A Robot Might Appraise Your Next Home Sale
WASHINGTON – Federal regulators have increased the value of homes exempt from a human evaluation by a licensed appraiser from $250,000 to $400,000. This means a majority of U.S. homes can be bought and sold with an appraisal performed by a drone and a computer algorithm.
Supporters of the change – including financial institutions and state banking regulators – believe lenders and homebuyers will save money by not having to hire a licensed appraiser, and that real estate deals can be closed faster.
Critics, however – like appraisers and consumer advocacy groups – say that the change introduces new risks to the mortgage market, and that computer models and other technology cannot replicate a trained appraiser’s judgment, human senses and experience.
Jeremy Sicklick, CEO of HouseCanary Inc., which offers computer-generated property valuations, says, “Software is eating real estate. You’re seeing the beginnings of the machines outperforming humans in terms of accuracy.”
Sicklick’s company charges $59 for its 20-page valuations, versus $375 to $900 for traditional single-family-home appraisals.
Rule official soon
The new rule has been approved by the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency. It will go into effect once the Federal Reserve approves it, which is expected. The threshold hasn’t been adjusted since 1994.
U.S. Census data and the National Association of Realtors® indicate that more than two-thirds of U.S. homes sell for $400,000 or less. According to regulators, about 214,000 additional home sales, or about $68 billion worth, could have been made without an appraisal if the higher threshold had been in place in 2017.
Unclear on impact
Because most home loans in the $400,000-and-less price range are bought by Fannie Mae and Freddie Mac or guaranteed by other federal agencies, which currently require valuations by licensed human appraisers regardless of home value, the immediate impact of the new rules could be limited.
Source: Wall Street Journal (08/24/19) Dezember, Ryan
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