AVM vs My Opinion
- Bias. It’s Easier to Blame the Messenger - April 20, 2022
- Hocus Pocus Magic Focus? - March 24, 2022
- Opinion, Estimate, or Prediction? - September 8, 2021
AVM versus my opinion…
My recent article “Why is Residential Appraisal in Trouble” lays out how the profession and the individual (you?) can prepare for the future. I do not take an emotional position for or against AVMs. AVM is a competing industry for valuations. AVMs have succeeded in taking a large market share for valuations and risk analysis in the past 20 years. Every large lender and our GSEs use them every day. And yes, a machine can only deliver an analytic result, not an opinion!
My only mission (Stats, Graphs, and Data Science classes) is to help arm appraisers with tools to take advantage of the technology available. An armed appraiser can beat an unarmed appraiser every day. An armed appraiser can beat an AVM every day.
It does bother me when someone ignores what science is. Science is the systematic study of the world through observation or experiment. There are systematic ways in which appraisers can deliver better valuations, risk information and other services.
The world has changed. Appraisal is in trouble unless it prepares for the future. That is now.
I’ll be as succinct as possible. The problem with AVMs is the person who builds the model. If you’re Zillow and have a few statisticians (actual PhDs in stats) building models it will be stronger. And even then, caveat emptor.
The problem is you have appraisers who take a course, play around with linear regression/multi-variable regression, can put a model together seems ok.
However, shit in = shit out. A lot of what I see are built off of faulty/incomplete modeling and gives a false sense of competency.
If you have the data, and it’s good data, then your model will be good. And even then;
-you can make statistics say what you want if you play around with things
-if your modeling sucks, you have built something on false premises
-models don’t account for black swans
-models don’t account for lack of input (anyone who uses CoStar will be acutely aware of how dangerous it is using a model based on someone else/crowdsourced information you didn’t independently verify
“Never argue with stupid people, they will drag you down to their level and then beat you with experience.”
The people who teach need to have extensive background and training—by other professionals -IN THAT EXACT FIELD-, otherwise it cheapens the industry. For example, if the premise is to sell something, perhaps that conversation is built off of faulty premises.
In all honesty……not worth a response.
There used to be a saying – Those who can, do. Those who can’t, teach.
Nick said it all “For example, if the premise is to sell something, perhaps that conversation is built off of faulty premises.”
Do these AVM statisticians/programers truly understand each individual real estate market across the country, and thus make custom individual models for all, or do they make one model and apply it across the board?
Considering I did an age restricted (55+), manufactured home with a condo form of ownership this week (yes even in San Diego), good luck to the programmers looking for the age restriction trigger in public records to build their model as it doesn’t exist. On the same property, do you think the programmers know that in the county of San Diego all condominium properties regardless of being attached, detached, manufactured home, etc. all have APN’s that end in numbers 01 to 99? Of course their models are going to in error combine age restricted properties with non-age restricted, condo form of ownership manufactured homes with non-condo homes, etc. Garbage in equals garbage out.
And before the programmers get to comfortable and think they have San Diego County figured out, good luck knowing that much of the data in the public record files will lead you astray. Meaning, who here thinks that properties under Land Use and Improvement Type that say Condominium Unit Residential, are 100% always of a condo form of ownership? Of course not, the county uses code “Condominium Unit Residential” when it’s describing attached but non condo form of ownership properties.
Excuse me while I deal with this new construction detached condo, and painstakingly go through market data to filter out what doesn’t apply. Always fun (detached condo) when the builders/MLS mistakenly represents each condo with an APN that ends in 00 (false), and public records have yet to reflect the true APN numbers (recorded split). Did I mention that 20 year old manufactured home was worth $350,000?
Seek the truth.
Just checked Zillow sales data for homes around me. You know, the nifty tool where you can focus in on your area, and identify sales, rentals, foreclosures, etc.
A remarkable amount of homes around me are in pre foreclosure status. This is just getting started. Check on your area today. They’re going under the radar for now, but could all drop at once.
A good appraiser can beat an AVM but not all appraisers are good so it depends
So true Greg, but fortunately for many, most lender clients don’t want good appraisers. Most lenders put fast & cheap, to the top of the heap (Bill Johnson / 07/01/2020).
Seek the truth.