it. It's for value too.

Wow that is real interesting. Who is a typical client?
 

DWiley

Elite Member
Joined
Apr 4, 2007
Professional Status
Certified Residential Appraiser
State
Tennessee
....There's so many appraisers doing these Red Bell (a desktop company) won't even take new appraisers on their panel cause so full.
.
That type of "hybrid" approach is not new. I know of at least two companies who have being doing BIG volume in that space for at last six years. What is new is the expansion of its use into more than home equity and/or default work.
 
Status
Not open for further replies.
Find a Real Estate Appraiser - Enter Zip Code

Copyright © 2000-, AppraisersForum.com, All Rights Reserved
AppraisersForum.com is proudly hosted by the folks at
AppraiserSites.com
Top

AdBlock Detected

We get it, advertisements are annoying!

Sure, ad-blocking software does a great job at blocking ads, but it also blocks useful features of our website. For the best site experience please disable your AdBlocker.

I've Disabled AdBlock
No Thanks