Appraisals and ValuationsReal Estate

What role will the appraiser play in the future of valuations?

Experts weighed in at HW Annual

HW+ appraisal inspection

Editor’s note: This story was updated on Friday, Oct. 15 to include significant additional discussion points from the Sept. 27 panel and to better contextualize statements made about appraisal management companies. The headline was also updated to reflect the array of issues that were discussed during the panel.

After a pandemic period that saw the increased use of appraisal waivers and hybrid appraisals, experts at the HW Annual event on Sept. 27 discussed the future of the rapidly changing valuation industry.

Driving much of that change is a mountain of property and market data that is now available to lenders, investors and homeowners, and new technology that can help standardize and make sense of that data.

“Whereas previously, the appraiser was the trusted professional, kind of implicit in that is you couldn’t really challenge your appraiser,” said Lyle Radke, director of collateral policy at Fannie Mae. “Now, with all the data, lenders are able to see essentially the same kind of market information that the appraiser has, and that means that they are a lot more open to discussion about the interpretation of the data. And that changes the relationship and the role of the appraiser.”

One of the big questions facing the valuation industry is what combination of humans versus technology will generate timely, accurate and repeatable property valuations. In other words, do we need human appraisers at all? The FHFA’s request for input (RFI) on appraisal modernization in December 2020 seems to suggest that federal regulators are considering the question as well, and it generated a huge response from industry.  

The tone of those comments, Radke said, were generally positive about adopting new techniques and methodologies, but many of the details of how to put that into practice were still unclear.

For its part, Fannie Mae, which has been testing a hybrid appraisal model in a pilot program, envisions a “cascade of risk-based approaches,” in the future, Radke said.

Shawn Telford, chief appraiser at CoreLogic, noted that desktop or hybrid appraisals have been around for decades. ”Those are not new services to appraisers — they’ve been around as long as I’ve been appraising. But the application of how they might integrate into how the lenders operate and how the lenders have their automated flows and so forth — there’s just a lot to still consider there.” In light of that, the role of the human appraiser may shift from collecting data to doing more analysis, Telford said.

Martin Froelich, chief appraiser at Nationwide Appraisal Network, said that the proliferation of data means AVMs have gotten more and more accurate. “There’s a lot more data being presented. No longer are we just looking at the MLS or scraping from assessor’s records, but really looking at the full breadth of data that’s coming out there, so that we can determine a lot more higher accuracy in our valuations.”

The biggest challenge remains a lack of standardization.

Kade Clark, senior vice president of alternative valuation products, data and technology at Radian, said this was where technology could be most helpful. “You’re always going to have an opinion of value. But there’s things that you can help the appraiser with, in regards to adjustments. For instance, everybody has a different opinion on what stainless steel means in one home versus another, and how much of an adjustment you’re going to give. If you could standardize that by neighborhood and give them the ability to see that this is where the benchmark starts, then you have the capability of making a change from there, you know, whether up or down, depending on your knowledge of that market.”

Radke sees a lot of opportunity to make valuations more reproducible. “A lot of appraisers will tell you that what they do is an art form. And what they mean by that, is that it’s hard for them to explain rigorously exactly what they’re doing. And I don’t mean that in a disparaging way, but it’s just, there’s a lot of experience and intuition that goes into it, right. A problem with that is it’s hard to reproduce. And it’s hard to critique,” Radke said.

“So, what we aim to do with the end technologies, a big part of this is to transform the process from a subjective process where the appraiser exercises a lot of discretion, and anytime you have discretion and subjectivity, you can potentially introduce error or bias. And we want to replace it or encourage a trend towards greater objectivity, more fact-based.”

Radke noted that even something as basic as a house’s square footage has been a challenge to standardize. Fannie Mae’s UAD database allows it to compare multiple appraisals on the same property over the last 10 years, which shows a wide variance in that metric. For about 10% of these repeat appraisals, Radke said, the square footage reported has changed more than 10%.

“This happens routinely. So, we’re talking millions of cases of this happening. Now, you know, 80% of the time they agree within that 10%. But, the tail is pretty fat,” Radke said. Using technology “can ensure that the whole measurement is accurate to remove human error, remove subjectivity or discretion from that process. Because the wall is the length that it is — it’s not bigger or smaller, it doesn’t grow or shrink, right? So, can we use technology to gather those facts and eliminate the human error in that process? And the answer to that is yes.”

The role of appraisal management companies has also been a hot topic over the last year. The recent announcement by UWM that it would be taking appraisals in-house — eliminating the use of AMCs — only added fuel to the fire.

But Telford pointed out that two-thirds of appraisals still go through AMCs, which means lenders find they help streamline and simplify the process. And Froehlich added that the critical role of the AMC was to maintain third-party distance from those engaging the appraiser.

“It allows that appraisal to be heard to remain unbiased as best we can,” Froehlich said. “But also, it allows the AMC to control the conversation, so that way, if there’s ever an issue with appraiser independence, if there’s any undue influence being applied to that appraiser, the AMC acts as that that a stopgap for compliance.”

Radke said that Fannie Mae is agnostic on whether lenders should use an AMC or other fulfillment models, saying that the most important thing from its point of view is a focus on appraisal quality. The way lenders utilize an AMC could affect that quality, Radke said.

“So, AMCs can bring great benefit in that they can really concentrate expertise in terms of being able to understand that value question. But they can also be, you know, overly focused on operations, because it depends on what the lender engages them to do,” Radke said.

“We have 10 times more AMCs per capita than Australia. Why is that? So, what are all these extra agencies in the United States doing? I think the concern is an AMC could be used to streamline operations, but it could also be used to sort of circumvent good controls at a bank. And so, you have to think about what you’re doing with your AMC, how you instruct them, how you engage them. How do you measure their success? And if you’re measuring on value quality, go for it. Right. But if you’re trying to do something else, you know, think really carefully about that.”

Clark said the future of valuations, like everything else in the home-buying process, is going to be influenced by consumers, forcing everyone involved to be more nimble. “Buyers today are a lot younger. They’re more technologically advanced — they’re looking at their phones, they don’t really want to talk to people, they just want it to move really, really quickly. They just want to get through the process.”

In a different session at HW Annual, Kenon Chen, executive vice president of corporate strategy at Clear Capital, and Rachel Robinson, director, collateral policy and product development at Rocket Mortgage, discussed appraisal bias and how to use technology to combat that.

“It’s no longer okay for somebody to be walking around with a clipboard and taking mental notes,” Chen said.

Robinson concurred. “There’s so much room for error in the appraisal process and there is so much subjectivity,” she said.

The panelists did not specify what this technology was, or what barriers exist for it to be used today.

Chen came closest to addressing the second question, noting appraiser reforms may be “bigger than any one company” and would require competitors “being willing to partner together for the good of the industry.”

Appraisers are a ripe topic for scrutiny. The average age of an appraiser is 61 and the industry is more white and more male than any of 400 occupations recently examined by the Bureau of Labor Statistics.

But just as appraisers may be imprecise in their work, criticisms of appraisers can be equally fuzzy.

HUD, despite its task force, has declined to disclose data on the number of appraiser bias complaints it has received.

Freddie Mac recently publish data that Black and Latino-owned homes are, indeed, valued less than white homes in comparison to the abode’s contracted sales price. Chen noted that such a study was perhaps the “first of its kind.”


  1. While it’s certainly easy (and in some cases justified) to pick on the AMCs, Mr. Radke’s notion of an “agnostic” approach to the compliance function that they serve is precisely what led up to the crisis back in 2008. Now more than ever, in a time of extraordinarily rapidly rising home purchase prices, we need to have some kind of firewall to sit between the lender and the appraiser or we will soon find ourselves right back where we were 13 years ago. Would we all benefit from some common-sense reform to the current regulation? Absolutely! But let’s not throw away the baby with the bathwater.

    We should also not lose sight of the incredible work that the appraiser community has done over these past 18 months. When the rest of us were working from home and in lockdown, it was the appraisers (many of whom are of an age that makes them particularly high-risk for complications from COVID-19) who put their health and the health of their families at risk in order to keep our industry on its feet. If the appraisers had not done so, we would have avoided the delayed turn times and higher fees, but only because the boom that we are all experiencing and benefiting from would simply never have come to fruition.

    So yes it is certainly true that turn times are extended and fees are up. I can assure you that as the AMC (and thereby the messenger who must walk that fine line to balance asking appraisers to do more and asking the lenders/brokers to be understanding of the current challenges the appraisers face), we do not like either of those current realities. And there have certainly been cases where the appraiser or AMC have taken advantage of the current situation, and shame on them for it! But as an AMC owner who interfaces with appraisers all the time, I can unequivocally state that the vast majority of the appraisers are not out to harm the consumer. They’ve been working 6-7 days/week, 12+ hours/day, for 18 months now, and some have quite literally sacrificed their lives to keep this industry going.

    Ultimately, the solution is not 100% technology-based. It is going to require technology, plus expertise, plus oversight in order to work well for everyone. Here at NAN, we support both the appraiser community, as well as common sense evolution of the business. The two are not mutually exclusive.

    Mr. Radke expressed his belief that appraisers see their job as an artform. I would assert that appraising is neither an art nor a science. It’s a mix of both. And that is precisely why we need to have entities like AMCs involved in the process. At NAN, we believe in transparency and accountability. From our appraiser fees, to our AMC management fees, to our average turn times, everything we do is fully available for our lender/broker partners to observe in full and without exception. They say that sunlight is the best disinfectant, and I truly believe that if the lender/broker community will engage in meaningful dialogue with the AMCs, and that if other AMCs will in turn join us in a push for genuine transparency, we can work together in good faith to make this industry stronger. And if we do that, everyone wins… and no one is agnostic about winning.

    –Steve Sussman
    NAN (Nationwide Appraisal Network)
    [email protected]

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