The president of San Diego-based valuation data and technology provider DataQuick is defending his profession against what he says are misconceptions about the fundamentals of valuations and the current regulations of the industry.
John Walsh said a recent article in The Wall Street Journal misrepresents the relationship between lenders, appraisers and appraisal management companies.
“A very broad generalization is made when the article says banks now outsource to AMCs. Not all banks outsource to AMCs, some build the process and expertise to manage appraisers in-house,” Walsh wrote.
“Appraising is not a core competency of lending, however. The lenders we work with are outsourcing appraisals to AMCs, because of the technology we have built, the latest process innovations we incorporate, the subject matter expertise we always have on hand, and the quality assurance and accountability we maintain in our organization.”
Walsh said the claim the article's sources make that the use of AMCs leads to under-qualified appraisers conducting home valuations is not indicative of the entire industry.
“We cannot speak for all AMCs, but the appraisers we use are specifically familiar with the markets in which we accept appraisals,” he wrote. “In fact, a sound lender holds us or any AMC to very specific standards regarding proximity, competency, and experience.”
The Aug. 12 article cites academic and real estate sources who claim undervalued appraisals are leading to an increase in home sale deals falling through. The article also cites complaints that automated valuation models are flawed because of the recent decline in home sales. But Walsh said AVMs are a tool, not the sole source of valuation decisions.
“The article scoffs at the use of technology in appraisals. The Interagency Guidelines made it impermissible to solely rely on an AVM for most lending decisions. However, they can and should be an important part of determining the value of a property,” he wrote. “When combined with data, analytics and the experience of a seasoned appraiser, AVM serve a valuable purpose—providing an appraiser all the information available on a home.”
“Unfortunately, this article reflects a serious misunderstanding of the causes of the housing crisis, the lending process, and the current challenges in the housing market,” Walsh continued. “This misunderstanding is pervasive both in the press and in Washington, D.C. It is driving poor legislation and outrage at the parties least responsible for the current predicament. Now is the time for 'less heat and more light.'”
