Electronic Appraisals The report also recommends that companies ensure that the underlying technology with automated valuation models (AVMs) does not include biased data. “While AVMs have the potential, if properly used, to reduce human bias and improve consistency in decision-making, they are not immune from the risk of discrimination,” the PAVE report says. “For example, the models may rely upon biased data that could replicate past discrimination or even data that could include protected characteristics, such as race, or very close proxies for them. Moreover, if an algorithm were to generate discriminatory results, the harm could be widespread because of an AVM’s scale.” By definition, an AVM should not have bias embedded in it, Johnson points out, but the companies that create those products already are scouring the underlying algorithms to ensure that is the case. Van Horn says he is concerned that there might be an overreliance on AVMs generally, especially as a means of reducing the prevalence and impact of appraisal bias. “While I understand and agree that AVMs have their place in the lending community, I also know there are risks associated with relying solely upon big data and believe that the most credible and reliable value opinions are those produced by properly trained state licensed or certified appraisers who have personally inspected the property being appraised,” he says. “It will take time, but it is my belief that the better solutions to many of the issues the appraisal industry faces today will rely upon the success of the initiatives encouraging a larger, well-trained and more diverse appraiser workforce.” Conolly suggests that the use of hybrid appraisals will grow nationwide because of the convenience and the heavy focus on data, including a floor plan and 3D scan that provides the appraiser a 360-degree view of the property, which means an appraiser does not have to meet with a property owner. “The appraisers can focus on and analyze the data,” she says. “And that helps create separation. Class Valuation’s chief innovation officer, Scot Rose, has been named a finalist in the Brookings Institute’s ‘Valuing Homes in Black Communities Challenge’ due to his forward thinking and work on digital appraisals that removes appraiser subjectivity from the inspection process and creates a repeatable, consistent data collection process.” The pandemic accelerated remote work in nearly every business, including the appraisal industry. That eventually led Fannie Mae and Freddie Mac to accept desktop appraisals permanently and to release guidance in March, about the same time the PAVE report was released, Conolly also points out. However, she expects that there always will be a need for a human touch. “I don’t think traditional appraisals will go away,” she says. “There will always be circumstances where there is a need for a full appraisal where the appraiser personally inspects the home. But I think the real growth will come with the hybrid appraisal process utilizing advanced technologies that allow for separation while also providing the appraiser and all downstream stakeholders with necessary and reliable data.” The PAVE report’s focus on the appraisal industry could create short-term public distrust of the profession, but longer term, public confidence will grow, Conolly and Van Horn suggest. “As an industry, appraisers are at a point where this public trust is being questioned on a large stage,” Van Horn says. “I believe that this is a time where we must address the questions head-on with humility, while also emphasizing the high levels of integrity and strong moral compasses that guide the vast majority of appraiser professionals who I call colleagues.” Johnson says a potential pitfall could be a tendency for overcorrections, where the initial intent of the project morphs into something different as the various agencies work through it. His experience with other projects has shown that to happen, so he stresses that it will be important for everyone to monitor the process through to the end. “I have seen that in past bills and past regulations—good people trying to do the right thing but overcorrecting.” REVERSE MORTGAGE / JULY-AUGUST 2022 31
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