AVMs run on data, your data. Has Freddie or Fannie paid for your data lately? Maybe indirectly. Don’t feed the beast!
There are a lot of discussions these days about AVMs displacing appraisers. Is this a tempest in a teapot, a kerfuffle over nothing, or is there a real threat to the appraisal profession? The answers to that compound question are, no, no, and maybe. Freddie Mac refers to their AVM as an Automated Collateral Evaluation or ACE.
According to Scott Rueter, Freddie Mac’s chief appraiser and director of evaluation, “An appraiser is part of a risk decision. If there is a subset of loans where we can make that risk decision without an appraisal by leveraging responsible innovation, then we should do that. Our charter calls on us to provide liquidity; it doesn’t say order an appraisal on every single property. While the ACE is something that goes counter to my appraiser DNA, I understand it, and for a small subset of the safest loans, Freddie’s goal is to better serve the public.” You might say that Freddie Mac’s ACE up their sleeves, for better serving the public, is an AVM. What could go wrong?
Rueter went on to say, “We will overwhelmingly still need to order, grade, score, and consume appraisals. Our data systems are modeled from appraisal data, so it won’t work without appraisals. That doesn’t mean we will need appraisals on 100% of loans.” So, there it is, are your appraisals feeding the machine? Did you give Freddie Mac permission to use your appraisals beyond the initial loan contemplated by the assignment?
What if every appraiser in America added a simple phrase to their appraisal report. Something like the following, “The data, conclusions, and opinions collected and rendered in this appraisal report are the intellectual property of the appraiser and provided to the client and users of the report for the exclusive use relating directly to the sale transaction contemplated by this assignment.” So, the lender, Freddie Mac, and Fannie Mae get to use the data for that loan, as anticipated. Would Freddie and Fannie just use the data for their AVM (ACE) without telling you, or perhaps without even realizing the use is unauthorized?
An interesting thought, but of course it would take organization to motivate the vast number of appraisers across America to work in unison to prevent the unauthorized use of their data in an AVM.
Other things appraisers might consider doing, if they feel they may lose some of their work to AVMs, is diversifying their careers. Consider adding certified business appraisals and/or building and home inspection services to your professional offerings.
We will explore some of your options later in a Food for Thought we call, “Diversify, Diversify, Diversify” as a way to ensure your financial future, and have greater control over your schedule.
Before I sign off, if you can take a minute and let us know what courses you would like to see developed, we will be more than happy to consider them and try to make them a reality.
Good luck and do good work, Rich
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