I watch with much interest as everyone is attempting to write automated review tools. Millions of dollars are being invested in the technology. Microsoft Word can tell me when I have a misspelled a word and sometimes correct a grammatical error. But it can't tell me when I have written something that is idiotic or not factual. The same would be true of automated review tools.
First let me back up a minute. They really shouldn't be called review tools. They should be referred to as Quality Control tools. Anyone who believes that a machine can read an appraisal report and identify a credible appraisal report is truly fooling himself or herself. Please note, I wanted to write "themselves" but Word corrected me.
Let's face it, our current forms are not very sophisticated. And while we live in a world of big data, real estate data is just not that great. While residential real estate is the largest asset class in the world, we have very little information about the underlying collateral of real estate loans. Since we just suffered the largest financial collapse in history, you might think we should all focus a bit on collateral risk.
Here we are, four years since Dodd Frank. Has appraisal quality improved? Have we removed the misaligned incentives for those in loan production to be removed from the appraisal process? Are appraisers independent and compensated fairly? I think the answer to each of those questions would be a resounding no. I am unsure if anyone knows how to find a solution or if they have yet to recognize that collateral values are an integral part of the housing finance system.
The big cosmic question is how do we get to a more credible appraisal report?
I have a very simple solution. In fact, every stakeholder could implement it without much effort or fanfare. All it takes is political will… someone or most everyone just has to step up and do the right thing.
Drum roll, please… hire a competent, ethical appraiser and compensate them fairly and you will get a credible appraisal report. Yes, it is that simple.
While everyone is focused on the next generation, we have a "fire in our living room". I am sure the appraisal community is worried about the here and now. There are a number of things to repair in the appraisal process the most expedient, inexpensive and effective cure would be to focus on the "people part" of the appraisal process. Engage the best appraiser and everything else will fall into place.
Joan N. Trice is the founder and CEO of Clearbox, LLC, publisher of Appraisal Buzz, and host of the annual Valuation Expo, the largest conference for the valuation community. Joan also hosts the Collateral Risk Network, a members-only group of more than 300 dedicated chief appraisers, collateral risk managers, regulators, and valuation experts who are focused on resolving the many challenges facing our profession.
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