Are Automated Home Evaluations Too Risky? – From your Friendly Vancouver Mortgage Broker

Are Automated Home Evaluations Too Risky? – From your Friendly Vancouver Mortgage Broker

How do automated evaluation systems such as emili which is used by CMHC, or Excel, which is used by Genworth, compare to the efficiency of human home appraisers? This Vancouver mortgage broker examines this interesting and challenging issue in more detail.

This is a debate which has been ongoing for some time now. Recently, in a couple of articles printed in the Globe and Mail, there has been a certain amount of criticism levelled at CMHC’s emili system.

The articles have claimed that some automated home appraisals have been overvalued, and some examples were presented in the article to support these allegations. Is the criticism being levied against emili substantially justified?

On the other side of the coin the overvaluing and undervaluing of home appraisals has also been a complaint that has been equally brought against human appraisers as well, and there are plenty of examples which supports the other side of the argument.

Automated home appraisals were incorporated back in around 1996 with the inception of the CMHC emili system. The idea was to allow the appraisal system to work faster so decisions could be rendered quicker. Also, the automated system was cheaper to use than the human based appraisal method.

One of the biggest critiques aimed at the automated system is that these systems operate in a somewhat obscure background. But, just how justified is this criticism?

One of the biggest difficulties is that there is simply insufficient data to properly support or to quantify one system over another. In simpler terms how does one properly compare the efficiency of human versus electronic appraisals?

And, another problem with the article in the Globe and Mail is that although it focuses on some examples of over evaluation, it does not adequately consider or provide examples of under evaluation of appraisals either. Both types of errors clearly happen with the human appraisal system.

Other considerations also need to be considered as well. Both CMHC and Genworth realize that their automated systems, like any system, are a work in progress and amend the programs to continually counter any errors.

We also don’t know the degree or extent of these errors when comparing the human appraisal system against that of emili or Excel to really make an informed decision. We simply don’t know or understand the ratio of errors which might be found in either appraisal methodology.

A lot more research is required before anyone can appreciate if there actually is any cause for concern. We also need to consider whether the value or low cost of using these convenient instant systems makes it better to have them to use versus to not having them at the mortgage broker’s fingertips.   

Many people say we should examine the problem in more detail because the automated system is using our tax dollars. If the problem is severe, then some even suggest it could have an impact on the economy, but this be more an overblown opinion and should not cause people to panic.

As a Vancouver mortgage broker, we can tell you that these automated appraisal systems do save a lot of time and money, and there is plenty of basis for this viewpoint. So, it will be interesting to see where and how this most recent article will have any impact on this heated debate.