Professional Opinions Can Never Be Replaced

Professional Opinions Can Never Be Replaced By Automation

Professional OPINIONS have value that can never, repeat NEVER be replaced by automation…

Earlier this week, George Dell‘s article titled “Why is Residential Appraisal in Trouble?” was published on AppraisersBlogs. Respectfully, George misses or misinterprets a few items.

  1. There has been zero evidence that an AVM produces credible approximations of MARKET VALUE consistently or with even an acceptable degree of variance. None.
  2. Like George indicates, an AVM is NOT an appraisal. By definition, it is not an appraisal. FIRREA required appraisal standards; NOT banking industry and TAF proposed alternatives. TAF is very far out of line giving AVMs any imprimatur of legitimacy.
  3. George postulates that FNMA (lenders) don’t want opinions. They want quantifiable results.
    • I don’t know that to be true. Certainly nothing in there guidelines suggests they are ready to forego professional appraisal OPINIONS.
    • BY definition (again) real estate appraisals are opinions. Not merely quantifiable facts to be found. Too many people/organizations including TAF, have forgotten this.
    • Real Estate Markets are imperfect. Especially residential real estate markets. That is because they are made up of human beings, who in turn are imperfect. Quantifying these imperfections in total will never work because they exist or become evident to varying degrees and varying characteristics in every single transaction. Go ahead and ‘quantify’ the positive or negative impact of the brightest lemon yellow living room you can imagine; or the hottest pink kitchen both nationally and then again in a 90% predominantly Latino neighborhood (Right, I know we can’t rely on racial or ethnic characteristics or stereotypes, but I live in such a neighborhood; and have lived in less ‘flamboyant’ color preference neighborhoods). Too close to prohibited considerations? OK, imagine a neighbor that keeps chickens in a residential (suburban) area. Chickens that stink beyond normal tolerance. Go ahead and quantify that impact ‘factually’ in say the old Clifton Heights annexed area of Redondo Beach, CA.
  4. FNMA, MISMO, TAF and a host of others have been trying to redefine appraisal since their inception. This despite the fact that they are not the only users or arbiters of proper appraisal techniques or even practices.George has spent a great deal of his life working at ‘perfecting’ or attempting to perfect data science applications. I think he is one of the good guys. Even though his work leaves less scrupulous characters like the operators of (former ZAIO), Clarocity and others something to hang THEIR versions of automation on.
  5. AVMs are seen as an alternative to the need to engage in price fixing between banks and AMCs for ‘valuation’ services (THAT work should be prohibited from ALL use except Business Valuation!).
  6. IF Congress intends that the American taxpayer is to be 100% off the hook against future too big to fail situations (including those like the current apparently successful Covid disaster emergency measures), then it really doesn’t matter if FNMA / Freddie Mac, HUD, & VA retain & utilize strong, principle-based real estate appraisal guidelines and rules. The self-serving industries can take their own chances and make their own rules… hoping Wall Street fraud doesn’t become more rampant than it already is.

Reminder to TAF and all others. Professional OPINIONS have value that can never, repeat NEVER be replaced by automation. Neither I nor most other people can tell you HOW our mind utilizes a life time of experience coupled with specific appraisal related skill to ‘know’ what the impact of certain market factors are… but the ‘fact’ remains that most good agents and appraisers “know” their markets even when they cannot be quantified.

I’m not suggesting we abandon tangible support for our opinions. On the same hand I AM suggesting that we do NOT abandon professionally developed opinions that have been proven over time to represent typical specific market perceptions…whether or not those opinions can be ‘quantified’.

Qualitative analyses are still recognized.

Our profession has been getting addicted to the sugar-laced data science kool-aid for far too long. It is a LIMITED USE tool at best. No programmer’s algorithm is capable of reproducing the neural network that God designed & created many eons ago.

Michael Ford
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Image credit flickr - Quinn Dombrowski
Michael Ford

Michael Ford

Over 28 years appraising all property types and interests, in Southern California real estate. VP/Chairman National Appraiser Peer Review Committee, American Guild of Appraisers, #44OPEIU/AFL-CIO. - Michael Ford on e-AppraisersDirectory

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10 Responses

  1. Greg Wilkinson on Facebook Greg Wilkinson on Facebook says:

    On the surface I agree that a good professional opinion should not be replaced by automation. The sad truth is not all appraisers are good and questionable values are assigned each day. I’ve been in the profession long enough to see the value game being played and we all know it happens. We are a drag on the process since they want it faster and cheaper. A 5 minute low cost AVM, while not perfect, in some cases is no better or worse than some of what appraisers take days to write and charge hundreds. I’m not advocating for AVM’s, just stating a hard truth. Automation is coming and I see the traditional appraisal model going the way of the Dodo bird and replaced with faster and cheaper data models for most appraisals

    • Scott Taylor on Facebook Scott Taylor on Facebook says:

      so true, you can review some appraiser’s work and feel bad for the buyer or owner that actually paid $500-$600 to the AMC for an appraisal of nothing. Canned comments, no real thoughts on the area or state of market values. And the appraiser feels he or she is not getting paid enough to do produce a credible report. There are too many hands that want a piece of the pie (appraisal fee). Too many hands wanting that pie make for a pie made with bad ingredients and has little taste.

    • Greg Wilkinson on Facebook Greg Wilkinson on Facebook says:

      Scott Taylor sadly some appraisers have sold out the profession and the lenders that want more risk analysis know that. Perhaps, just perhaps, a quality AVM could be better. Food for thought

    • Greg, bad appraisals happen, but they do not predominate. It may be difficult for reviewers to accept that but consider this;

      Most reviewers tend to receive review work from the same general clients. Those clients, in turn, tend to use the same appraisers repeatedly. They may also be the discounted or bargain-basement fee appraisers either lacking in experience or in too much of a hurry to meet ridiculous client turn time requirements to do good work (no excuses-just an explanation). End result? Poor work quality.

      I frequently run or check AVMs of property I have personally appraised or other competent appraisers have appraised. In many dozens of samples, I’ve found ONE that was credibly accurate (IF the house had actually been as small as public records indicated).

      Another notable example (done for litigation work) was in Van Nuys. Remodeled house ‘with issues’. AVM range was from $450k to $790K and the ‘middle’ one was $675k. The appraised value was $600,000.

      I’m fortunate enough to read appraisals from all over America. You’ve read my posts enough to know I can nitpick, but seriously most of what I’ve seen were credible real estate appraisals performed by conscientious professionals. Not perfect, but pretty good and in the Ted Whitmer vein of USPAP compliance, they were mostly solid.

      The ‘exceptions’ to this were in all cases except one, receptive to improving their own work quality. They had simply never been taught better; and testing for certification didn’t pick up on their shortcomings. THAT is TAFs fault!

      While AVMs, bifurcation, and waivers may allow FNMA to maximize the mortgage money pump for a while; right after the next economic disaster people will once again ask “How did this happen?”

      I studied the original FNMA CU patent application and process. I also carefully read and studied the FHFA White Paper on the comparative use of AVMs; regression (hedonic and forest methodology) and human appraisers. NEITHER demonstrate an ability to produce consistently credible results.

      FNMA and current GSEs may well convince themselves and their investors that “The Emperors New Clothes” are indeed a wonderful new suit of magnificence, but those who are honest with themselves will see they fail to cover the naked truth.

      I’ve already focused my personal business on complex assignments or litigation work where I don’t have to deal with FNMAs silliness or deception. I’m guessing that’s about 40% to 60% of all potential appraisal work in the future…with a high probability of increased litigation work once the intended users of bad valuations start using the lenders and brokers involved in their transactions.

      I appreciate that you are only the messenger, bringing unwelcome news for many. I don’t think full automation will happen, but the handwriting is certainly on the wall.

    • Avatar Alan Cooper says:


  2. Blake Kernea on Facebook Blake Kernea on Facebook says:

    Ah yes and yesterday automation was taking away my career. As if this wasn’t enough of an emotional roller coaster.

  3. Avatar Cotton says:

    As an active appraiser still completing over 10 appraisals per week I can say with almost 100% certainty that AVMs are absolutely flawed! My market consists of various style dwellings, horribly flawed county records and gentrifying/ changing neighborhoods. There is no AVM including fannie mae’s collateral underwriter that can replace an appraiser. If you’re looking for a ballpark number then sure you can say a home is at least worth at least 500K with an AVM however to obtain a true value you need an appraiser. Houses located next to each other can have many similarities however the sale price variances can exceed 300K. I consistently see the free AVMs like zillow or redfin overvalue or undervalue properties by as much as 50%. Now as far as bad appraiser’s go we are all aware that is a direct result of the AMC parasitic business model. Longer turn times and poor appraisal quality can be blamed directly on the AMC. It comes down to who exactly is willing to work for clowns like clear capital, proteck, valunet class, and xome. They rob the borrower, rob the appraiser and deliver crap work to the client. If the GSEs truly wanted to fix the appraisal profession they would remove the AMCs and be done with the bifurcation scam however we are all fully aware that those who work at the GSE’s at one time worked for the lenders and AMCs and the cycle of stupidity just revolves. A simple linkedin search will reveal most of the chief appraisers, valuation directors and collateral policy makers have all worked with each other. We are all being scammed and unfortunately nobody cares! The only defense we have is to refuse to work for AMCs, refuse to complete those scamming flawed bifurcation products and continue to do what we do best. Uphold public trust, develop well supported opinions of value and hope the industry sees some positive change! I have maybe 10 years left in this business. I hate to see it go to hell however the lies and manipulation are never ending! When a director at fannie mae tells appraiser’s bifurcation is the way of the future it is a clear sign they have friends in the AMC game looking to make a buck off our backs.

  4. Avatar TruthBTold says:

    What I’m experiencing now is an AMC that pays fairly, but they’ve decided to review all reports via a computer. Everything that I’ve addressed in the report that is “out of the box” according to their template guidelines comes back asking the questions I’ve already addressed. This happens frequently since most of the properties I appraise are high-end and complex. I know this type of system promotes apathy and an incentive to get the data that will pass that boilerplate template instead of what is actually happening in the market because most of my OG appraiser colleges have adopted this attitude. The obvious thing to do is to raise my fees, but the oversupply of appraisers in my market puts me at risk of not getting much work.The “suggestions” that are being made for comps are often directed towards a higher value, and there is a complete disregard for what I’ve concluded in the report, along with the supporting data .

    • TbT-You have already LOST whatever good client they used to be.

      I simply don’t accept computer reviews of my work. Period. Now, if they want to have a USPAP SR3/4 compliant appraisal review performed I’ll happily cooperate. THAT is the minimum acceptable standard for an appraisal review. No matter how they try to parse it by calling it something else.

      Tell them that they can either stop that practice; pay more money to put up with the BS OR just say goodbye.

      THEN turn their asses in to the state regulators for failing to comply with FIRREA and Dodd Frank and sit back and watch.

  5. Avatar don says:

    Theirs lots of bad paper out their and it is growing by the TRANCHES of CLO’s. these are not the traditional appraisers product, however traditional appraisals will pick up the pieces, the parts and if we behave ourselves we will regain recognition. Wall street’ as before is leaving a bad taste with investors, but wall streater’s out number us. and have better press. ??? What will happen tomorrow???


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Professional Opinions Can Never Be Replaced

by Michael Ford time to read: 3 min