Channeling Deep Blue Versus Garry Kasparov in Home Valuations It’s time to standardize how real estate appraisers make their adjustments

Channeling Deep Blue Versus Garry Kasparov in Home Valuations It’s time to standardize how real estate appraisers make their adjustments

Source: Corelogic blog

Excerpts:
It might be time to reengineer the process appraisers use to make adjustments to comparable homes. The current approach does not appear to be defensible.

To investigate this issue, we obtained a set of relocation appraisals from an appraisal management company and conducted our own analysis. (As background, for relocation deals, two or more appraisals are ordered at the same time; and the two appraisers often choose an identical comparable property).

For the experiment, we:
1) Obtained a set of relocation appraisals—two appraisals on each property prepared at roughly the same date for which the appraisers choose an identical comparable.
2) Looked at the adjustments made to that comparable and noted discrepancies in the amount of the adjustments, and even the direction (positive or negative).

It’s time that we re-engineer the process so that appraisers can focus on the things that may benefit from the human element, such as defining the neighborhood and selecting comparables. But for the pieces of the puzzle that need to be standardized, like adjustments to comparables, we should be harnessing the power of our machines. Too much is at stake to maintain the status quo. Appraisers would benefit by being allowed to focus on things they do well; loan applicants would benefit from a less-costly, streamlined process; and lenders would benefit from valuations that were standardized and more reliable.

Read the full article and see how they analyzed the data, with graphs etc. at:
http://www.corelogic.com/blog/authors/michael-g.-bradley/2014/10/channeling-deep-blue-versus-garry-kasparov-in-home-valuations.aspx?WT.mc_id=crlg_131016_0OGMz#.VFERojTF8zr

My comments: of course, it would be very helpful if appraisers had access to all the Big Data being compiled by Fannie and Others. Fannie will be looking at appraiser adjustments but don’t offer any help from their Big Data to appraisers making the adjustments.