The November 30, 2018 Wall Street Journal has an article, “Home Appraisals Go High-Tech.” It seems that the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and The Federal Reserve have proposed loosening real estate appraisal rules so that a majority of homes can be bought and sold without being valued by a licensed appraiser. According to the article, the plan would increase the value of homes that can be sold without an appraiser visiting the property from $250,000 to $400,000. This does not sound like a good idea for the financial industry, or for those who buy mortgage-based securities. Nor, is good for the appraisal profession which has declined about 21% since the housing crash.
Appraisers adhere to a very strict code of ethics. They must follow proscribed formulas to value real property. The Appraisal Institute strongly objected to the proposed rule.
The Institute issued the following statement:
“The Appraisal Institute strongly objects to the FDIC’s proposal to raise residential appraisal thresholds,” said 2018 AI President James L. Murrett, MAI, SRA. “Congress just considered establishing a residential appraisal exemption and instead chose to enact a vastly different allowance involving appraisers in rural areas. This proposed rulemaking flies in the face of this action, and recreates the same type of environment that led to the housing crisis.”
By increasing the residential appraisal threshold from $250,000 to $400,000, FDIC would threaten the vital role that appraisers play in real estate transactions” said Murrett. “This action would undermine the crucial risk mitigation services that appraisers provide clients and users of appraisal services.
It is particularly dangerous when one considers the fact that a robot appraisal which is only off by a few percentage points can leave a homeowner with a home that is worth less than they owe.
As one who makes a living cross-examining human appraisers, I would like to know how do I test the credibility of a bot. I know! At trial, I will ask if the computer was plugged in.
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