And just like that, incorporated data which drives the mean’s and averages up or down for everyone else.

Works the same way with unrealistic high priced listings.

Quite the trending line. It’s either the avm is overly responsive to listings and does not competently kick out skewed value indicators, or the market just crashed overnight and nobody is aware this has happened. Your pick.

Specifically mentioned; AI systems which pertain to lending.

Might just be easier to continue using human appraisers instead.

https://www.skadden.com/insights/publications/2024/06/colorados-landmark-ai-act
https://www.cpr.org/2024/06/17/colorado-artificial-intelligence-law-implementation-ramifications/
https://leg.colorado.gov/bills/sb24-205

NAR settlement came and went for many appraisers. But for others it’s a real game changer. The delineation of which side you fall on has to do specifically with your states rules on concessions disclosures. Apparently CO updated some contract forms for a simple one, two, three option check box, clearly describing who’s paying fees on either side. But in other states it sounds like the buyers agency fee may be stated as a concession, and may also be combined with actual concessions, in the concession reporting lines. So this can get real complicated real fast.

Appraisers must identify if they need to be researching this data and following the advice as stated in this latest WorkingRE article on the NAR settlement. Read this in detail, check your own states laws, and identify if you need to be engaging in manual concessions verification for each and every comparable you select. If you need to do that, the solution is obviously to ask your MLS to approach concessions reporting differently, and have more straight forward state forms so that these agency fees do not need to appear in concessions disclosure lines. In some places they are, so be very aware of what’s happening and the importance of this issue. In some places MLS systems removed all agency fee disclosure from searchable data completely.

The implications how this data could be fed into avm systems and create extremely over valued positions is incredible. Like a redundant data loop which leads to eventual stack overflow. One of the most glaring instances of federal rule making incompetency ever.

https://www.workingre.com/nar-settlement-what-it-means-for-appraisers/

I brought this up because it mentions how important accurate data is. Wasn’t necessarily thinking of the CA when I typed that out.

However, the buy and sell prices are NOT always fact. In my area they are often inflated by agents and I have to call around to figure out what the correct selling price was or buy the deed to have it for my work-file. The last “fact” was inflated by $30,000 and had already been used as the high end sale for that neighborhood by multiple appraisers. It was reported and still not changed.

Throwing all that information in an AVM and having it kick out anything remotely defendable is laughable. Maybe where you are you can trust all mls and tax records. Maybe where I am no one gives two hoots about accuracy in information.

The verification process is one of the most important parts of my job in order to produce a credible report.

So, yes, to me, because of the low to no standards for the information entered, AVMs are a joke.

Maybe I should stop verifying since, when mentioned that most of the information I gather is wrong, people are jerks. No one else seems to care anyway. Maybe I can just look at Zillow?

Communist and Retroactive Fees …

Welcome to the used car lot, formerly known as real property appraisal!

What gets me thinking is the fundamental modeling shifts. Assessment systems are subject to oversight by the citizens. Imagine our entire countries assessment systems being administered by one set of private corporations. Nobody voted for a centralized model of value control which has the potential to reshape price and value benchmarks throughout the entire country. A usurpation of the entire system of democratic feedback and free market response. Maybe Mr Kiedrowski could please chime in on that point. Proportional to the appraiser or realty community only a small fraction of licensed persons have been trained on the underlying mechanisms which govern mass appraisal and/or avm type systems. As you said, up to this point there has not been much attention paid to the matter of avm guidelines either. Great points Dave, well informed.

Not sure what you’re referring to with a false flag. The content above, everything after the link is copied language from the CFPB’s own avm documentation. / In my state, assessors state wide did adjust up to match higher market values. Peoples taxes and insurance costs increased substantially.
https://commonsenseinstituteco.org/colorado-property-tax-primer/

County assessment data has never been a reliable basis to substitute live human appraisers. Formulas for assessment, rate, and levy, are all subject to change based on political and other external forces, citizens get to vote on those issues. Now, avm derived ‘market values’ will be subject to cryptic difficult to understand or recreate algorithmic calculation adjustments, and nobody will get to vote on the matter.

This is a significant departure from the rules which govern human appraisers such as re creatable methods, recognized methods, requiring documentation of the method, furnishing a workfile. Where is the individual accountability?

‘Interested parties’ will be in control of the avm systems. Why bother keeping up the pretense of separation from loan production, when the loan production team will now be in charge of governing rule sets which directly influence avm systems end value data outputs?

No more humans complaining about value pressure. ROV’s will be a thing of the past. Maintaining maximized production volume will be the measurement of the avm’s operable state. The automation and behind the scenes data manipulation will result in a continuous pump and dump predatory investment cycle. Central planning never works.

This blogs article brings forward great suggestions for minimum avm standards and uniform rules to govern the system. Unfortunately if that’s what lenders wanted, they’d simply continue using human appraisers whom are already subjected to more than adequate regulation and oversight.

What exactly is wrong with lower housing prices? The premise of moving away from human appraisers and towards these automated systems is that people deserve higher prices. This is the conclusion of the PAVE presidential task force; people should pay substantially higher housing prices, aka; ‘housing value equity’. Unlike zillow, taxpayers will be backing this one. All gse loans are backed by FDIC insurance.

Lenders and avm providers will be self certifying inflated values from heavily tainted data pools and will adjust proprietary avm programming on the fly with no external oversight. There is less than one year before this program runs full speed. Lender program participation will be mandatory. Read the final rule with commentary, first link, 190 pages. The conflict of interest gap is incredible. ‘adjustable cascading rule sets’.
https://www.consumerfinance.gov/about-us/blog/cfpb-approves-rule-to-ensure-accuracy-and-accountability-in-the-use-of-ai-and-algorithms-in-home-appraisals/

As modeling technology continues to evolve, this flexible approach will allow institutions to refine their implementation of the rule as appropriate. The proposed and now adopted approach will allow mortgage originators and secondary market issuers the flexibility to set their quality control standards for covered AVMs as appropriate based on the size, complexity, and risk profile of their institution and the transactions for which they would use AVMs covered by the rule.

the agencies have determined that a flexible approach to implementing the quality control standards would allow the implementation of the standards to evolve along with AVM technology and reduce compliance costs. Different policies, practices, 81 procedures, and control systems may be appropriate for institutions of different sizes with different business models and risk profiles, and a more prescriptive rule could unduly restrict institutions’ efforts to set their risk management practices accordingly. For these reasons and after considering the comments, the agencies are not issuing additional guidance at this time and recommend that institutions review and consider existing guidance when establishing and implementing appropriate polices, practices, procedures, and control systems for AVM quality control

As noted, the final rule implements a statutory mandate, thereby limiting the ability of covered agencies to consider alternatives. That said, agencies did exercise authority provided by section 1125 to include the nondiscrimination quality-control factor (given continued evidence of disparities in residential property lending terms along racial and ethnic lines) the size of their institution and the risk and complexity of transactions for which they will use covered AVMs—institutions should be able to work with AVM providers to assist them with their compliance obligations under the rule