Is the GSE’s “Appraisal Modernization” Really Just Mass Appraisal?

Is the GSEs "Appraisal Modernization" Really Just Mass Appraisal?

Mass Appraisal tend to exhibit a regressive nature… 

In the intricate landscape of real estate mortgage financing, the notion of appraisal waivers recently dubbed “Value Acceptance”, by the Government Sponsored Enterprises (GSEs), has stirred considerable debate. The most recent statistics show Value Acceptance accounts for up to 40% of all mortgage approvals. It is presented as part of the GSEs “Appraisal Modernization” initiative, which aims to streamline the mortgage appraisal process. However, a closer examination reveals potential drawbacks, raising questions about its efficacy and impact on the housing market. Despite its roots in a methodology designed to support appraisers, Value Acceptance appears to divorce itself from appraiser standards and oversight, leading to legitimate concerns regarding its reliability and accuracy.

Value Acceptance is marketed to the public as an efficient mechanism, sparing lenders and borrowers the time and expense associated with traditional property appraisals. By leveraging automated systems like Fannie Mae’s Collateral Underwriter combined with a data report from a Property Data Collector (PDC), the GSEs promise lower costs and expedited loan processing. This standardization is touted as a means to mitigate appraisal bias and alleviate market bottlenecks, particularly during periods of increased transaction volume. When still called appraisal waivers, the original pilot program allowed PDCs to take detailed 3-D scans, notes and photos. That data was then provided to an appraiser for analysis to complete an appraisal. This was widely used during COVID. However, in 2023, Fannie Mae rebranded the program as “Value Acceptance + Property Data”, while Freddie Mac started calling their similar initiative “Automated Collateral Evaluation + Property Data (ACE+PDR)”. Collectively referred to as Value Acceptance for brevity, these renamed programs eliminated the appraiser from the process entirely, leaving both the lender and consumer to rely on the opinion of an unlicensed data collector and proprietary algorithm.

In contrast to Value Acceptance, most homeowners are familiar with Mass Appraisal, the approach commonly employed by County Assessors for property tax purposes. Mass Appraisal is defined in the Homeowner’s Guide to Mass Appraisal as “the systematic appraisal of groups of properties as of a given date using standardized procedures and statistical testing.” It involves analyzing data collected in mass quantities, developing statistics from the data, and applying the results to value properties. For Mass Appraisers, knowledge regarding cost, sales comparison, and income valuation models is essential, along with adhering to stringent standards for model calibration and specification. Noted in the International Association of Assessing Officers (IAAO) Standard on Mass Appraisal, “appraisal staff should have at least a general understanding of how the models work and the various rates and adjustments made by the models.”

This approach bears resemblance to emerging programs introduced by the Enterprise’s Fannie Mae (Value Acceptance) and Freddie Mac (Automated Collateral Evaluation). These programs, similar to Mass Appraisal methodologies, rely on advanced modeling techniques and statistical analyses of large quantities of data for property valuation. Value Acceptance is enabled by the GSEs Uniform Appraisal Dataset (UAD), introduced in 2011, which allowed for the digitization of most appraisal data and is described by the GSEs in these terms:

  • The algorithms determine the acceptability of the value (or sales price) as the basis for the lender underwriting the loan and uses available data to assess the condition and marketability risks associated with the property.
  • ACE leverages proprietary models, 40 years of historical data and public records.
  • Value acceptance better reflects the actual process which uses data and technology to accept the lender-provided value
  • Uses data and a modeling framework to confirm the validity of the value/sale price. For purchases and refinances

This phenomenon is not novel within the realm of appraisal; in fact, it finds its roots in Standards 5 and 6 of the Uniform Standards of Professional Appraisal Practice (USPAP) which say:

STANDARD 5 applies to all mass appraisals of real or personal property regardless of the purpose or use of such appraisals (see advisory opinion 32). The reporting and jurisdictional exceptions applicable to public mass appraisals prepared for ad valorem taxation do not apply to mass appraisals prepared for other purposes.

A mass appraisal includes:
1. identifying properties to be appraised;
2. defining market area of consistent behavior that applies to properties;
3. identifying characteristics (supply and demand) that affect the creation of value in the market area;
4. developing a model structure that reflects the relationship among the characteristics affecting value in the market area;
5. calibrating the model structure to determine the contribution of the individual characteristics affecting value;
6. applying the conclusions reflecting in the model to the characteristics of the property(ies) being appraised; and
7. reviewing the mass appraisal results

It’s essential to highlight that licensed appraisers are bound to adhere meticulously to all the Standards outlined in USPAP. Additionally, the guidelines set forth by the GSEs expressly deem any deviation from USPAP requirements as an “unacceptable appraisal practice.” However, there remains uncertainty regarding whether the GSEs comply with USPAP Standards 5 and 6 in the development or reporting of their Value Acceptance program. This requirement, mandated by their own guidelines and state law, necessitates clarity on the Value Acceptance program’s alignment with USPAP standards.

Since the advent of computers, Mass Appraisers have employed technology to assist in property valuation. In essence, Mass Appraisers pioneered what are now commonly referred to as Automated Valuation Models or AVMs. Notably, the IAAO released the first Standard on Automated Valuation Models in 2003 and updated/revised the standard most recently in 2018. The IAAO Standards on Mass Appraisal scope says “the primary focus is on mass appraisal for ad valorem purposes. However, the principles defined here should also be relevant to CAMAs (or automated valuation models) used for other purposes, such as mortgage portfolio management.”

Often referred to as Computer Assisted Mass Appraisal (CAMA) by County Assessors, this approach has been viewed as a tool to augment appraisers’ expertise rather than replace it entirely. The IAAO Standards address the role of appraisers and data collectors in this situation. Section Initial Data Collection stipulates, “a physical inspection is necessary to obtain initial property characteristics data. This inspection can be performed either by appraisers or by specially trained data collectors. In a joint approach, experienced appraisers make key subjective decisions, such as the assignment of construction quality class or grade, while data collectors gather all other details.” Despite these standards, the GSEs require their Property Data Collectors to make key subjective decisions such as the assignment of quality, condition, and view attributes. The crucial question arises: Can we confidently assert the accuracy of a property valuation without the oversight of a trained appraiser?

AVM or CAMA models can serve as indispensable tools for appraisers, akin to a box of tools provided to a seasoned contractor to erect a house. The contractor, well-versed in building codes and regulations, ensures the construction of a structurally sound building. However, entrusting the same tools to an inexperienced individual begs the question: would they adhere to the same meticulous standards and regulations? Similarly, with AVM or CAMA models, proficiency in the intricate framework of appraisal standards and guidelines, cultivated over decades of data analysis, is indispensable. Handing over these tools to anyone lacking such expertise would inevitably yield questionable results.

The standardization of Value Acceptance, also introduces inherent risks, especially concerning these models’ tendency to overlook the distinctive characteristics of individual properties and the intricacies of local markets. By relying solely on historical data and predetermined criteria, the process may overlook fluctuations in local market conditions, zoning changes or property-specific factors, thus risking inaccuracies and disparities in valuation. Extensive studies conducted on Mass Appraisal models over the years have consistently shown a concerning trend: they tend to exhibit a regressive nature. In other words, these models often demonstrate bias, over-assessing the value of inexpensive houses while undervaluing more expensive ones.

The most public, real world example of this phenomenon was through Zillow’s ambitious venture into home buying/flipping. In a bold move, they backed their confidence in their proprietary Zestimate AVM by engaging in the buying and selling of homes. However, the outcome was far from favorable, as they incurred staggering losses amounting to hundreds of millions of dollars which ultimately ended the program. Zillow’s misstep suggests a significant flaw in their model, which consistently overestimated property values, leading them to overpay on the multitude of houses involved in the program.

Perhaps the most concerning aspect of Value Acceptance is its potential to erode market integrity. By prioritizing expediency over accuracy, the process undermines the fundamental principles of transparency and accountability essential to a healthy housing market. In the absence of robust valuation practices, the risk of market distortions, speculative bubbles, and systemic vulnerabilities looms large, posing significant threats to economic stability and consumer welfare. Moreover, the adverse effects of regressive value models are disproportionately borne by marginalized communities and underserved regions. By perpetuating disparities in property valuation and financing accessibility, the process could exacerbate existing inequalities.

This also raises concerns regarding public safety. These are unlicensed individuals who are going into your home, taking detailed video scans, photos and notes. Where is that data stored? Is it on the phone of the data collectors? What recourse, if any, would a consumer have if they were harmed by a PDC, such as their property being damaged or their private information shared without their consent? In a display of caution, the U.S. Dept. of Veterans Affairs (VA) has cited the prioritization of veteran’s safety as a primary reason for refraining from adopting the Value Acceptance program.

Furthermore, what consumer protections are in place when a lending decision is made based solely on a property data inspection report? If the report misrepresents the subject characteristics or location (e.g. specifically ignores a health and safety item) or if there is evidence of bias and/or discrimination in the report, there appears to be no recourse. In contrast, if there is an issue with a report completed by a licensed appraiser, there are multiple paths for the consumer to seek recourse at the state licensing level as well as at the federal level through the Department of Housing and Urban Development (HUD). PDCs are not licensed, are not certified, and not required to carry E&O insurance. If the property data report is later found to be misleading, fraudulent or biased, it could leave the consumer with no options for remedies. This would appear to be at odds with the goals of HUD’s recent Property Appraisal and Valuation Equity (PAVE) action plan, recommending among other things, anti-bias training for providers of appraisal services.

Up until the Value Acceptance program lenders had two primary options, appraisal or appraisal waiver, depending on the perceived risk associated with the underlying loan. When the GSEs discovered the lack of data from the appraisal waivers was negatively affecting their automated valuation models, the Property Data Collector program was created to fill this gap. It’s presented as a way for lenders/banks to further break up their risk pool with a quick, low cost solution. This reasoning bears resemblance to the conditions preceding the last housing crisis, where the misuse of loan products, divided into various risk pools, by unlicensed and unregulated individuals significantly contributed to the crash. This is one of the major reasons Mortgage Loan Officers are licensed today.

I strongly advocate for the implementation of publicly published sales ratio studies on the AVMs utilized by lenders and GSEs. A prime example of such evaluation is seen annually through the Measuring Real Property Appraisal Performance study conducted by the Washington State Department of Revenue. This comprehensive analysis includes sales ratio studies on models used by assessors, providing valuable insights and transparency into the effectiveness of these systems in assessing property values. Given the diverse range of software and models employed by County Assessors across the state, it is imperative to ensure that they adhere to established statistical parameters derived from Mass Appraisers decades of experience handling vast amounts of data. By extending this scrutiny to the AVMs utilized by lenders and GSEs, I believe we can promote transparency, accountability, and consumer protection within the real estate mortgage market.

The IAAO Standards specify that an ideal sales ratio falls between 90% to 110%. In other words if your sales ratio is for example 100%, half of your values will be below 100% of market value and half will be above. This is to be combined with a coefficient of dispersion for residential properties ranging from 5% to 15%. These standards, crafted by the pioneers of AVMs – already provide clear benchmarks for assessing credibility and statistical accuracy. It begs the question: If these standards are used to evaluate the work of assessors utilizing CAMA models, why aren’t they universally applied to all AVMs in the market? By implementing consistent standards across all AVMs, we could effectively “grade” their performance and gain a comprehensive understanding of their efficacy in real-world scenarios.

The Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA) mandates that “an institution should use caution if it engages a third party to administer any part of its appraisal and evaluation function, including the ordering or reviewing of appraisals and evaluations, selecting an appraiser or person to perform evaluations, or providing access to analytical methods or technological tools.” It goes on to say “prior to entering into any arrangement with a third party for valuation services, an institution should compare the risks, costs, and benefits of the proposed relationship to those associated with using another vendor or conducting the activity in-house. The decision to outsource any part of the collateral valuation function should not be unduly influenced by any short-term cost savings.” In the case of the AVM models used by lenders, which often rely on proprietary technology, lenders and consumers may find themselves confronted with a “black box” scenario, raising doubts about their ability to fully grasp the inherent risks involved.

In light of these concerns, a reevaluation of the Value Acceptance program is essential. While efficiency is undoubtedly desirable, it must not come at the expense of credibility, integrity, and equitable market participation. Rather than succumbing to the allure of expedience, stakeholders should prioritize robust valuation practices, incorporating human judgment, local expertise, and comprehensive due diligence into the decision-making process.

As an example why this reevaluation is necessary, look no further than the distinctive landscape in Washington State. Where the significance of recent legislative strides regarding real estate cannot be overstated. House Bills 1110 and 1337, among others, herald significant changes poised to reshape numerous housing market areas across the state. These impending shifts necessitate local market competency and a rigorous appraisal analysis, including meticulous considerations of highest and best use, a domain where AVMs often falter. While these efficiency efforts also aim to address appraiser shortages, it’s important to recognize that the lack of appraisers is most acute in rural regions. It remains uncertain whether AVM models, which historically struggle in these rural areas, can truly bridge this gap. Thus, the efficacy of these measures hinges on their ability to adequately address the nuanced challenges faced by both urban and rural communities alike.

Advancements in technology and data analytics offer exciting opportunities to revolutionize property valuation, promising heightened efficiency and precision. Yet, as we embrace these innovations, it is paramount to uphold a steadfast dedication to ethical principles and established standards, safeguarding the integrity of the housing market and the welfare of its stakeholders. By coordinating the initiatives of key efforts such as the Appraiser Diversity Initiative with Property Data Collectors and programs like the Practical Applications of Real Estate Appraisal (PAREA) and/or Practicum, a remarkable opportunity arises: reducing barriers and allowing for the cultivation of a robust and diverse pipeline of professionals entering the appraiser field. This potential holds the promise of significant and lasting benefits for all involved parties. However, it’s crucial to note that currently, these programs operate with conflicting objectives, hindering their collective effectiveness.

The proliferation of terms under the banner of “Appraisal Modernization” such as Automated Valuation Models, Property Data Collection, Value Acceptance, and Automated Collateral Evaluation may seem like a new phenomenon, but in essence, they represent concepts that appraisers have long referred to as Mass Appraisal. These modern labels are often heralded as a cure-all for the perceived inefficiencies and biases of traditional mortgage appraisal processes. However, their resemblance to established Mass Appraisal techniques without the benchmarks, oversight or transparency, raises concerns about potentially regressive standardization and market distortions. As stakeholders navigate the intricate landscape of real estate financing, it’s important to proceed with caution, prioritizing credibility, transparency, and equity above all else. Only by striking a delicate balance between innovation and responsibility can we ensure the housing market thrives as a pillar of economic prosperity for all.

By Dallas T. Kiedrowski, MNAA – Dallas is a Certified Residential Appraiser, an Accredited Mass Appraiser, as well as on the Executive Board for the West Puget Sound Chapter of IAAO. Dallas is also on the Board of Directors and Legislative Committee for the Appraisers Coalition of Washington (ACOW), is a Designated Member of the National Association of Appraisers (NAA) and a Candidate for the Residential Evaluation Specialist (RES) designation from the International Association of Assessing Officers (IAAO). You can find him on LinkedIn.

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18 Responses

  1. Quite possibly the most thorough appraisal article I’ve ever read on modernization risks.

    However, lets not forget that the GSEs could not be trusted to competently manage their own affairs in the first place.

    They are no more able to do so today than they were in 2008 or even 1989.

    Back in 2014-2016 words like ‘leveraging’ or phrases like ‘value added’ became the mantra of those demanding changes to better facilitate loan fraud, and diminution of recognized appraisal standards.

    Remember “bifurcated hybrid?” A phrase so discredited that replacement euphemisms had to be created to get past the negative stigma.

    Phrases or terms such as “trained” PDCs or “value acceptance” were coined. Toss in the current magical buzzwords of diversity and equity and just about any foolish concept gained instant acceptance.

    I note in the article that one of the GSEs seeks to bolster credibility by claiming to have a database covering over 40 years. What wasn’t disclosed is that in January, 2015 FNMA realized their arbitrary adjustment percentage guidelines were producing a preponderance of appraisers giving greater weight to guidelines, than to real world market reactions.

    So over thirty years of the forty year database claimed is comprised of flawed or compromised data.

    The very same flawed data that Collateral Underwriter was built upon.

    Since FIRREA 1989 was first passed the so called ‘stakeholders’ (meaning every business benefitting from minimal mortgage processing rules / laws) sought to eliminate FIRREAs protections that they perceived to be onerous burdens.

    They succeeded. The Departure Rule was replaced by the watered down and very vague Scope of Work Rule. False claims of shortages were promoted so that waivers permissible under limited circumstances by FIRREA could be invoked.

    Reasonable and customary fee LAW (misnomer is C&R) was undermined by AMC lobbying organizations such as REVAA, with the improper interference of the FTC.

    Falsely claimed shortages became a reality as more and more experienced appraisers refused to accept the substandard fees that lenders and AMCs conspired to price fix at rates 20 years out of date.

    Toss in phony appraisal racial bias claims and micromanaged language, and even more experienced appraisers refuse to work for the dishonest GSEs.

    Unless and until predictable outcomes (GSE failures Part Deux) result, ALL requirements for credible real estate appraisals will continue to be eroded.

    Reread the original authors excellent article. Pay attention to the limitations of mass appraisals, AND the almost non existent audits of the process.

    There’s good reason mass appraisal has never been acceptable for determining collateral value.

    By the way, don’t overlook the new focus on acceptable price ratios versus value. A subtle substitution of terms that will become increasingly critical in the future…

    As stakeholders “leverage” PC gimmicks over sound appraisal practices. Practices developed over 91 years (1933) shortly after the Great Depression of 1929.

  2. Great article. This is exactly what’s happening. Market distortion will be even greater over time when multiple valuations are based on multiple AVMs instead of actual appraisals.

  3. Unfortunately, supported or not, the GSEs have concluded that in many market segments, the implemented data collection and automated valuation processes are more reliable to assist in the mortgage lending risk decision than appraiser submitted appraisal reports.
    The intended purpose and use of mortgage appraisals is to mitigate valuation and collateral risk, that from my years of review management our appraiser practices often fall woefully short. Many appraisers yet believe their opinions and judgements don’t need to be tangibly supported or replicable in their appraisal reports; that from a client and intended user perspective, is no longer acceptable. Unfortunately, too many times I found the AVM service provided more comprehensive and relevant information and conclusions to decision the risk-based lending purpose, than the appraiser provided appraisal report! Sad, very sad… We have to do better!

    Going forward, mortgage purposed appraisals need to be succinctly reported with value opinions supported with replicable data-metric analyses that are included in the appraisal report. Otherwise, our mortgage clients are moving onto other service platforms without us! This isn’t only a legislative driven issue, its a market-client driven issue. Either our professional appraisal services meet our client expectations, or they will progress without us. Now, with some market segments the lending decision risk doesn’t always need our appraisal service, but for others they will continue to need our professional appraisal service and experise – if we stay relevant to the purpose and expectation.

    As a real world analogy, we no longer go to Block Buster Video to get our entertainment, so unless we advance our mortgage appraisal processes to meet the current client and user expectations, our client base will no longer need us for part or all of their needs. So, we need to start by learning and understanding the power of Excel and Excel based resources available for relatively small subscription fees, you can also now use ChatGPT to tell Excel what you want/need, learn and understand how to utilize and include multiple linear regressions and metric analyses in appraisal reports. The marketplace and appraisal users expect tangible support for added credibility to our opinions and work. And if you think by diversifying your appraisal practice away from mortgage lending clients, your won’t need to do this, think again. With other appraisal services, supporting your conclusions and opinions with tangible data-metric analyses is fundemental to meet client expectations.

    Also, for mortgage purposed appraisers, be ready to implement the new forthcoming UAD reporting process to your mortgage valuation service; that is designed to keep our mortgage valuation services relevant to the everchanging metric driven mortgage valuation marketplace.

    Yes, we as appraisers are best prepared to provide mortgage purposed appraisals, but unless we get and stay current with client and intended user risk objectives, we will become Block Buster Video! When I entered the appraisal profession, typewriters were in the process of being replaced by computors – that many appraisers protested…with many retiring and/or quiting. That change in part provided appraisers like myself the opportunity to learn how to use computors and advance our appraiser careers for the next 40 years! Now going forward, its appraiser sourced metric driven charts and graphs included in our appraisal reports (not just high-level MLS charts and graphs), that the client-user marketplace expects for support and credibility of our appraisal valuation opinions.

    Our Future is Our Decision… 🙂

    • I also never went to Blockbuster to obtain 1/4 to 3/4 million dollar mortgages.

      Any investor foolish enough to treat such loans as a drive through convenience item deserves the inevitable losses they will incur.

      I can stay as busy as I wish without GSE work.

      I expect it will be much more once consumers start suing lenders for predatory lending or collusion to defraud them.

      No one goes to court with a “value acceptance” or hybrid as their only value support.

      • Baggins Baggins says:

        Mr Ford said; ‘No one goes to court with a “value acceptance” or hybrid as their only value support.’

        That’s where amc indemnity agreements come into play. Special hint; Appraisers will not be the ones initiating lawsuits. But if they were foolish enough to complete that work, they may be the ones paying.

        AMC’s basically ignore any and every state rule which prohibits them imposing indemnity agreements, the amc imposes them anyways. Mr Ford which would win in an actual court setting? The amc whom proves the appraiser signed these agreements? Or the appraiser whom would say the agreement was null and void because of the state rules, so the appraiser signed the agreement anyways so as not to be excluded from the work force?

        This is a key thing most states missed in terms of amc regulation; Prohibiting indemnity agreements imposed upon appraisers. One ponders if the lending and amc industry would have pursued these mass appraisal methodologies if they were liable, rather than passing all the risk and cost to the appraiser. For appraisers seeking regulatory correction, a good idea may be to start with having your state impose a prohibition on indemnity agreements for appraisers, and actually enforce penalties and sanctions when lenders and their amc’s routinely ignore those engagement limitations.

        • Baggins Baggins says:

          Found the rule.

          § 12-10-614, C.R.S. Appraisal management companies – prohibited activities – grounds for disciplinary actions – procedures – rules.

          (b) Requiring an appraiser to indemnify the appraisal management company against liability, damages, losses, or claims other than those arising out of the services performed by the appraiser, including performance or nonperformance of the appraiser’s duties and obligations, whether as a result of negligence or willful misconduct;

          Chapter 6, appraiser license law. Pg 18.

          (r) Failing to disclose to a client the fee amount paid to the appraiser hired or engaged to complete the appraisal upon completion of the assignment; or
          Is the indemnity agreement valid or not? The amc agreement is confusing because it says ‘from or in connection with’. And every amc has some indemnity agreement language variance. Every single amc requires appraisers to sign these agreements.

        • I think you missed my point baggs (or I failed to make it clear).

          My concern isn’t about the work volume available to appraisers that engage in hybrids. Of COURSE they and their E&O will be the ones to pay.

          The opportunities for more honorable appraisers, will be in the litigation cases where we will be hired by the complainants rather than by the respondents.

          At pretty good fees, I expect.

          • Baggins Baggins says:

            Understood. We’re on the same page. That requires judges, lawyers, and court rooms. I don’t care if they are giving out free pots O gold to appraisers with real life rainbows and leprechauns in little green hats, I’m not going into situations like that on purpose. My days are numbered, time is running out. I was in this for consumer protection, a sincere belief in the American dream. You should apply for a government grant to support the public by way of appraiser based housing and best process counseling, and I’ll be your full time guy. The servicing industry side of things is what evaporated in real time.

  4. Great article and very infomative.

    What has always struck me is why did they change the name from Appraisal Waiver (a meaning which is quite obvious to the general public) to “VALUE ACCEPTANCE”? Pretty tricky way to lure the buyers/market into thinking oh hey… the lender has completed some sort of appraisal or analysis and has determined that the property that I am paying hundreds of thousands for or more… is worth at least what I am paying for it. I call it deceptive marketing to all parties involved.

    The public has NO clue how hard they will suffer by these deceptive practices. There is no explanations given to the buyers when their loan qualifies for “Value Acceptance” protocols, you can be sure of that!

    • Avatar Jack Preacher says:

      Hybrids and AVMs are here to stay. The old saying is the one who has the gold is the one who makes the rules. Unfortunately, the banks have all the gold.

      • The FED has all the gold (or at least the promise of its lesser equivalent). They are in turn answerable to the taxpayers.

        Jack, hybrids and AVMs have never had credible acceptance by honest, informed professionals. They are purely tools to facilitate fraud agaisnt investors, by the same GSEs that can’t be trusted to operate unsupervised by their conservator…The U..S. Government, in the form of the FHFA.

        Did around a little bit for an AVM White Paper FHFA had written a few years ago…where their own study proved AVMs were not nearly as reliable as appraisals.

  5. Avatar IMJSAYN says:

    Brace yourself, the next real estate crash is barreling down the highway like an out-of-control semi with no brakes. These fly-by-night valuation tools are nothing more than drunk drivers recklessly churning out questionable home prices. Their shoddy estimates are leading buyers down a dangerous road paved with over-inflated market values and bad data.

    Let’s call these tools what they really are: glorified Zestimates. They fluctuate more wildly than gas prices and are about as reliable as a weather report in March. One day your house is worth a fortune, the next day, it couldn’t buy a dilapidated shack.

    Without the seasoned eye of an appraiser carefully reviewing which sales to include and exclude, these are nothing more than weapons of mass financial destruction. They lack the rigorous training and keen analytical skills to determine accurate valuations. But accuracy isn’t the goal is it? No, it’s all about the money honey. They funnel unsuspecting buyers into purchasing overpriced homes, which benefits someone, but it sure isn’t you.

    So watch out – the crash is coming. Don’t get lured in by the siren song of effortless home valuations. Unless you want to end up bankrupt and broken down on the side of the road, steer clear and let qualified appraisal experts call the shots.

  6. Avatar Coach says:

    The GSEs established a new set of anticompetitive rules for states, rather than supporting licensees with training. This prioritized their own profits over public safety and trust by creating conflicts of interest through regulatory capture and antitrust practices. However, they spent considerable resources and remain determined to impose this system at any cost.

  7. Mr. Kiedrowski. This is an excellent peice, very thoughtul and well written! Thank you for sharing It raises a lot of questions which will likely go on deaf ears. As you spell out, the appraisal modernization systems are really untested, markets always change and these new systems will likely get a stress test relatively soon, I am holding my breath.

  8. Baggins Baggins says:

    ‘Have Fannie and Freddie Wrecked the U.S. Housing Market?’
    This just in from Bagott. Things are happening.

    Of course this is mass assessment. The methods will not hold up on a national level. The latest vogue trend in progressive politics is to mandate by imperial decree increased housing density in areas which were not designed to support such capacity, as well as imposing limits on assessment value rises via novel programs, such aa yearly percentage increase cap limit. These parity based approaches will have unpredictable unintended consequences. Half of the progressive politicians are slamming appraisers for supposedly repressing their home values. The other half are actively working to suppress home values using government mechanisms to save on taxes. The use of waivers, the already excessively high demins thresh hold, has already led to massive over valuation of our entire housing markets.

    There are possibly millions of rule variances out there distributed through all the counties in this country. Assessment rules, allowances, caps, limitations, various exceptions based on home values, sizes, occupancy, age, location, special zoning districts. Whatever you can imagine, there is probably a special rule in some district somewhere, and the rules are always changing. Theoretically even if the tech industry hired enough workers to keep up with this data, the industry would require more people than the appraisers they replaced. And they would not have the same skills or experience to properly analyze and value the real property. Appraisal Modernization!

    • Was just today talking to one of our City councilman who says the planning manager is rubber stamping all proposed developments that are in direct violation of ordinances as it relates to site size, green space, size of homes etc. they just want more people in the city and of course more tax paying citizens. They have turned our wonderful city into high density affordable housing townhomes and small single family home with just over .10 of an acre. Planning manger approving things without even putting them to a vote. They are worried that we don’t have enough affordable housing in our small city which borders Lake Lanier. I told him that they are ruining this area with townhomes so close to the lake. They need to take advantage of the lake and be like the North Shore on Lake Michigan. High end homes should be here not small townhomes. He agreed. He said the Hamlet of Flowery Branch has been ruined by the city planning managers focus on cramming houses into every open space there is!

      • Baggins Baggins says:

        When you observe the building department approve projects outside of existing zoning allowances, you are observing them padding their budget, aligning themselves for a raise in the future. They say whatever needs to be said to justify the action. In my state they say high density housing is to protect the open spaces, so they stack em and pack em in special zoning districts. If you want to see something really disconcerting just search for; Micro Housing. That comes after the townhomes. Dig into those city rule books, somewhere in there should be a counter mechanism to recall or sanction the people whom break the rules.

  9. Is this accurate? Regression-based standardization is a practical alternative to the direct method. It can produce more reliable estimates than the direct or indirect method when calculations are based on small numbers.


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Is the GSE’s “Appraisal Modernization” Really Just Mass Appraisal?

by Guest Author time to read: 11 min