Appraisal Process Sees More Changes in 2015
Fannie and Freddie have a new appraisal “review” system that will take effect January 26th. It’s called Collateral Underwriting, which is a new management tool, an algorithm that will require up to 20 different comparable homes to measure the appraisal that has been done. This second review is designed to minimize the risk of a faulty appraisal.
Yes, the real estate community is in a tizzy. Here are some criticisms:
- An algorithm is a bad replacement to a human appraiser. Many can see all kinds of problems and errors with this approach.
- This will add hours of work to each appraisal. I can’t imagine an appraiser doing this extra work for free, so it stands to reason that the cost of an appraisal will go up.
- The software doesn’t break down neighborhoods, so it’s inevitable that comparable homes won’t be true comparables…leading to wrong results.
- Without much imagination, we can imagine appraisers cutting to the end results desired, by choosing the lowest comparable homes, to minimize the potential problems and extra work.
After basically re-creating the appraisal industry, Fannie Mae and Freddie Mac still don’t trust them. We’ll come back with updates when we see some outcomes.
The Highland Group
Frederick, Md 21704