The Appraisal Profession Is Clearly Regressing

Posted by Jonathan J. Miller -Tuesday, March 13, 2012, 6:30 AM
3 Comments

A commercial appraiser I know passed along this press release from Bradford Technologies. We liked and used their MacAppraiser software back in the day when they were known as Bradford & Robbins and supported Macs. No disrespect meant to them specifically – I am referring to the state of the broader mortgage lending industry and their use and interaction with appraisers.

How on earth can the mortgage industry, who has successfully pushed the professional appraiser away from valuations through the use of appraisal management companies (who are more about bulk and cheap) than about professional quality, unleash a regression tool on the appraisal masses? Yes they will take a class or two to learn it, but this is way above the average skill set. The appraisal industry is still struggling with the selection of comparable sales.

Here are a few observations on this made by others on an advanced product like this:

This is just what the by-the-book residential appraiser ordered: a statistically supported valuation! A regression analysis that inputs all those hard to define variables like driving distance to a Starbucks, or economic conditions in Uzbekistan. We commercial appraisers have been stuffing reports with this garbage for years and look how much it has done for the reasonableness of our estimates.

…you can cut your overhead and staff…and sleep well at night-no doubt this is geared to the banking industry that will repeat all the mistakes of the past once the new generation of lending mavens is ensconced and they settle into their quota of what they have to lend for their P&L bonus pool (that’s the real regression analysis)

I have likened it to giving an appraiser a loaded gun.

Ok, got it?

BRADFORD TECHNOLOGIES BRINGS REGRESSION ANALYSIS TO RESIDENTIAL APPRAISALS [Working RE]

3 Responses to “The Appraisal Profession Is Clearly Regressing”

1. Marc Kushner says:

   March 13, 2012 at 9:52 AM

   I agree with the loaded gun analogy, but sometimes you need the tail to wag the dog. I would venture that the widespread adoption of more sophisticated valuation techniques will eventually result in a more sophisticated population of appraisers.
2. Jonathan J. Miller says:

   March 13, 2012 at 11:13 AM

   Thanks Marc – While I like my dog (if I had one) to wag it’s tail, I disagree with your point. I am a tech wonk like you but the quality of residential appraisers has been systemically altered by a confluence of legislation and bank lobbying power. It’s no longer an open market system where the combination of quality, price and service rule. It’s only about the latter two. If this were an open market system and financial institutions had financial incentives to use reliable appraisal services to mitigate risk, then I would agree. Cream would rise to the top and such a regression analysis would be competently handled.. However in this environment, its only about widgets. Throw a complex concept into the valuation process and you get garbage.

   Think AVM products during the housing boom. Nearly all were unreliable but it was a form with a chart for the file.
3. Marc Kushner says:

   March 13, 2012 at 11:24 AM

   Good point. I am definitely an outsider when it comes to the residential side of things, so I’m not as conscious of the realities of that operating environment.