The Long and Winding Road…
Many lenders who rely heavily on AVMs and BPOs have stated, “AVMs and BPOs have improved significantly over the past five years, but appraisals (more specifically appraisers) have not evolved during that same time period.” From the lender’s standpoint AVMs and BPOs make a lot of economic sense. But, is their statement correct? I would say, yes and no.
Individual appraisers are not rewarded for going the extra mile, it is in fact the opposite. Appraisers are more often than not reprimanded by lenders when they attempt to evolve and improve their work. First, they are not paid for any “extra” work; so their first reward for evolution is to make less money per hour. Second, the lender is required to review the appraisal, so new techniques by the appraiser means the reviewer has to understand and take time to review these new techniques. The bottom line is that these same lenders who criticize appraisals for not evolving are the very force that retards appraisal evolution and promotes the status quo. Appraisers have been slowly learning more about statistical techniques, and a lot about market cycles. I expect that this will translate into more reliable and more useful appraisals in the near future.
I personally believe that about 25% of appraisers are movers and shakers and would like to elevate their game. This number may seem low, but you have to consider that over half of the profession is above 50 years old. In addition, appraisal fees have been too low for appraisers to invest any time in “research & development”. This means that guys like me are relied on to provide new automated products. A third problem is that none of the appraisal associations are fostering an environment for appraisal evolution to occur at a pace that is rapid enough. For example, while the Appraisal Institute is still the prominent appraisal organization in terms of advancing new technics and methods for valuing properties, they have turned down all of my attempts to work with them to promote regression analysis. Their reasoning is that I would be promoting my own appraisal product, the Regression Plus. The fact is that I created the Regression Plus because no one else was working on a regression product that would enable appraisers to move in that direction. It is like we are all trapped in a 15 foot pit and I gathered some tree limbs and constructed a ladder (as no one else was doing it). However, when I produced it for us to be able to climb out of the pit, those in charge said that we cannot use my ladder as I would be promoting my own product. So, here we continue to sit trapped in this pit while I have a ladder in my lap. Now, keep in mind that while I am critical of the AI in this situation, I am a member (MAI and SRA) and a promoter of this association. I encourage all of you to join and earn a designation as well.
This leads Automated Valuation Technologies, Inc. (AVT) to it continued goal of elevating the appraisal profession in terms of new valuation techniques and methods via automated tools. These tools have to be automated so that they are efficient, enabling a better value opinion in the same amount of time as traditional appraisals. AVT maintains that having the best regression related products possible is the main goal. However, because the phrase, “build it and they will come” has not proven to be true AVT is now trying to identify and market directly to the 25% percent of appraisers identified above. So, look for more advertisements and marketing. The first stop in marketing is the AVTtools.com site. We have introduced a new media for explaining what our products are. This medial is the Xtranormal platform which allows us to use a cartoon format to present the product information. It is very engaging, but still a cartoon, which may not appeal to everyone. Take a few minutes and watch these presentations called “Frequently Asked Questions”. In addition we have opened out forums to a public format. We hope to make this the premiere forum for discussing regression and other statistical methods.
The 2013 product editions will be ready some time before the end of the year. There are some significant updates:
All of the products have been updated to run on Windows 8. They now require version 4.0 of Microsoft’s DotNetFramework where they required version 3.5 to be loaded before.
The Regression Plus:
An automated system for scrubbing data has been built in. No matter how good and fast you are at scrubbing data with Excel you will now be able to scrub the data several times faster.
Many statistical outputs have been added; standard errors, confidence intervals, Variation inflation factors, and more.
A qualitative sales adjustment grid has been added.
i. Comp selection is aided by the Fusion identifying the most recent sales, closest sales, most similar sales, and the sales that sold at a price consistent with the market model.
Improved mapping features have been added.
Improved narrative margin controls have been added.
The USL has been updated to meet the 2012-2013 USPAP.
As always I appreciate your patronage to AVT and I commend your dedication to self-improvement.