Jeremy Sicklick @JeremySicklick
CEO & CO-FOUNDER | HouseCanary
HouseCanary CEO weighs in on the latest Wall Street Journal article
As The Wall Street Journal noted in a recent story, “federal regulators have proposed loosening real-estate appraisal requirements to enable a majority of U.S. homes to be bought and sold without being evaluated by a licensed human appraiser.”
And as I stated in the article, this change would be a win-win for both consumers and lenders — reducing the cost of buying a home for consumers, speeding up home sales by days and potentially weeks, and eliminating human errors and bias from the home valuation process.
Regulators are specifically talking about raising the de minimis cap for evaluations, currently set at $250,000, to $400,000. A full human-driven appraisal is currently necessary for mortgage, home equity, and other real estate-related loans for more than $250,000, and this change would mean that amount will be increased to $400,000, leaving the door open for alternative appraisal products for loans for $400,000 or less.
Why would regulators want to do this? A couple of reasons: First, appraisers are humans — usually well-qualified and superbly trained humans who know their craft, but like any other person, appraisers have good days and bad days; their work is subject to bias and human error, much of which can be eliminated by basing a home valuation on deep data and analytics instead of one person’s opinion. “Although appraisals are based on criteria such as sales of recent comparable homes, they are sometimes more art than science,” wrote the Journal, adding that appraisers “came under fire following the housing crisis, shouldering much blame for inflating home prices at lenders’ behest.”
Second, there is a scarcity of appraisers operating in the country today. “Since the housing crash, the number of appraiser credentials in the U.S. has declined about 21%, to fewer than 96,000, according to a federal group that governs the profession,” noted the Wall Street Journal. This means that in rural areas or markets with a high number of real estate sales, it can be difficult to find an appraiser, which in turn means that consumers have to wait longer to close a real estate sale.
Since 2013, HouseCanary has been building home valuation products that minimize risk and improve the borrower experience — helping people make better real estate decisions by providing deep, relevant context about a home’s block, neighborhood, and surrounding market, including forecasts, rental yield and monthly rental estimates, and much more. I’m excited to see that the housing market is beginning to catch up with the work we’re doing. And I look forward to the possibility that more lenders, homeowners, and others involved in real estate transactions will be able to use the tools we’ve honed using some of the best minds in data science and artificial intelligence.