The upcoming UAD (Uniform Appraisal Dataset) was part of my presentation at the CRN (Collateral Risk Network) meeting at an appraiser conference in Las Vegas. The CRN panel was from a workgroup.
That workgroup effort is for lender and AMC “readiness” for appraisal acquisition (ordering).
This UAD topic is intertwined with the new integrated URAR by our GSEs (Government Sponsored Enterprises) – as both the UAD and URAR will arrive on the scene together.
I tried to stay on topic in writing my outline and PowerPoint slides. Things went sideways.
My creative brain kept following logical outcomes, and kept coming to “unintended consequences!” Each thought led to another thought. What if? What about? And Oh no!
The threat heard from appraisers is that this is yet another move by the GSEs to eliminate them. “If we just make the appraisers (and non-appraisers) data-gatherers, we can do the analysis in house.”
Everything is quantified. A long list of ‘subjective’ words are banned. Descriptive narrative is difficult. Inherent human bias can become embedded and righteous.
This “objective quantified” data approach does make standardized analysis easier. The “quants” win. The problem is that it can make subjective uncertainty opinion a hard number.
“Quant thinking,” unaided by appraisal knowledge and experience, says, “just give me clear data, and I will solve it.”
An example: If property condition is scored, say, 1 to 5 . . . A “3” in the past would have been “average” condition. Here’s the problem. A data collector may be out in the field, in a neighborhood of ‘nice’ homes, mostly in good to very good condition. (Which is ‘average’ for this nice neighborhood.) This demonstrates the issue of uncertainty and “relative reference.”
More possible “bad” outcomes? (We will also consider “good” and “unexpected” outcomes in coming parts on this the UAD and URAR topic.)
Some negative outcomes may include:
- Limitation of investigative property inspection, work scope, anomalies, and interaction with the lender client when unique situations arise. An example comes to mind – moving a hatbox on an upper closet shelf reveals a ¼” crack, leading to discovering a cracked slab.
- Precluded judgment elements, due to fixed, rigid data classifications. Intuition, experience, and situational awareness cannot be duplicated long distance.
- The “dashboard” nature of delivery will entail different information being presented (on screen) to different users. What is important for an appraiser reviewer, will be different to others such as an administrative reviewer, underwriter, administrator, risk analyst, portfolio analyst, and regulators. Possible meaningful conflict may go unnoticed.
- The interactive nature of the dashboard delivery systems may entail issues of “appraisal acts” or even bias by reviewers, underwriters, or investors. This because of the ability to “adjust” appraisal elements, or even judgments on screen (dashboard). This revised analysis, not by an unbiased, independent, impartial appraiser will emerge as a new challenge. This merging of risk decision and valuation will be a conflict. (More on this in part 2).
In part 2 of our UAD/URAR exploration, we will consider more possible unintended consequences, and some possible benefits to “data-centric” appraiser professionals and other stakeholders.
October 9, 2024 @ 3:46 am
The “threat” is certainly a valid concern of buggy whip appraisers. The users (GSE’s et al) are making rules and methods about what they are willing to use and rely on to make decisions that carry risk. If appraisers had the ability to be objective and not bend to influence, they could be more depended on, but we know how that goes… So the users of valuations are evolving what they want to use for considering values and risk in effect saying you can type a report for anyone else who wants one, but WE are willing to engage you to make us THESE things for a fee. Meanwhile, some appraisers are working away at the Macro valuation process with it under a Micro-scope developing code to fix it all but the users are saying, “thats nice” but WE want THIS:. The appraiser built solutions are great for those who service non GSE (et al) clients. An appraiser is a vendor with no voice to the G’s and if they do desire, can supply them the specified thing along with their digital signature & CE & experience & E&O, etc, but they get to supply a commodity for all that. For all the other clients, use the wonderful solutions in progress.
October 9, 2024 @ 12:39 pm
Why on earth would I allow anyone else to touch my appraisal? Make changes? The whole process, as outlined, is utter insanity.