Predetermined Value: Appraiser Influence

Appraisers are often faced with the "evidence" of value that is provided by owners or lenders who visit Automated Valuation Models (AVMs) or who receive 
broker sales sheets that display area sales on a dollar per square foot basis.  While these information sources provide a general indication of value, they are 
often not accurate. 
 
If you inspect a number of single-family residential homes you will find that their interior finish can vary dramatically even within the same subdivision.  
AVMs estimate value based on the the assumption that the interior of your home is the same as the others in your neighborhood.  That's a big assumption, and a 
wrong one if you have paid to significantly upgrade yours over the years. 
 
The problem for appraisers is that AVM estimates are cheap, accurate not so much - but definitely cheap, and owners and lenders want to believe tat their output is 
accurate.  I have heard stories from appraisers of lenders who influence appraisers to confirm the AVM estimate as true.  That's right, use the estimate 
as a predetermined value and just rubber stamp it. 
 
In my opinion It's wrong-headed thinking to force an appraiser to confirm an AVM estimate, but I believe that it has happened.  Predetermined values, based on an 
AVM estimate or not, are not the way the appraisal process is supposed to work. 
 
It has always been my opinion that AVMs may work well in static market states but they are doomed to failure in changing markets.  The data for the models is 
extracted from appraisal reports, so how responsive can an AVM be when the market is often changing in a cyclical fashion?  Could AVMs have forecast values 
changing when they dropped after the Savings and Loan failures in the late 1980's or in 2008 as the recession took hold of the real estate market following 
the failure of mortgage backed securities?  Probably not. 
 
Did appraisers fare better forecasting values prior to those downturns?  Not really, but would you rather rely on an AVM that's being fed old data taken from 
appraisals or the data supplied by the appraisers themselves that is the most current? 
 
For more residential or commercial appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email or via his business 
website Horizon Village Appraisal (http://www.horizonvillageappraisal.com) or "Contact Us" on the homepage of this website.

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