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  • What is an automated valuation analysis? An automated valuation is what you get when you buy a report from us. We prepare our automated home valuations through a continuously updated nationwide data store of billions of records, we gather specific data on the subject property and then estimate the value of that property in real time. Our valuations are based on comparable sales data, a price and time comparison and a complex valuation engine. Our reports are the most accurate in business, second only to a physical inspection and opinion by a qualified professional. An automated valuation is not an appraisal and no human interaction or inspection is involved in such an analysis; however banks and lenders routinely use such analysis to check the accuracy of appraisals in what is known as the appraisal review process. Further, appraisers and realtors use the same type of information when conducting valuations and market analysis.

  • My comment: OK, so now they've finally 'come out of the closet and 'spilled the beans in the fine print! Let's break it down line by line.

  • a) "We prepare our... valuations through a continuously updated nationwide data store of BILLIONS of records, we gather SPECIFIC DATA on the SUBJECT PROPERTY..." The 'billions of records and 'specific data on the subject property phrases certainly give the impression that these people know every important detail about the subject home. It's as though they're practically living there themselves or are relatives of the property owner!

  • b) "Our reports are the MOST ACCURATE in business, SECOND only to a physical inspection and opinion by a QUALIFIED professional." They write that their appraisal reports are the 'most accurate BUT they are 'second to a 'qualified professional'. Well, now wait a second because I'm getting confused again from the mixed messages they're sending. What happened to the 'billions of records and 'specific data on the subject property phrases? So now we've got the real facts that they put in the written caveats about their service to CYA. They're now admitting that an appraisal report done by a trained, human appraiser with two eyes and a brain is better and more accurate then their computer database with 'billions of records and 'specific data'. I wonder what the chances are of their salesman verbally explaining this when they are marketing their electronic appraisal services to banks, lenders, consumers, and real estate professionals?

  • c) "An automated valuation is NOT an appraisal and NO human interaction or INSPECTION is involved in such an analysis..." There you have it. Straight from the horses mouth! 'An automated valuation IS NOT an appraisal...'. That is a very clear and direct statement in the caveats or fine print. Moreover, it's coming from a service company that some lenders and consumers use since they're led to believe electronic appraisals are as good as a human appraiser's report.

  • d) "...however banks and lenders routinely use such analysis to check the accuracy of appraisals in what is known as the appraisal review process. Further, appraisers and realtors use the same type of information when conducting valuations and market analysis." OK, this I will agree with. This is a valid purpose and logical reason to use electronic appraisals. '...routinely use such analysis to check the accuracy of appraisals in what is known as the appraisal review process. An appraiser, lender, and real estate professional has a fiduciary responsibility to do the best job they can when obtaining information to present a report to a client. Using electronic appraisal data to ASSIST with an appraisal report, a mortgage loan, appraisal review process, etc. is perfectly fine, and makes a lot of good business sense. An appraiser has to rely on many different data sources to make sure their market value estimate is accurate and reliable. As an appraiser, the data available from an electronic appraisal service can certainly assist you with your report, but it cannot do the report for you; nor can it replace you!

 

  • How is the automated valuation analysis limited? The automated valuation analysis is not an appraisal and no site inspection is completed as part of the process. Excess depreciation or wear and tear as well as property upgrades which are not contained in public record information will not necessarily be reflected in the automated model and the analysis is limited in discerning these types of conditions.

  • My comment: OK, here they're giving you the straight talk without the hype - in the written caveats. They again state that an electronic appraisal, '...is NOT an appraisal and NO SITE INSPECTION is completed...'. That's a key problem. It's NOT an appraisal and NO site inspection is completed. Even the electronic appraisal services that do send someone by for the exterior site inspection of the subject property, do NOT send their inspectors inside he subject home to evaluate the interior. Why is that a major problem with the accuracy of their appraisal reports? Well, I'll let the electronic appraisal service answer and tell you why: 'Excess depreciation or wear and tear as well as property upgrades... will not necessarily be reflected... and the analysis is limited in discerning these types of conditions.'

  • How is our service different from an appraisal or comparative market analysis? A licensed appraiser certifies to the estimate of value in an appraisal based on a physical inspection during an onsite visit. The automated valuation model is designed to duplicate and take into consideration the same functions as an appraisal but is limited in the things it can discern as noted above. A comparative market analysis is a "guesstimate" of value based on the particular level of expertise possessed by the realtor preparing the analysis and this may lack critical information not available to the realtor at the time. A comparative market analysis lacks the complex valuations analysis that you get when completing a valuation through electronic appraisal services.

  • My comment: Here again, the problem is stated.

  • a) An electronic appraisal report '...is LIMITED in the things it can discern as noted above...'. Yes, it is a limited tool that can assist in decision making and estimating market value. But it cannot replace a human appraisal report for accuracy.

  • b) 'A comparative market analysis is a "guesstimate"... and this may lack CRITICAL information...'. This I agree with. A Realtor CMA is only a ballpark range of the market value estimate of a property done by someone that does not have any experience as a licensed appraiser.

  • c) 'A comparative market analysis lacks the complex valuations analysis that you get when completing a valuation through electronic appraisal services.' Yes, I agree. An electronic appraisal may be better than a Realtor CMA. However, an electronic appraisal, and/or a CMA, are definitely NOT more accurate than an appraisal report done by a trained human appraiser!

OK, so let's recap here. As you can see they tell you three times in their written caveats that an electronic appraisal is not an appraisal!!! They didn't write it once or twice, but actually three times! Clearly, they're trying to CYA and notify people about that very important fact. So my next question that I would like to ask these electronic appraisal companies is: If it's not an appraisal, then why do you market it and call it an "Electronic Appraisal"? That is a misleading name because it gives people the impression that you're doing an appraisal report. The reason the National Association of Realtors doesn't call a CMA a Comparative Market Appraisal is because they are well aware that a CMA is not an appraisal and it would be misleading to the public if they used that term.

In 2004, there was a State that actually forced these electronic appraisal services to change their names and remove the term "appraisal" from their service name!! This was because the State appraisal laws do not allow the use of the term "appraisal" for any report or market value estimate unless the work is done by a State certified/licensed appraiser. A computer database cannot be a certified/licensed appraiser, but a human being can. As a result, the electronic appraisal services had to remove the word "appraisal" from their names when doing business in that State. It would be great if more States or the Federal government enforced the same laws for the use of the term "appraisal" so consumers would not be misled.

I'm not trying to discredit electronic appraisal services (you probably find that hard to believe after reading this section). Electronic appraisals can provide valid and useful services to the real estate profession. I'll repeat what I said earlier to stress the point I'm trying to make: If electronic appraisal information is used to ASSIST someone, then that is a valid purpose and logical reason to use electronic appraisal services. '...banks and lenders routinely use such analysis to check the accuracy of appraisals in what is known as the appraisal review process. An appraiser, lender, and real estate professional has a fiduciary responsibility to do the best job they can when obtaining information to present a report to a client. Using electronic appraisal data to assist with an appraisal report, a mortgage loan, appraisal review process, etc. is perfectly fine, and makes a lot of good business sense. An appraiser has to rely on many different data sources to make sure their market value estimate is accurate and reliable. As an appraiser, the data available from an electronic appraisal service can certainly assist you with your report, but it cannot do the report for you; nor can it replace you!

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