Do Not Lose the Appraiser in the Appraisal Review Process

DEC 4, 2012 2:02pm ET
Comments (2)

Appraisal review is often a point of tension in the appraiser-AMC-lender relationship.

Oftentimes, appraisers don’t feel like reviews are processed by qualified real estate property valuation professionals.

Of course, automation will play a critical role in the future of this industry, but there are ways that technology adoption could both hinder and help this relationship, and the outcome of an appraisal review.

The ultimate goal of an appraisal review is to allow a second set of eyes to review the report, much like a doctor’s second opinion, and then render an opinion to justify or qualify the original report. A review is performed to confirm that the appraiser’s conclusions in the original report are accurate, or to mitigate the underwriter’s perspective. 

In order for this to be effective, qualified appraisers must be employed that have the appropriate levels of competency within the subject market area. In this sense, technology cannot possibly manage compliance or analyze the narrative of the appraisal report, a crucial component of a successful appraisal review.

USPAP has very specific guidelines outlining a true appraisal review.Essentially, it’s all about human oversight to qualify a compliant, accurate appraisal report.The guidelines state that experience and competency in the subject market area are must-haves in the review process.

Again, technology cannot be the eyes of review and opinion; a qualified, competent appraiser is the only method that can reach accuracy. While there are areas that technology could never touch in an appraisal review, there are certain components that it could support.

The standardized classification system implemented with the UAD makes it easier for technology to make inroads into the process. This will make analyzing the report more universal, which opens doors for technology providers to offer review assistance with added detail from a review perspective.

The standardization of classifications from the UAD will be the largest driving factor behind improving the appraiser-AMC-lender relationship and the use of technology could facilitate this improvement.

Both Fannie Mae and Freddie Mac are pushing forward with automating the appraisal review process, though it has not quite reached maturity.

This higher focus on streamlining reporting will put more control in the hands of the GSE’s and regulators. If a technology solution is included, it should mirror and utilize the same technology that is used during the original appraisal process in order for the review to be done properly.

Portions of the review process can be automated, but not all. It will always be critical to have human oversight into what is a very complex moving target of regulatory compliance. The narrative must be reviewed and understood in order to reach a fully developed review appraisal report.

Automation simply cannot take over this process completely with the same level of accuracy or success as human oversight.


Frank Danna is president and CEO of Appraisal Logistics.

Comments (2)
It appears that becoming 'automated' is the "magic" solution to getting what we want- i.e., correcting what we have. I would argue it will be impossible to fully automate the review process. Under the USPAP appraiser competence requirement, (as an appraiser and as the reviewer) and lack of bias are the primary requirements for a good review. I cannot imagine a program that could verify either qualities- competence or bias. But of course, if the government approves the program for all federally regulated organizations,it would be an easy matter to solve. Just ask the reviewer: Appraiser Certification - Are you qualified to review this report IAW USPAP requirements? Answer Yes or NO. Were you unbiased in arriving at the final opinion in relation to your review? Answer: Yes or No. As you see, the problem is solved! (sic) Now, the automated software can do what automation does - check spelling, insure all squares are marked, calculations are correct, and the Statement of Opinion has been signed and the date is correct. Exactly what is the problem? (sic) Every federally related department has just agreed with the above comments...
Posted by Ronald B | Friday, August 01 2014 at 3:29PM ET
I agree 100%. Automation is not the fix all for everything. I want a human being doing my appraisals that is familiar with the trends of the area in which the subject property is located. This is even more important in the appraisal review process! Let the automated program catch the misspelled property addresses, and arithmetic errors. At the end I want an experienced set of human eyes looking at the end product and with an objective mind. To my knowledge no artificial intelligence program is as of yet capable of doing this (I hope). Yes, computers that can think for themselves....the very thought scares me to no end.
Posted by Steve H | Friday, September 25 2015 at 1:33PM ET
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