Thursday, March 28, 2024 | The Latest Buzz for the Appraisal Industry

Can We Talk?

One of my favorite videos on You Tube is “Listen Linda”. It has become a favorite in my family. When we don’t feel as though we have been heard we begin the finger wagging, hand on hips posture followed by our rant of the moment with… “Hey, Listen Linda”.

There is a lot more at stake here than cupcakes. As appraisers we need to do a better job articulating why an appraisal is an essential component of housing finance. Last November I testified in front of the Housing and Insurance subcommittee. If you haven’t seen it yet watch it here. As I stated in those remarks, the discussion of an appraisal shortage, raising the threshold, long turn times, and poor quality are all just code words for “let’s get rid of the appraiser”.

Appraisals are the weak link. Why? I hate to be a cynic but appraisal independence has not exactly been embraced by all stakeholders in the housing finance system. Appraisals can still be manipulated. You know exactly how it is done. But no one is going to step up and announce they are against appraisal independence. That would be akin to actively protesting “Mothers Against Drunk Driving”. Instead the proclamation is they cost too much, are too slow and aren’t very accurate. Automated Valuation Models will save the day.

We’ve all heard that one before. But the Artificial Intelligence mantra is growing in popularity again. Who doesn’t use Siri, Amazon Echo, Google, or even Netflix recommendations as to what to watch next? They all add convenience to our lives. I love these gadgets. But I wouldn’t rely on an algorithm to select my stock portfolio or value my house or even select my next date. Hey, if algorithms were so hot there would be no single persons, right? And political polls… do you think they are independent?

“Big data” has been a threat to the appraiser profession for several decades. Modeling is essential for risk analysis. While modeling can never consider every possible catastrophic event to a market, they can measure the impact on stresses. At time of origination, an appraisal is needed to record and report what is observed by inspecting a property. There are certain elements of an appraisal (at time of inspection) that represent facts- square footage, smells, construction components, lot size and so on. There are other elements of an appraisal that rely upon judgment, local market expertise and verification and analysis of information about the subject property and the market. No model can emulate what a trained valuation professional can do. Financial modeling cannot be done without the input of the appraiser, the only independent stakeholder of the lending process.

The next time you complete an appraisal consider if the reader of your report is benefiting by your local expertise. Did you verify the seller concessions and terms of sale of each comparable? Did you paint an accurate picture of what is going on in the market and in particular your market segment? If it is just recent sales prices you are regurgitating, then they really don’t need you for that. They really can hit the “easy button”.

There is a lot more at stake here than cupcakes. So listen Linda. Give your clients a taste of why they engaged a competent, ethical appraiser. This is serious.

Have content of your own that you would like to submit? Email comments@appraisalbuzz.com.

Brent Bowen

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