Mamas, Don’t Let Your Babies Grow Up to Be Appraisers

Issue 07-16-17   |   Reviewer:   Michael S. Raisinghani, Ph.D.


Advances in big data at Zillow Group Inc. and elsewhere are helping automation creep into knowledge-based professions. Its algorithms are learning to capture not only the crude facts about values in the surrounding neighborhood but also more sophisticated price indicators, such as whether the living room has hardwood floors or the kitchen has granite countertops.

Freddie Mac, the government-sponsored company that backs many U.S. mortgages, in June 2017 started allowing automated valuations for some refinancing loans. It is a big force in the U.S. mortgage market that's allowing some loans to go through without an appraisal by a human being. Lenders increasingly are finding that estimates based on computer programs are giving almost as much protection as appraisals.

There is untapped data such as ambient street noise or airport flight paths, as well as remote and unique homes that do not have homes for comparison, that a human appraiser can factor into the estimates. The problem for human appraisers is that most Americans are not planning to live in geodesic domes, a building type that would be an outlier in algorithmic models and therefore throw off automated appraisals.

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