Lowballed… It Is Open Season On Appraisers

Lowballed... It Is Open Season On Appraisers. ABC TV Documentary: Our America: Lowballed

Because this issue was ignored by the appraisal industry, it is open season on appraisers.

Because of the lack of credibility or awareness of the diversity issue that the appraisal industry faces by the two primary appraisal industry organizations, The Appraisal Institute and The Appraisal Foundation, there is no counter that can be presented to this continuing storyline. It’s too late to have our industry review that second report in each of these situations as many appraisers have said.

After all, TAF has fostered an appraisal career process that has resulted in an industry that is 98% white (dead last of 400 tracked jobs) and never had a person of color on any of its boards in its more than three-decade history. Only after capitulating to external pressures such as these Housing Notes and other efforts required a change. That included adding one person of color to the AQB and, of course, having a middle-aged white guy lead their diversity initiative.

And AI CEO disbanded their diversity committee around seven years ago, relegating it to a panel in a political move to protect his power within the most white, male organization.

Now it’s too late. The documentary storyline was launched by the 2018 Brookings Institute report that made for good headlines and started the much-needed conversation, yet fundamentally misunderstood what appraisers actually do but fit in perfectly with the stunning lack of diversity within the industry.

Reporter Julian Glover in San Francisco has been all over this issue since the beginning, leveraging local stories into broader coverage. Here’s the trailer for the series that begins on December 2nd.

 
I get a steady stream of PR pitches after twelve years of blogging. Here’s the PR pitch on this documentary to me:

Good Morning Jonathan,

As many of us may know, Black and Latino families have had their homes appraised for up to $500,000 less than expected, and racial bias may play a significant factor.

According to an ABC Owned Television Stations data analysis of more than 50 million home loans, refinance applications in predominantly Black neighborhoods are nearly five times more likely to be under-appraised than in white communities. The analysis also found that home-purchase loans in Black neighborhoods are more than twice as likely to be appraised under value.

To raise awareness on this systemic issue affecting families across America and to equip viewers with information on what they can do if they find themselves lowballed in an appraisal, ABC Owned Television Stations has produced “Our America: Lowballed,” with the trailer now available.

The documentary special will debut on ABC Owned Television Stations’ 24/7 streaming platforms, 32 connected TV apps across streaming platforms Amazon Fire TV, Apple TV, Android TV, Roku and Hulu beginning Dec. 2, with a linear release across eight ABC stations the weekend of Dec. 5

The press release with the full details is detailed below.

With that said, are you interested in:
Sharing the trailer to “Our America: Lowballed” with your audience?
Interviewing one of the spokespeople

Please let me know your thoughts. I’m looking forward to hearing from you.

Respectfully,

Vanessa Abron

Jonathan Miller
Latest posts by Jonathan Miller (see all)
Image credit flickr - Michael Zanussi
Jonathan Miller

Jonathan Miller

Jonathan Miller is President and CEO of Miller Samuel Inc., a real estate appraisal and consulting firm he co-founded in 1986. He is a state-certified real estate appraiser in New York and Connecticut, performing court testimony as an expert witness in various local, state and federal courts.

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40 Responses

  1. Avatar Koma says:

    Sorry I might have missed it, but how do they know how many in our profession are white? I am not and I don’t remember answering any questions to that fact.

    17
    • Avatar guy says:

      maybe when we originally got certified? don’t know for sure

      0
    • They are referring to stats from the Bureau of Labor Statistics which are misleading. In that case someone calls a home landline and asks about the occupations and races of the occupants. They don’t always talk to the actual person but another occupant of the home. That person can be a non-adult or an older person who can’t effectively answer the question.

      3
    • Desiree Mehbod Desiree Mehbod says:

      Koma raises a good question.

      I looked at the copy of my license applications for VA, DC and MD when I applied in the 90s and none asked about my race. So how are they coming up with 98% white in our industry? Is this through a survey?

      Let’s see. NAR emailed 50,000 non-appraisers and 9700 appraisers for their 2022 Appraisal Survey and out of 60k only 2535 responded. That’s about 4%.

      I browsed through workingRE most recent surveys and the highest number of respondents they had for their surveys was 4k out of 100k appraisers. That’s also about 4%.

      So it looks like about 3.9% of the 4% respondents who reported on their race if there was such a survey, were white appraisers. Why would we assume that 96% of the appraisers who did not respond were also white?

      And if Mary is correct, then I can tell you with almost certainty that about 4% of appraisers/occupants ever got a call from the Bureau of Labor Statistics. And don’t count me, in the 4%, because I never got such a call. Did you?

      6
      • Avatar Fitz Turner says:

        Do not tell me you have not received one of these, and how did you respond?
        If you responded no, or did not respond, then you must be a white male.
        I have had several questionnaires like the following:

        iMS logo

        Dear Appraiser,

        Vendor Id: xxx

        Email Address:

        We hope this message finds you well. iMortgage Services supports the Supplier Diversity Programs of our customers and requests participation from our vendor partners in a survey. Your participation is OPTIONAL, and regardless of how each question is responded to, it will not impact future assignments from our organization. iMS is a performance based company and promotes vendor partner relationships based on open communication regarding service levels in an effort to continually improve and exceed our customer expectations. If any of the below apply to your business, please proceed to the survey located at https://www.propertysmart.us/forms/Diversity_Survey.pdf:

        OWN or OWN at least 51% of a business AND are a:

        Member, able to provide certified proof of:

        -National Minority Supplier Development Council (NMSDC)

        -Women’s Business Enterprise National Council (WBENC)

        -National Gay Lesbian Chamber of Commerce (NGLCC)

        -Small Business Administration 8(a) Program

        -National Veteran-Owned Business Association (NaVOBA)

        -US Pan Asian American Chamber of Commerce (USPAACC)

        -Disadvantaged Business Enterprise
        -HUBZone
        -The Port Authority
        -State and Federal Agencies

        OR Business Owners who are and able to provide :

        -A Service Disabled Veteran

        PLEASE BE AWARE: To be considered you MUST provide REQUIRED information such as certifications, expiration dates, and copies of specific documents. ANY survey that fails to provide this information will be not be able to be processed. Our customer’s Supplier Diversity Programs as VERY SPECIFIC in their requirements.

        IF NONE OF THE ABOVE APPLY TO YOUR BUSINESS please respond to this email message stating NO that you are not completing the survey..

        0
      • Baggins Baggins says:

        In Colorado it’s not that high, we have a lot of latino guys and mixed race appraisers both men and women. Yeah, where did this stat come from? I’ve read stories about using advanced algorithms to inferring race by persons first and last name, so they’re actually doing that with some mass data review. Call asb, get a real stat, stat.

        https://www.bls.gov/opub/reports/race-and-ethnicity/2020/home.htm
        https://www.bls.gov/cps/cpsaat11.htm
        (click into the pdf file, then use control+F to draw up the pdf search tool, enter; appraiser.
        Claims adjusters, appraisers, examiners, and investigators. . . . . . . . 330 58.2 74.4 16.7 4.3 14.6
        That said 74%, which is roughly in line with national labor participation general demographics.

        Gotta love disinformation on the internet, repeated, repeated again, and again, and again.
        FACT CHECK; 98% of appraisers are white. FALSE.

        5
    • Desiree Mehbod Desiree Mehbod says:

      Per the Bureau of Labor Statistics:

      In 2012, 86.5% of the 93k appraisers & assessors of real estate were white – 9.8% were black/African American
      https://www.bls.gov/cps/aa2012/cpsaat11.htm

      In 2013, 86% of the 98k appraisers & assessors of real estate were white – 5.5% were black/African American & 5.5% Latino/Hispanic
      https://www.bls.gov/cps/aa2013/cpsaat11.htm

      In 2014, 88.8% of the 95k appraisers & assessors of real estate were white – 5.4% were black/African American & 4.2% Latino/Hispanic
      https://www.bls.gov/cps/aa2014/cpsaat11.htm

      In 2015, 89.3% of the 76k appraisers & assessors of real estate were white – 5.9% were black/African American & 3.9% Latino/Hispanic
      https://www.bls.gov/cps/aa2015/cpsaat11.htm

      In 2016, 82.8% of the 73k appraisers & assessors of real estate were white – 5.5% were black/African American & 9.5% Latino/Hispanic
      https://www.bls.gov/cps/aa2016/cpsaat11.htm

      In 2017, 88.8% of the 97k appraisers and assessors of real estate were white – 9% were black/African American & 11% Latino/Hispanic
      https://www.bls.gov/cps/aa2017/cpsaat11.htm

      In 2018, 83.9% of the 84k appraisers and assessors of real estate were white – 10.7% were black/African American & 4.2% Latino/Hispanic
      https://www.bls.gov/cps/aa2018/cpsaat11.htm

      In 2019, 93.2% of the 84k appraisers and assessors of real estate were white – 2.7% were black/African American & 8.3% Latino/Hispanic
      https://www.bls.gov/cps/aa2019/cpsaat11.htm

      In 2020, 96.5% of the 86k appraisers and assessors of real estate were white – 2.3% were black/African American & 6% Latino/Hispanic
      https://www.bls.gov/cps/aa2020/cpsaat11.htm

      In 2021, 97.7% of the 80k appraisers and assessors of real estate were white – 1.1% were black/African American & 4.3% Latino/Hispanic
      https://www.bls.gov/cps/cpsaat11.htm

      In 2017 we had the highest number of non-white appraisers and assessors. 21.8% of appraisers and assessors were black/African American, Asian and Latino/Hispanic. In other words, 78.2% were white, and I believe the USA race demographic for whites is around 75-80%. So not racist in 2017 and prior to 2019, but racist afterwards?

      In November of 2018, the Brookings published its “The Devaluation of Assets in Black Neighborhoods” and then suddenly in 2019 there were about 10% more white appraisers and assessors and 8% less black/African Americans in these two professions per the bureau’s stats above. And in 2020, there were 2k more appraisers and assessors joining these 2 professions and it looks like they were all white (96.2% – 93.2% = 3.3%, 84,000 + 3.3% = 86,777; 2772 more white appraisers and assessors in 2020). Every year after 2018, the stats for whites went up and stayed in the 90 percentile vs. previous years were it was in the 70-80 percentile.

      So my question is, did our profession suddenly grow racist after 2018?

      At the bottom of each of these statistical reports published by the Bureau of Labor Statistics, you’ll find the following statement: “NOTE: Estimates for the above race groups (White, Black or African American, and Asian) do not sum to totals because data are not presented for all races. Persons whose ethnicity is identified as Hispanic or Latino may be of any race.”

      6
      • Baggins Baggins says:

        Are we sure these numbers are reliable? Some of these trends defy logic. Look at just one here, 2018 vs 2019, black appraiser populace. A rate difference of 8% between 10.7% & 2.7%. 8% x 84k appraisers (a convenient analysis as 84k appraisers constant between these two years), that’s 6,720 black appraisers whom straight up walked away from their careers? I’m not so sure. Unless they’re among the most talented and smartest among us, and got out while the getting was good, moved on to greener pastures? More opportunity I guess, wished I could have moved on by now too. Still though, you bring up an important illustration of data reliability. Measuring by race is perhaps among the most difficult and least reliable measurements possible. And latino’s may often be sandwiched in as the white demographic, if they’re like 1/2 & 1/2 or something. What’s the point of even looking at this data, it’s not all that reliable. I triple dare anyone to be an appraiser, if they want to volunteer for the abuse, have at it.

        3
        • Desiree Mehbod Desiree Mehbod says:

          Absolutely not reliable per their OEWS Research Estimates.

          “Reliability of the Estimates:
          https://stats.bls.gov/oes/current/oes_research_estimates.htm

          As with all data derived from sample surveys, OEWS research estimates are subject to sampling and non-sampling error. Sampling error occurs as a result of sampling from a population rather than recording the population’s true value; this is what sets a survey apart from a census. The variation that results from sampling procedures is given by a standard error. OEWS research estimates give the standard error of the estimate divided by the estimate itself, then multiplied by 100; this is known as the percent relative standard error (PRSE). For example, if the estimate of occupation A in state B is 50 and the standard error is 5, the PRSE of the estimate is (5/50)*100, or 10 percent.

          OEWS research estimates are also subject to non-sampling error. Non-sampling error can occur for many reasons, including the failure to include a segment of the population, the inability to obtain data from all units in the sample, the inability or unwillingness of respondents to provide data on a timely basis, mistakes made by respondents, errors made in the collection or processing of the data, and errors from the employment benchmark data used in estimation.”

          Percent relative standard error for the employment. Relative Standard Error (RSE) is a measure of the reliability of a statistic; the smaller the relative standard error, the more precise the estimate.

          For year 2021, PRSE data under the category ‘Finance & Insurance’ for property appraisers and assessors:
          AZ: 32.7%
          AR: 24%
          CA: 35.8
          CO: 19.3%
          FL: 19.3%
          GA: 42.9% …
          https://stats.bls.gov/oes/special.requests/oes_research_2021_sec_52-53.xlsx

          4
      • Desiree Mehbod Desiree Mehbod says:

        After looking at the information provided by the Bureau of Labor Statistics regarding appraisers, it looks like their 98% white appraiser estimate is no better than Zillow’s zestimate. Just a guesstimate fitting today’s narrative.

        4
        • Avatar Jim Anderson says:

          Zillow…I’ll bet that’s the same source they use to see if a property is undervalued.

          2
          • Baggins Baggins says:

            Awesome, let’s take the data in the other direction with this deviation error thing.

            108% of all appraisers are white. Who knows, and who cares? lol.

            And that’s what happens when you rely on the government for information.

            2
  2. Avatar John says:

    I see a lawsuit against ABC coming on….

    8
  3. Avatar Jaydee says:

    When did you stop beating your wife?

    1
  4. Avatar Timothy Thompson says:

    And, if the property is over-appraised, you exposed the poor property owner to predatory lending — you deplorable racist pig!

    8
  5. Avatar Eric Kretz says:

    This is a friendly PSA to update your E & O.
    The release of this hit piece seems perfectly timed with the current market slow-down.
    I imagine that more than a few phones will ring.

    8
    • Baggins Baggins says:

      That’s a tough one to speculate upon. I mean, sensationalized documentaries have a delayed to market response as they follow sensationalized more simple to put together news stories. Probably more of a coincidence. But yeah, the people affected by the coming market slow down will want someone to blame, and this will help them determine whom should be accused. Now appraisers are also responsible for a mis managed fed lending rate. lol.

      This one is aging quite well, so far. Sadly. Bonus news, reo is coming back and the fees are up.

      4
  6. Baggins Baggins says:

    Ever since prices starting spiraling upward where we are at, society has been quite disrupted. Be careful what you wish for. What exactly is wrong with lower prices? Appraisers measure existing trends, we’re not taking anyones potential away. Housing markets are complex and the appraisal is always subjective, just get another opinion already, dang. Today it’s we’re not getting as much value! Tomorrow if these activists get what they want, we’ll hear a brand new argument about how over burdened with debt they are.
    Become a buyer, and decide if you’d rather pay less or more for that exact same house. These arguments do not stand the logic test and the documentaries are severely imbalanced, biased, and poorly researched. Where is the local black guy whom is super appreciative to have paid $48k less on his purchase price? Those peoples interests dominate this particular segment of the housing market, the proof is right there and they’re showcasing it, while sadly misinterpreting the data they themselves are observing. I wish people around here would quit over paying because then we’d finally catch a financial break and be able to make a move. Counter this doc with an opposite one, all the people paying less and being appreciative of lower mortgage payments.

    7
  7. Avatar Jim says:

    Over appraised, under appraised…where did they get the data? Zillow? Appraisals require significant analysis to see if the property might be over or under appraised. Apparently, ABC has no problem reviewing appraisals without a license.

    These people need to get it through their head that the appraiser is the only party with no dog in the hunt. Why would we want to under appraise? I can’t think of a single reason. Maybe there is an appraiser out there that hates people of color and under appraised their property to get them. Seems to me that an appraiser like that would be uncovered fairly quickly. I’ve never met an appraiser like that.

    The fact that this business has few minorities, is most likely because minorities don’t apply for these jobs. I work for a small firm. We have had two blacks apply, both got jobs with us. What else are we supposed to do?

    6
    • Baggins Baggins says:

      https://www.nareb.com/site-files/uploads/2020/12/Biden-Transition-Plan.pdf

      via the NAREB group. Wonder if the documentary producer consulted them, probably not.

      https://www.nareb.com/what-we-do/

      Question; Has NAREB ever made a general response to these accusations? Their solution plan, well, don’t agree with all of it but also it’s professional and focused, re iterating so many points we’ve made on these boards in the past. If you want reform, turn to the lenders, their access and credit policies.

      2
    • Avatar Joseph A Fassari says:

      I reviewed an appraisal where the appraiser was judging the way they lived. Bed sheets thrown around, Bath towels. Messy kitchen. Other items which did not have to do with the job. We need more relevant facts. An honest review of the appraisals in question.

      0
      • Baggins Baggins says:

        Thank you Mr Fassari, appreciated. If there is to be such a focus, does it not stand to reason that the lack of qualification testing is also a valid focus point? When I tested through PSI for the license, passing all three tests first time around to CR (as there was also an apprentice qualification program at the time), passed all of them and there were no questions regarding such subjective principals. PSI, Mckissock, welcome to the club. If appraisers have been systemically trained to perform in a racist manner, who provided said training? Do these companies somehow believe they are insulated from said accusations? What makes them feel justified in not taking a firm defensive stance against the industry they supposedly serve and cater to?

        This pick someone to blame then frame the argument against them after the fact schtick is growing old. I reviewed an appraisal once where the appraiser being reviewed had apparently used photoshop to falsify his EO insurance included in his own appraisal report, among other egregious violations. That’s a real bad guy and in an effort to sweep the whole thing under the rug, the amc whom sent me that request cut me off in short order due to my discovery and subsequent interest regarding accountability follow up. Protect the interests of the client is the name of the game for ‘appraisal management’.

        Certainly, the anecdotal approach has limits. The current vouge is one bad apple means everyone else must be held accountable. This is a counter productive and illogical approach to a complex problem. The problems interpreted as inherent are often just simple to rectify issues which to date have yet to been addressed by those who’s supposed service positions are to sort out these very same concerns. Probably gallivanting around the world on taxpayers dimes to host seminars or who knows.

        1
  8. Other than on HUD/FHA Roster, my race is not captured nor reflected correctly. I am a minority male, which is not reflected in my surname. The cost in time and money to gain Minority Owned Business documentation has proven onerous for me which I consider discriminatory, as others are not required to invest in proof they are not a Minority.

    I have a birth certificate indicating my mother’s maiden name supporting my “minority” status.

    Other than HUD’s FHA Appraiser Roster, there are a paucity of opportunities to claim one self as an individual that is a racial minority, let alone provide support for such a claim. Business yes. Individuals no.

    Lenders, AMCs, Relo Companies, hire individuals. Not companies.

    All of the following apply to businesses:

    “OWN or OWN at least 51% of a business AND are a:

    Member, able to provide certified proof of:

    -National Minority Supplier Development Council (NMSDC)

    -Women’s Business Enterprise National Council (WBENC)

    -National Gay Lesbian Chamber of Commerce (NGLCC)

    -Small Business Administration 8(a) Program

    -National Veteran-Owned Business Association (NaVOBA)

    -US Pan Asian American Chamber of Commerce (USPAACC)

    -Disadvantaged Business Enterprise
    -HUBZone
    -The Port Authority
    -State and Federal Agencies

    OR Business Owners who are and able to provide :

    -A Service Disabled Veteran

    PLEASE BE AWARE: To be considered you MUST provide REQUIRED information such as certifications, expiration dates, and copies of specific documents. ANY survey that fails to provide this information will be not be able to be processed. Our customer’s Supplier Diversity Programs as VERY SPECIFIC in their requirements.

    IF NONE OF THE ABOVE APPLY TO YOUR BUSINESS please respond to this email message stating NO that you are not completing the survey..

    1
    • Avatar Jim Anderson says:

      I’m guessing there are many folks like you. A lot of people are also biracial. I honestly hate that we have to have this discussion. Dividing people up by ethnicity is contrary to everything I believe in.

      I seriously doubt that minority appraisers see things much differently than white males. Facts is facts…

      2
  9. Kathy Morton Bunting Hoey on Facebook Kathy Morton Bunting Hoey on Facebook says:

    The AI and AF have failed us at every turn. We Appraisers need to get smart and band together and start fighting back. As paying members of NAR , we have a national association that is equipped to help us if we pushed for real representation!!

    6
  10. Baggins Baggins says:

    Quite right Jim. The various people looking into this relatively obscure appraisal industry do not understand the realities of the working position for 1099 appraisers. There is no faster way to tank your client base and put yourself out of business, than to purposefully kill potential loans in the pipeline, especially so if one does this repeatedly as a habit or rooted in some indefensible bias.

    The notion that a working appraiser could just consistently devalue all these properties so lenders could not even make loans on them, or provide people biased advisement and seek to make their financial decisions for them, that’s an appraiser whom won’t be on the approval panel for long. Lenders provide this necessary check to balance (or an amc might also, downstream of the lender but still upstream of the appraiser selection), because lenders have a constant unyielding motivation to close loans. A lender whom was not attentive to faulty appraisal practices would be a lender soon shuttering and closing it’s doors. If appraisers have devalued properties as proclaimed, then the lender (and the lenders chosen amc if present) is ultimately holding the bag to bear a substantial portion of culpability and liability. They’d better get in here fast, because appraisers are not going to sit idly by and bear the brunt of these false and misleading accusations alone.

    Attention outsiders looking in to the appraisal industry; Most appraisers are insolvent and struggling to hang on, we do not enjoy percentage based commissions and our fees are often a minuscule 1/1000th of total loan value, if not far less. If you’re looking for a liability case and a payday, pursue the billion dollar lending originators instead.

    Racist appraisers? Give me a break. These people are misinterpreting the data they are observing. They’d be better equipped to logically and more accurately interpret this data, like a well qualified experienced real estate appraiser. What exactly is wrong with lower prices? You pay less taxes and borrow less from the bank. It’s not rocket science. I wish someone would drive my value down and relieve me of these excessive taxes, open up some doors of opportunity to actually be able to afford a better home. geesh.

    Remember, as home prices rise, the margin of price difference between home classes grows too. The end result of higher housing pricing is inevitably, reduced access potential. If we want to talk about pursuing the American dream and increasing home ownership rates, we need to support the idea that lower prices for everyone would benefit everyone in the long run. Appraisers are just innocent bystanders. We have not caused prices to go up, or down. That’s someone elses department. We merely measure the market. I’m going to call this one ahead of time, that watching this particular documentary is a waste of time.

    4
  11. Avatar Joseph A Fassari says:

    I been in so many neighborhoods in PA and NY. What I pay attention to is not the color. The numbers. The homes that are most similar and close in proximity which give more weight to any appraisal report. Being in the New York City or Long Island in particular, school districts often were our boundaries. If you had three homes two in close proximity and one much further away exposed to other influences and it’s the highest selling price. You are not going to give weight to that sale and would need to notate why there were differences. The neighborhood dictates value. I remember builders stating they are building homes in that area for that value. Yet those areas which were fifty miles away is a much different market. It’s clear that the individual on the trailer showed the bias for their color. What if the high appraisal was done incorrectly. More information should be shown on how the comparable sales. How far, same influences. Questions that are necessary than just looking at the final value estimate over $500,000 difference. My son just bought a home in a large city in Pa. I pulled up a Zillow map to show him the sales near him were not comparative to the sales selling a half mile away. Where there were two or three sales in his neighborhood the other location lit up like a Christmas tree with sales similar to his purchase price. Unfortunately, he was buying a home in an area they are trying to rehabilitate. I was just showing him his risks to buying in that area. Had to use Zillow since we have no national database to see MLS Information. I do not want to judge a book by its cover. Show us the real information ABC. Show us all the sales. Not one, not two or three. All the information. The things that will influence value. I never see appraisers coming in with the same values. try doing a divorce case. A different conversation yet I can show the buy bias they give to their clients instead of doing their job.

    2
  12. This is soo frustrating! Alot of people are mislead due to zillow and other “what is your home worth?” websites. Then they blame us, the appraisers. These companies should not be able to just mislead the public. IMO

    1
    • Baggins Baggins says:

      Yeah. All this attention to regulating human appraisers through the decades. An integral part of sound lending and FNMA’s own charter and mantra . Exit stage left with a silly work around that some automated valuation model generated by a computerization system is somehow more reliable, does not need regulation, even though the operational perimeters are still run and programed by possibly biased humans. Unregulated unlicensed uninsured humans at that who’s specialty skills are not that of valuators, but rather technical and coding related, large database analysis focused. If these tech people make a mistake, there is instant systemic consequences to their coding peramiter flaws which affects far more people than an individual appraisers mistake could ever cause. It’s a micro vs macro argument. Moves towards mass valuation and avm software tech will create exponentially more damages with fewer mistake allowances, liabilities which are not so easily reviewed and managed. Balance the future effort to clean that up vs dealing with the occasional human appraiser error. Question, who’s shouldering the liability insurance for avm generated valuations?

      The argument about mass data observation and subsequent bias in real property valuations by race is a flawed observational theory from the start. The observers have a new source of information, mass data and newer more advanced technology to interpret the results, from their own human perspective. In turn they’re observing societal trends regarding value of real property in such real property data repositories. Specifically in the parsed segment of data related to race and location, because that’s what they chose to review and parse data around. They observe one societal segment has a lower price point average for similar housing than another, in different locations. Reviewing only the data regarding a homes size and construction, ignoring all other proximate amenity and surrounding economic factors of the larger city and society where the home is located, perhaps also relying on rudimentary arbitrary data parsing such as census tracts as a way to allocate such massive data troves into smaller more simple to analyze segments.

      The data reviewers errantly state this is a lower value point which they have observed. Their obvious conclusion is, who’s purveying these values, it must be those appraisers fault this data disparity exists. Question, if you bought the identical car for 10,000 vs an optional purchase opportunity for the exact same car for $20,000, which purchase opportunity represents a better value? Which is preferable, to be tied up into higher prices for higher resale value and higher purchasing cost, or to have lower purchasing side cost and lower resale value, a lower pricing structure? These are personal buyer driven considerations, there is no right or wrong answer. Often the locals pricing structures are consequences of the larger market place relating to labor goods and material pricing. Some people prefer thrift and discount regardless of location. Some prefer to pay more for increased amenity which comes with higher taxation and area management costs. What exactly is wrong with lower prices? These are consumer decision trade offs related to purchasing decisions, employment decisions, credit management decisions, general economic opportunity by location, etc.

      The important counter argument is to illustrate how price is not the same thing as value. The story purveyors argument is for higher pricing, as if that is a good thing always and there can be no room for lower pricing also being an appealing market perimeter. Lower pricing provides necessary relief to those with less and fewer means. Value is the end point of peoples market participation, and their subsequent drive and desire to pay more, or pay less. The ability to afford any specific product offered to market, is a price related issue. That’s the employment, industry, regulatory, lending and credit departments, and the likes. Blaming the real estate appraiser for lower home pricing here vs there is the height of financial systems ignorance.

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  13. Avatar Fitz Turner says:

    I mean no disrespect to the modelers of the AVMS or to Zillow for relying on their AVMS, as an appraiser of many years I have yet to find a computer that can tell me if I want vanilla or chocolate ice cream, or want to go on the wild side and buy cookie dough today. Does the buyer want more acres or less grass to cut? I will admit that all and all the raised ranch, a two story farm house, a colonial, a split level, and a dutch colonial can all sell for the same price, unless they don’t. Then I have to figure out why. Its not a mean thing, or average thing, with 36 years appraising when it gets to the bottom line its a gut thing, also referred to as a qualitative appraisal, that I then have to explain so that the avm underwriter approves it for lending purposes, or the irs for estate purposes, or I have to explain it to a jury or the judges in a tax appeal.

    It is fun to look at the times when appraisers are correct, and the AVMs burn, unless you had stock in the biggest avm, Zillow. An article from
    https://www.wusa9.com/article/news what took Zillow Ibuy down? They relied on their AVMs.
    “they did not see the market start to cool” their AVM did not see the market cool, and they did not hire an appraiser for their purchase a house in a week plan. Zillow let down their investors, for a significant loss of market value. The housing crash “recession of 2008” the corporate greed did not want the thoughts of appraisers either.

    What ended Zillow Offers?
    Zillow sent us (Wusa9) this statement from the CEO:

    “We’ve determined the unpredictability in forecasting home prices far exceeds what we anticipated and continuing to scale Zillow Offers would result in too much earnings and balance-sheet volatility.” (Buying High and not selling)

    In other words, DelPrete said the pandemic housing market sent home values through the roof. Zillow and other iBuyers bought along with it.

    But then, in the summer of 2021, the market started to slow down. However, Zillow Offers according to DelPrete didn’t slow down with the market.

    “What happened is they ended up buying a lot of houses and overpaying for a lot of those houses because they didn’t see those brake lights,” he said. “They didn’t see the market start to cool.”

    Appraisers are independent individuals who train themselves to recognize the market value of a particular property.
    We appraisers are the buyer and the seller, we track the motivations of the moment. We are historians trying to recognize the changing markets. April 1, 2020, we were watching closings take place for contracts written before Covid and Maryland was closed for business. I called an agent and asked what is going on in the market, he said “in stead of showing my buyer 10 houses over a week, I showed 2, and they picked one because they did not want to go into any more houses. The seller said yes to the offer because they were not sure if there would be anymore buyers until the Pandemic was over. This was repeated by many, and we were off to the races, ending up with 4 times the number of sales above a typical year. I am not sure if the sellers sold quickly not knowing what would happen, at first the prices were level but then by August prices were rising as the inventory was being sucked up. The computer model would not know about this hot market until August after the settlements started to boom, and even then, where was the real price? and what was the value? Houses being bid up, multiple bids above the asking price. By spring 2021, there was no inventory, we had 1800 sales in the prior 12 months, and 22 houses on the market. There were offers on coming soon listings, before they were inspected, some without any conditions. And then all of a sudden agents were telling me, the buyers are balking at the prices…I remember this happened Y2K, the market stopped, and no buyers for 3 years. And FNMA thinks they can write a model AVM to project a safe investment for a bank. good luck with that. I do feel sorry for the buyers who moved to the country, the land of pleasant living, only to find out later there is no where to purchase a latte, the restaurants close at 9 or earlier. Some of our Comers are trying to sell and move back to the city, and the interest rate is getting higher, has the AVM put that in the model? The appraisers are following these changes in real time with real people in their markets.

    I have a copy of an article in 1987 warning that the computers will be the end of appraising. At the time my secretary would type both side of the 1004 form in 15 minutes on her Selectric typewriter. Only to have me find an error, and no white-outs allowed on the form. She would type it again. in the early nineties I added digital photos, better than polaroid or going to a photo lab and getting 3 copies of each picture. I hated sending the pages through the fax machine, an old single page, thank heaven for gmail. When the AVM can tell me whether I want a beer, wine or a mixed drink tonight, then perhaps I will begin to believe it can value a property. Happy Halloween!

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  14. Avatar Jim says:

    AVM’s can do okay valuing oranges in a bag full of oranges, but throw in some apples and they quickly get lost. Someday AVM’s will incorporate artificial intelligence. When that is perfected, AVM’s might do a credible job, but that is many years away.

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    • Baggins Baggins says:

      Artificial intelligence is a misnomer and synonym for ‘how skilled were the humans providing technical code’. Computers will never have a soul or the ability to comprehensively and consistently serve humans in the humans best interest. We must always maintain human control at the peak administrative level over all software systems. AVM’s are a reflection of such code. They work better on the market upswing.

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Lowballed… It Is Open Season On Appraisers

by Jonathan Miller time to read: 2 min
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