Federal regulators are looking to pave the way for computers to replace humans in an increasing number of home value appraisals.
The Office of the Comptroller of the Currency, the Federal Deposit Insurance Corp. and the Federal Reserve proposed altering regulations related to when a home must be assessed by a licensed appraiser, the Wall Street Journal reported. Currently, homes valued at $250,000 or less can be bought and sold without an appraiser visiting the property. The federal agencies want to increase that threshhold to $400,000.
Such a change could prove lucrative for upstart property valuation companies that use algorithms, artificial intelligence and drones to value homes. If these rule changes had been in effect last year, roughly 214,000 additional home sales, or some $68 billion worth, could have traded hands without an appraiser.
In the proposal, the regulators noted that “the cost and time of obtaining an appraisal can, in some cases, result in delays and higher expenses.”
Not everyone — especially the human appraisers — are happy about the possible change.
Some are worried that relying on automated valuations could introduce new risks into the $10.7 trillion home loan market, because such valuations are largely unregulated.
Regulators have yet to propose standards for automated valuations, even though such controls were required under the 2010 Dodd-Frank Act. [WSJ] — Kathryn Brenzel