a la mode sought by press for pro-appraiser view

a la mode had a chance to express the pro-appraiser view in an article in the July 18 National Mortgage News. The piece, “AVMs Said More Immune to Deal Making Pressure Than Paper,” was about a new research paper that touts the benefits of Automated Valuation Models.

“The study found that biases in full appraisal value opinions are pronounced and consistent with the allegations of transactional pressure placed on appraisers by originators,” the article said. “While AVMs have a lesser tendency to overstate values, they are not as accurate as full appraisals.”

The article quotes Matt Barr, a la mode’s Communications Director: “We’re pleased and a little surprised that the paper admits appraisals are more accurate than AVMs.  Beyond that, it doesn’t tell us much worthwhile because it isn’t getting to the issue of what causes ‘transactional pressure.’ No appraiser in the history of humankind has ever inflated a value on his own, without pressure from a client….

“The issue is that you have people with a commission stake in the loan – they don’t get paid at all unless it closes, and they get paid more the higher the loan is – ordering valuations.  The REIPA paper paints a picture of a world where these brokers and LOs have two choices.  They can choose from among a number of different appraisers, trying to find one who will ‘play ball,’ or they can use one, single, carved-in-stone, bright, shining AVM number.  That’s not at all how it works.

“In fact, regardless of the tool, someone with a commission at stake will sometimes try to get the highest ‘number’ possible.  There isn’t one, single, authoritative AVM, there are several available on most properties.  The whole concept of ‘cascading values’ is that you get to run a number of different AVMs on a property until you get one that’s ‘best for you.’ Which means ‘confidence score,’ wink wink, not highest number.

“The solution to this isn’t to change the tool, but the user.  Federal regulators have been warning banks not to let commissioned salespeople order valuations, and that’s a very positive step.”