The Death of the Residential Appraiser
Those that know me on a personal level and that have worked with me over the years have had to hear me talk endlessly about the pending death of the residential appraiser. The other day I eluded to it at the end of another long post. I figured it’s time to share the thoughts with everyone.
First off, I come from a long career in corporate America and spend 20 years working in everything from manufacturing, order administration, marketing, sales, and engineering. One thing always held true no matter what function I had was the need for standardized data. By having standardized data it allowed deep analytics to be run. It just never works well with non-standardized data since there were too many variables.
When I first started appraising in 2003 one thing was very clear. Every appraiser said things in a different way and every way could be interpreted in a different way. I always called this the grey area of appraising since some did this to actually not say much but meet the requirement of saying something. Much like the form filling appraisers with canned comments that are the same in all reports they write.
I know, I know, there has been talk for decades of getting rid of appraisers. The talk came and went, nothing changed, and we are still here. But that was before UAD and standardized data.
UAD came about a few years ago and caused all residential appraisers working for lenders to report the majority of aspects of all homes in a certain format. It didn’t matter where you were, the format was the same. That meant all reports must look the same now. Now there is standardized data. This is good for them but bad for us.
Since they rolled out UAD they also rolled out CU. CU compares your data to other appraisers data and when it finds disconnects it warns the lender and the lender might talk to the appraiser. They are using this data to not just double-check us, but to scrub this data and to also to run, re-run, and fine-tune AVM’s that are far more powerful than they have ever been.
Standardized data is the key.
While the rules are to now use an appraiser for most lending transactions there is overwhelming evidence that we, as a profession, are not very good at what we do. There are still far too many that rubber stamp contracts, stretch walls, use sales from better markets to prop up value, or simply make stuff up. Happens every day. We have done little to improve the profession as a whole and they know this. We add time and cost to the process. We are human after all.
I project that in the next 5 years they will have very good data on the majority of homes across the country. They will also be fine tuning their AVM’s to build somewhat credible “on the fly” valuations. The data will be there. The system is being built. The wheels are in motion. Once the next collapse happens they will say “see, appraisers are still not helping. Why do we need them?”. Once we start to come out of the decline our very own CU data will be fully used to replace us. For homes that don’t have data on, they will hire someone, maybe even an appraiser, to verify particulars on the homes so their systems can project value. I guess some of us will be “runners” so to speak.
There will still be a need for private appraisals for the time being. Eventually though that will be replaced as well. Just the natural course to take.
Of course you say that the computers can’t always get it right and don’t understand the nuances of some local markets. You are absolutely correct. But then again, some appraisers don’t know those either so they are not much better. In the end we are removed, no more waiting a week for a value, no more costs for us. It’s just how I see things being down the road.
Anyway, my thoughts on the profession.