AVM Appraisals Facing Controversy

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Chase’s motion to dismiss a lawsuit over HELOCs (Home Equity Line of Credit) was denied in a US District Court. JP Morgan Chase was trying to have a lawsuit thrown out of court because of their use of AVM (Automated Valuation Models) to value properties in their portfolio in determining which HELOCs to cut. The judge refused to throw out the lawsuit. This could have a greater impact on the use of AVMs in the future.

“The use of AVM has for once been questioned and acknowledged… So the ruling by the US District Court in the case of Chase and the use of AVM could have far reaching effect on the rest of the real estate industry and their use of past, present and future AVMs” say Frank Garay & Brian Stevens, hosts of the TBWS Daily Show.

Watch the TBWS Daily Show clip below – discussion about AVM starts at 1:05

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2 Responses

  1. Jeremy Hall Appraisals - CO Jeremy Hall Appraisals - CO says:

    If computer process could have properly considered the trends of buyers and sellers, salesmen and lenders, I suppose they would have a long time ago.

    AVM is best used for mass appraisal. An individual hand developed research report is what a human appraiser should be bringing to the table.

    When a human appraiser relies on automation, he’s falling somewhere in between accurate thoughtful analysis and an automated process. So the coin is still up in the air. Myself, I look at all data without the computer assistance, and make quality decisions not driven by pre set analysis limitations or directives. What works for one data set, may not work for another, and that’s why it can be argued the use of an avm is only coincidentally accurate some of the time, and could never be accurate within a narrow range, all of the time.

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  2. Jack Schlenk says:

    I just wrote an appraisal report were the 6th comp was the subject’s prior 2005 sale, and the 5th comp was a mirrior townhouse unit on the subject’s street, with a sales date of 2011. The plus time adjustments were warranted for the 5 & 6 comps. Comp 4 was a active listing therefore a market value adjusted was warranted. Comps 1, 2 & 3 were 2012 sales, and a plus .0022% per month adjustment was warranted. The market data in the subject appraisal report addenda has the market data to support the report adjustments.
    Appraiser’s must think out of the box to conduct a property analysis for their assignment(s).

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