Traditional real estate appraisers are disputing the practices of data companies that use publicly accessible property information to create “automated valuation models” (AVMs), which many lenders are now using for home equity transactions and even primary mortgages.

Appraisers have disliked AVMs for years, in part because they take away business. They also argue that AVMs aren’t very accurate, especially when price patterns are changing rapidly.

But lately appraisers have been particularly upset, claiming that data companies are stripping key information out of their appraisal reports without compensation or permission. In particular, they accuse FNC Inc. of Oxford, Miss., one of the largest real property data companies, of extracting information and reselling it to lenders.

To add insult to injury, appraisers say, they are forced to pay FNC $5 per report when they send valuations to lenders in electronic form using FNC's online platform, AppraisalPort.com.

A spokesman for FNC says the company only extracts information that is in the public domain — not proprietary narrative analysis.

Appraisers urge home buyers to ask for a copy of the full appraisal to make sure a licensed, professional appraiser did it. "Nobody should pay $400 for an appraisal that was done by a computer somewhere,” says Patrick Turner, a senior residential appraiser based in Virginia.

Not only is that a violation of federal rules banning "markups" of real estate settlement services, "it's just another form of stealing," Turner says.

Source: Washington Post Writers Group, Kenneth Harney (01/19/07)