The Appraisal Blog

In the past I've written about my experience with AI in the appraisal industry.  You can read those posts here and here.  Generally speaking I am not convinced AI will be able to do what appraisers do on a daily basis.  They work okay in areas where all the homes are homogenous, but in older neighborhoods, rural areas, coastal areas, etc.  ... not so much.

But according to this article the County of Riverside's Assessor Department will now be using a product from C3.ai to analyze and assess the counties property values.

A couple thoughts.  1) In California we have Prop 13 which caps your assessed value at the purchase price plus ~1% per year.  So this tool will have little impact on the vast majority of homes.  2) Assessed value is not appraised value.  The assessed value is a part of a calculation that is part of a mass appraisal of the all the dwellings in the area.  So the accuracy and impact of a service like this is to be determined.

But I am watching closely!



https://finance.yahoo.com/news/riverside-county-california-selects-c3-130000348.html?guccounter=1

As the article states, AI (Artificial Intelligence) is all the buzz.  From creating writing reports to passing the bar exam, from realistic photos and deepfake videos.  It can write music and solve math problems ... is there anything it can't do?

I recently gave ChatGPT a shot. 

Will AI take the place of appraisers?  Probably not.  They may help with certain tasks in some areas ... but the existing AVM (Automated Valuation Models) probably aren't going to get significanlty better.

Here is one person take on what it can assist with.  I'll give a real world test run in my next post ...



https://appraisalbuzz.com/the-next-generation-of-appraisals/

The Appraiser Qualifications Board (AQB), which is one of the subcommittees of the Appraisal Foundation, and is responsible for establishing the minimum qualifications for real estate appraisers has approved the Practical Applications of Real Estate Appraisers (PAREA) program.  The program will be a departure from the standard Supervisor-Trainee model that has existed for decades and will allow another pathway for individuals to enter the profession.  The Appraisal Institute appears to be the first organization with an approved PAREA program.

I am all for modernization of the appraisal process and training, but think that this might not be necessary if the AMC model was retired.  I have trained many individuals to licensure over my career... but don't do so anymore.  The AMC's require the supervisor appraiser to inspect every property with their trainee and makes no financial sense.  It didn't used to be that way!

So we will see how this pans out ... 



https://www.appraisalinstitute.org/aiparea/

FNMA has relabeled their Appraisal Waiver program ... Value Acceptance.  Apparently they felt that the new phrase more accurately reflects what happens behind the scenes... which means they run an AVM (Automated Valuation Model) and then the lender and/or borrower can accept the value ... or not.

In conjunction with this they are rolling out Hybrid Appraisals.  These assignments will have unlicensed Property Data Collectors conduct on-site physical inspections of the subject who will then provide that data to a licensed appraiser who will conduct an actual desktop appraisal.

I've been told the goal is to speed up the appraisal process and reduce cost.  Neither of which will happen.  You will still have to schedule an inspection, and now you will be paying to contractors, as well as the AMC for the report.



https://www.skylineschool.net/post/fannie-mae-just-created-a-new-real-estate-career-with-their-new-appraisal-waiver-program

James Heaslet, Chief Appraiser for the VA discusses the AAPP (Assisted Appraisal Processing Program), ANSI Standards, and PAVE (Property Appraisal and Valuation Equity).



https://www.workingre.com/whats-new-at-the-va-interview-with-vas-chief-appraiser/

The CFPB is implementing procedures to allow borrowers to request a Reconsideration of Value (ROV) if they believe their appraisal is inaccurate.  I agree with the rational and intent behind the policy, however, I also believe this will open a can or worms creating excessive complaints and work with little to no gain for borrowers.  Appraisals are not conducted in a vacuum.  There is a layered review process in which multiple people must agree with the appraisal report before a loan is finalized.  For most conventional and FHA loans there is the Appraisal Management Company (AMC) who reviews the appraisal and submits questions/corrections,  Then the appraisal is given to the lender who also reviews the file and can also submit questions/reviews.  Typically somewhere in the process an AVM (automated valuation model) is run and compared to the appraisal.  So after all this ... the homeowner is going to have the ability to challenge the appraisal?  They will provide "comparable" sales that they want to be included in the report that just closed a little while ago.  Typically a little while ago to a borrower will have occurred 12+ months ago.  Or just down the street ... 3 miles away.

This is not good policy.  It will further erode public trust in appraisals and drive appraisers out of an already thinning workforce.


https://www.consumerfinance.gov/about-us/blog/mortgage-borrowers-can-challenge-inaccurate-appraisals-through-the-reconsideration-of-value-process/

George Dell discusses potential modernization of the appraisal industry on his blog ...



https://georgedell.com/appraisal-reform-whats-missing/