Federal Regulators Propose Allowing More Houses To Be Appraised Automatically
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A group of federal agencies has proposed new regulations that would significantly affect how homes are appraised.
The Federal Reserve, the Office of the Comptroller of the Currency and the Federal Deposit Insurance Corp. have submitted a proposal that would raise the threshold price of a home that would require an in-person appraisal from $250K to $400K, the Wall Street Journal reports.
While they acknowledge appraisers' value in protecting against fraudulent home selling and lending prices, the organizations said in a statement that their in-person visits can increase the money and time spent on a house.
Advances from PropTech startups like HomeCanary and eVest Technology have increased the sophistication of automated valuation systems, which people like eVest founder and CEO Dan Summers believe is a crucial cost-saving advancement.
"It’s crazy when you have Netflix, Amazon, Google and self-driving cars, but still have old-fashioned appraisers charging you a left lung for appraisals — it’s nuts,” Summers told Bisnow in mid-November.
But despite the increasing viability of computerized appraisal, the lack of a human in the process could easily lead to an overlooked issue with the house that would significantly affect the house's worth.
“We still would prefer a human being doing the appraisal,” Moody’s Investors Service analyst Lima Ekram told the WSJ.
Automated valuation software is currently unregulated, adding to concerns over the potential for abuse. Regulation for the software is a requirement under the Dodd-Frank Act, but the Federal Reserve, Comptroller and FDIC have yet to introduce any such guidance.