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Changes Coming for Appraisers

March 7th, 2017 by Bill Collins Leave a reply »

Turning the Clock Back 3 Years to Understand Where We Are Now.

Appraisers have been hanging out in a fairly comfortable bubble over the past three years as mortgage appraisal volume has been strong and fees have risen.  We are all too aware that this is changing and that successful appraisers will be the ones who adapt.

When we began work on this issue of AppraiserNews, we were reminded of an issue from March of 2014.  That archived newsletter addressed many of the issues that are of concern to appraisers now.  Perhaps the only real change is in terminology with many now referring to “Modernizing Appraisals”.  It is our hope that “Modernizing Appraisals” includes “Modernizing Appraisers” and doesn’t become code words for leaving appraisers out of an automated valuation process.

So, let’s turn back the clock and see what AppraiserNews had to say on March 25, 2014.  It’s interesting to see the projections that have come to pass while others are emerging now.

What is Meant By “Big Data?”

We have seen “Big Data” used in a variety of contexts including the following.

IBM and Data Clarity Corp. website: “Big data is more than simply a matter of size; it is an opportunity to find insights in new and emerging types of data and content, to make your business more agile, and to answer questions that were previously considered beyond your reach. Until now, there was no practical way to harvest this opportunity. Today, IBM’s platform for big data uses state of the art technologies including patented advanced analytics to open the door to a world of possibilities.  Big data spans four dimensions: Volume, Velocity, Variety, and Veracity.”

The Social Media Association announcing an upcoming meeting: “If you have heard of the term “Big Data” you might think of it as one of those new scary buzzwords. Fear not, because the Social Media Association has brought in Tyler Roye of egifter. com to decipher Big Data for you so that it may be used for you and your company. Use Big Data to help build your brand and use all the information you gain from Big Data to propel your company forward”.

Forbes/Century Link (1/7/14 posting by Natasha Baker from interview with John Lucker (Deloitte Analytics Global Advanced Analytics & Modeling):
“Big data pundits have long been touting the technology as the Holy Grail companies need to more effectively manage their supply chains, understand their customers and control their resources. Yet, this year the hype began to wear off as companies struggled to derive value from their strategies, Lucker said.

Mr. Lucker indicated that the start of big data as a paradigm’ began two years ago but last year ‘…the discussion around value had an important resonance with people. People started asking, ‘What is this beyond the hyperbole of the term?’

Lucker said companies will re-focus strategies and processes and hit their stride due to greater maturity of technology tools and skills. He predicts that companies will ramp up their investment in big data, begin hiring chief analytics officers to lead the way, and invest in visualization tools…

In 2014, more companies will implement machine learning technologies, including semi-automated development of predictive and prescriptive models to increase productivity. Lucker said executives will forge ahead with greater awareness that algorithms have their limitations and need to be balanced with human rationale”.

‘A machine can detect certain things based on algorithms, but a human brain can sort out any inconsistencies in a way an algorithm can’t,’ he said”.

Appraiser and software developer Mark R. Linné, MAI, SRA, chief analytics officer of ValueScape Analytics, in a January posting on the Appraisal Institute’s website: “Big data refers to massive volumes of data … so large that it’s difficult to process using traditional database and software techniques. We have more data on virtually everything than ever before. The prospect will provide valuation professionals with more information to determine a property’s value”.

In a posting one year earlier on ValueScape’s blog, Mr. Linne noted that: “What will the future bring? Will it bring a pool of ever-increasing data, a plethora of tools and new ways of analyzing data? Futurists are already talking about Big Data-data about data. Appraisers have always been at the forefront of using multiple data sources to explain other data about property. That process is about to go into high gear with the greater availability of data, UAD and the transference of analytic techniques from other financial services sectors”.

Why Appraisers Should Concern Themselves With “Big Data” and “Data Mining”

The Mortgage Bankers Association News Link posted an article at the end of last year looking towards 2014 by Lisa Binkley of Platinum Data Solutions titled “Beware the Second Phase of UCDP”.  Ms. Binkley wrote:

“Lenders, look out. Thanks to the Uniform Collateral Data Portal, the world of appraisal quality control is changing again.

This time, there will be no formal warnings, no new regulations, and no new mandates. Appraisal scrutiny is simply going to get exponentially more rigorous and appraisal-based buyback risk is going to skyrocket. The reason? The GSEs’ appraisal evaluation processes have just been infused with big data analytics. That’s right–buyback risk has gone high-tech…

The UCDP is now raising red flags on appraisal-related issues that cause headaches at best, and buybacks at worst. Contrary to what some lenders mistakenly assume, the UCDP isn’t just another hoop or hurdle in the loan origination obstacle course. It’s no longer the new and unfamiliar tool that the GSEs are learning to use. The GSEs have put their people and processes in place. They have access billions of pieces of appraisal data and they’re not afraid to use them.

Let me give you an idea of what I’m talking about. It used to be that repurchase requests were limited to nonperforming loans. Not anymore. They’re now being issued on performing loans as well. As far as appraisal-based buybacks are concerned, lenders are being mandated to repurchase loans because of issues like inappropriate comps, unsuitable adjustments, misrepresentation of physical characteristics and more. These are all issues that the UCDP has made easy to catch. It does not matter whether an appraisal was intentionally compromised. The GSEs don’t make concessions for errors versus intentional fraud…

The UCDP makes it simple for the GSEs to scan any appraisal for issues like completeness, compliance and consistency, but it goes much deeper than that. The UCDP and its mandated data format have also given the GSEs access to a massive data warehouse, one that is filled with billions of pieces of data that have been collected since the UCDP was implemented in 2012. The GSEs can sort and analyze that appraisal data, and leverage it to detect questionable activity, not only for individual appraisals, but also for lenders’, appraisers’ and originators’ bodies of work. And they can probably do it in minutes…

So what’s a lender to do? Screen appraisals as though their lives depended on it”.

Does “Big Data” Offer Any Opportunities For Appraisers?

Mr. Linne, a supporter of the expanded use of statistics and new data analytics for more than two decades wrote in the aforementioned earlier report that:

“For residential and commercial appraisers-there simply has been no process improvement in workflow or analysis in a decade or more. I eliminate from this statement the continuing fine-tuning of appraisal software, which is nothing more than figuring out how to fill out a form more efficiently.  Filling out a form faster is NOT what this industry needs. What it needed simply stated-is more standardized data and the ability to analyze that data…

Appraisers are the local market experts. Data is ever more readily available. Tools are being developed and will continue to be exposed to the market over the next several years.

What should appraisers do? They should be open to the tools; they need to be open to new ways of thinking about values. They must step out of the form prison that they have been inhabiting for the last decade, and think about the value first-the form second”.

In my early days as a real estate appraiser, gathering data on comparable sales involved hours of scanning printed books of sale data (most without photos of the properties), viewing thousands of lines of data seeking to find a handful of transactions most comparable to the subject property.  The stunning technological advances made during the past several decades have given appraisers the opportunity to spend more time on analysis than on data gathering.  It is likely that future advances will be game-changing or “disruptive” as the techies like to say.

As Mr. Lucker noted earlier “…a human brain can sort out any inconsistencies in a way an algorithm can’t”.  Appraisers will need to do a lot of “sorting” in the future.  This sorting will not only involve the gigabytes of data encountered in the course of each new appraisal assignment but will require business decisions involving the proliferation of new technologies and platforms offered as a means to the end, a completed appraisal report.

A 1004 with three comparable sales has become a distant memory in the same way older appraisers remember Polaroid cameras.  Making the right choices from the plethora of new technologies, platforms and data assemblers in the future will be difficult but critical to the future of an appraisal practice.

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Back by Popular Demand: Random Tweets to Make You Smile

1) My goal for 2017 is to accomplish my goals for 2016 which I should’ve done in 2015 because I promised them in 2014 and planned them in 2013.

2) Thanks for the invite to your housewarming party but I’d rather not be forced to robotically say “wow” everytime you show me a new room.

3) Do what makes you happy, and be with who makes you smile.

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Rates & Dates

Freddie Mac and the Mortgage Brokers Association (MBA) reported mixed results in the movement of mortgage interest rates last week.

Freddie Mac and the Mortgage Brokers Association (MBA) reported mixed results in the movement of mortgage interest rates last week.

In their survey on February 16th, Freddie Mac reported that 30-year fixed-rate mortgages moved downward from 4.17% the prior week to 4.15%. They also noted that one year ago, the 30-year rate was at 3.65%.

Sean Becketti, the chief economist of Freddie Mac noted that:

“For the last 46 years, the 30-year mortgage rate has been almost perfectly correlated with the yield on the 10-year Treasury, but not this year. From Dec. 29, 2016, through today, the 30-year mortgage rate fell 17 basis points to this week’s reading of 4.15 percent. In contrast, the 10-year Treasury yield began and ended the same period at 2.49 percent. While we expect mortgage rates to fall into line with Treasury yields shortly, this just may be a year full of surprises.”

The MBA reported on February 15th (for the week ending February 10th) that 30-year rates with conforming loan balances ($424,100 or less) fell to 4.32% from 4.35%. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $424,100) moved up, from 4.27% to 4.28% and rates for FHA backed mortgages dropped from 4.16% to 4.12%.

Mortgage applications fell by 3.7% from the previous period.  Refinance applications as a percentage of all applications declined from 47.9% to 46.9%, the lowest level since June of 2009. The FHA share of applications was unchanged at 11.9% while the VA share declined to 11.8% from 12.7%.

Additional information from Freddie Mac can be found by going to: Primary Mortgage Market Survey PMMS – Freddie Mac

Additional information from the Mortgage Bankers Association can be found by going to their site at: Research and Forecasts – Mortgage Bankers Association

Ask Angie

Angie would first like to acknowledge the winner of her last contest: Texas appraiser Donna Jones of Donna Jones Appraisals. Donna was the first to answer correctly that Charley Chaplin was the answer to all three questions in the last newsletter: “I remain one thing, and one thing only, and that is a clown.  It places me on a far higher plane than any politician”; “This is a ruthless world and one must be ruthless to cope with it”; and “In the end, everything is a gag”.

Today’s questions:

Who said the following:

“What you get by achieving your goals is not as important as what you become by achieving your goals”.

“Wealth is the ability to fully experience life”.

“It is not enough to be busy. So are the ants. The question is: What are we busy about?”

a) Henry David Thoreau
b) Tony Robbins
c) Warren Buffett
d) None of the above

The first to respond with the correct answers wins:

One Free Regular Listing on

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We invite your responses to any of the issues raised in this newsletter. Please e-mail us at: with your thoughts!

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We really hope you find our newsletter to be informative!  If you have any input on future topics for discussion, please email me your questions and I will do my best to address them in the next issue.  If you want to look back at past issues you can see our archive at


Bill Collins, Appraiser Help Inc.

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