Johnathan Lansner of the OCRegister.com has written an excellent, and balanced, piece on AVMs (Automated Valuation Models) , the roles the play, and why they've become popular.
Lansner writes: "We've become relatively comfortable with a banker gauging a potential borrower's financial reliability with a computer analysis of the person's bill-paying habits."
"But what about home prices undergoing a loosely analogous statistical review?"
"Math wizards at both small entrepreneurial outfits and giant real-estate companies are pushing what are dubbed "automated valuation models." These computer programs try to replicate work done by human real-estate appraisers - combining a home's characteristics and nearby sales trends into a guesstimate of the residence's value."
"Many traditional appraisers abhor these computer programs, and numerous industry Web sites mock the models, including one calling them "The Big Lie." Folks in the mortgage trade fret about the limited track record of computer models and what they say is suspicious accuracy. Others worry that pressures on traditional appraisers might have inflated home values."
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