Big Banks & the Fleecing of the Appraisal Industry

Big Banks are tricking appraisers into providing the very information they perceive they need to put appraisers out of business. There are countless new programs coming out and made available to appraisers, so they can fine-tune the formulas and help to make the programs better. These programs attempt to provide support or what banks like to call “Proof” of appraisal adjustments. Once appraisers figure out the best methods possible for doing this (although there are no exact formulas for a system that doesn’t provide exact adjustments, ever), then bankers think they will have just enoughdata to make their case for technology over traditional appraisals.

It’s a brilliant plan and they are
getting away with it daily as appraisers, so anxious to stay in the process,
play it anyway the big banks require. It’s the Golden Rule in play and once
again, appraisers get the short end of the totem pole.

If you think about who is providing the
majority of these new forms and programs designed to help support adjustments,
many are owned by companies who also just happen to own automated valuation
companies. Convenient right? It’s all smoke and mirrors, again, and the big
banks convince government regulators, and they try to pass it on down the line,
all the way to consumers. “Trust us and trust our technology. We’ve got your
best interests at heart.” Said the wolves to the sheep.

The two biggest myths of our industry
are that AVMs can provide accurate and consistent home valuations. Impossible
task, regardless of technology. It’s easy to prove if you really want to see
the answer. And second, that every appraisal adjustment can be “proven” by statistics.
Again, impossible task. It’s like thinking we can replace all surgeons with technology.
Some decisions have to be based on experience and cannot be performed by a
computer or technology. It requires experience, guided by wisdom. There are
some fields where a human brain is required to make subjective decisions and appraisal is one of those industries. That’s
why appraisers are required to have so much education and training. It is not a
math only business. You have to learn trends and patterns, and what “comparable”
actually means. That’s the biggest problems with Realtors®, lenders, and AVMs. They
don’t understand what homes are truly “comparable” sales and often end up being
guided by the highest priced sales and owner’s opinions, rather than based on
fair market data. AVMs select comparables based more on proximity rather than comparability
and a computer may take forty sales in a certain area and average all the
information. That is NOT the way to price real estate and it cheats consumers
into lower or higher values. Appraisal is an art not a science and no computer
can ever replace the human brain. No matter how many new programs or algorithms
they come up with, it’s a task that has been tried for decades and failed
miserably. You can’t make orange juice with lemons. Technology and real estate
data just don’t mix.

Big banks want us to trust one of their
employees to judge a home’s fair value. No training, no oversight, and talk
about bias! Whatever value the bank wants is what they get. Where’s the danger
in that? It’s time to let appraisers do their jobs and stop letting big banks
try to eliminate appraisers from the mortgage lending process. The AVM and technology
revolution is a scam with only one possible outcome. And, that outcome is only
good for one group, and it’s NOT consumers.