Freddie Mac: Quality & Condition Ratings

[Tom4value]

Ok, there are 200+ comments on how to derive the quality rating of the subject. We have to compare it to the comps. How about some direction on deriving a quality rating for the comps from MLS photos and a biased broker?

 

[TerryRohrer]

Ok, there are 200+ comments on how to derive the quality rating of the subject. We have to compare it to the comps. How about some direction on deriving a quality rating for the comps from MLS photos and a biased broker?

The GSEs don't have any advice (that is their secret sauce), they just tell you when your wrong!

 

[Terrel L. Shields]

I'm curious: from an historical perspective, who decided and when that the default Opinion of Value should be singular?

The courts and law decided it. Even under the old 3 "experts in real estate" valuations that many states used for decades, the courts appointed 3 people to come up with and agree upon a single value. I have one on my own abstract where upon the death of a patriarch of the family, the judge appointed three people to set a value for the estate for division. Some of the heirs took land, some money and my g-g-grandfather bought some of his siblings out which is the core part of my own farm and my grandfather's old farm. My uncles old place is under contract. But his abstract only held 3 deeds. He never had a mortgage on the place and inherited it from his grandmother who inherited it from her father (my g-g-grandfather) He sold out and moved to town and the buyer is just now selling out after 30 years.

 

[Tom4value]

The GSEs don't have any advice (that is their secret sauce), they just tell you when your wrong!

That’s the rub. That is why when you make a quality adjustment you have to explain in detail, not just say, “comp 2 is adjusted for quality’.

 

[shrubberyvaluation]

Ok, there are 200+ comments on how to derive the quality rating of the subject. We have to compare it to the comps. How about some direction on deriving a quality rating for the comps from MLS photos and a biased broker?

How do AVMs derive it?

 

[TerryRohrer]

How do AVMs derive it?

Appraisal reports.

 

[RCA]

The Bad (for the GSE's): Fannie Mae and Freddie Mac are so large, that when they screw things up, it's too late to do anything about it for another decade or two. So, if you don't like these organizations and you think they are headed in the wrong direction, THEN you just set back and wait for their proposed regs to materialize, then beat up on them for the next decade or so.

The Good (for the GSE's): Fannie Mae and Freddie Mac, with their new somewhat flexible form format, will be able to implement changes somewhat faster in the future.

What they still get wrong and can't help themselves get right for the love of God Almighty: Absolute quantitative or qualitative measurements are meaningless when it comes to Market Value. Market Value depends on local competitive forces and differences in quantity and quality, which are relative differences and relative values. Like a contest, ranking is the all-important determinant. The buyer goes out into his desired market area, compares the positive and negative features of each potential sale property, and then chooses a winner. And, oh, the quantity/quality differences can be so small, YET due to competition from other buyers, the price differences resulting from these minor quantity/quality differences - so large.

So, yes, ranking - non-parametric statistics. And idiots.

 

[Non Sequitur]

Ok, there are 200+ comments on how to derive the quality rating of the subject. We have to compare it to the comps. How about some direction on deriving a quality rating for the comps from MLS photos and a biased broker?

This will lean heavily toward AI-driven photo recognition with UAD 2.0. It will be bumpy in the beginning but software like Aloft's will be the norm (see below link). And before anyone dismisses this, keep in mind who Fannie just hired on as their new Lead Associate SF Collateral Risk, and Aloft helped develop Fannie's recent Industry's Guide to the New URAR.

"Aloft’s new AI-Driven Image Analysis feature automates image analysis of both subject and comparable properties, providing appraisers with accurate, data-driven recommendations for UAD quality and condition ratings, significantly reducing analysis time and potential for error."

Aloft Announces Launch of Revolutionary AI-Driven Image Analysis Feature in Toolkit

Aloft launches AI Image Analysis in Appraiser Toolkit, revolutionizing real estate appraisals with one-click accuracy. Try it free: aloftappraisal.com

www.businesswire.com

https://finance.yahoo.com/news/aloft-announces-launch-revolutionary-AI-193600499.html

The Industry's Guide to the New URAR

www.fanniemae.com

 

[RCA]

What you are mentioning here is not nearly as significant as you think. Not at all .

Now the RCA method I use can rank photos by MARS regression residual values - without seeing the photos - without any image analysis. Once you have that ranking then you can use image analysis and neural networks to train an automated system to place new home photos in the ranking of photos for valuation - which will take time even on a high speed computer. - For each valuation! Or, you could have an appraiser just place based on human intelligence in a matter of seconds.

So, the image analysis at best is an expensive way to add some objectivity to the process. In reality it is a marketing gimmmick

In reality, you won’t find appraisers, nor even instructors around, who know WTF they are doing - and the solution is years away.

The real business opportunity is suing the fat pigs.

 

[J Grant]

This will lean heavily toward AI-driven photo recognition with UAD 2.0. It will be bumpy in the beginning but software like Aloft's will be the norm (see below link). And before anyone dismisses this, keep in mind who Fannie just hired on as their new Lead Associate SF Collateral Risk, and Aloft helped develop Fannie's recent Industry's Guide to the New URAR.

"Aloft’s new AI-Driven Image Analysis feature automates image analysis of both subject and comparable properties, providing appraisers with accurate, data-driven recommendations for UAD quality and condition ratings, significantly reducing analysis time and potential for error."

Aloft Announces Launch of Revolutionary AI-Driven Image Analysis Feature in Toolkit

Aloft launches AI Image Analysis in Appraiser Toolkit, revolutionizing real estate appraisals with one-click accuracy. Try it free: aloftappraisal.com

www.businesswire.com

https://finance.yahoo.com/news/aloft-announces-launch-revolutionary-AI-193600499.html

The Industry's Guide to the New URAR

www.fanniemae.com

I read it - the usual buzzwords how it will "revoulaiontoinze the appraisal process," etc

It reminds me of when the internet was born - the promise to change the world, -everyone would be smarter and united because they could interact with people all over, be more well-informed, etc. Ad, where is humankind now? War is breaking out all over, fake news and bots impersonating people on social media, division, and hate everywhere. Of course, the internet has provided benefits as well, and we are here on the board interacting; we can research online, and so on.

But whatever technology gives, it also takes away. Hacking, fraud, deepfake photos and videos


Fannie's guidelines and what they expect now for time adjustments, in my opinion, will result in prices climbing to the stratosphere. But that is for another thread.

There is no standardization in the RE market. Artificially imposing it on the market with C and Q ratings will skew values.

There are many elements that go into why a property sells at a certain price and while quality and condition play a large role there is rarely a consistent application of it the market and too many elements influence well to extract an "Accurate" comparison. The software makes false promises but ones that are impossible to refute if it mathematically proves itself..