The topic of appraisal and valuation bias has been in the news frequently over the last few years. Reports of minority homeowners being given insanely low appraisals for their homes have made headlines in mainstream media, and the Biden Administration has even formed a taskforce to combat valuation bias.
Traditionally, a property valuation is conducted by a certified appraiser—a practice that appraisal industry leaders acknowledge has contributed to bias and discrimination. However, computer-based automated valuation tools have also received criticism for perpetuating bias. Most recently, the Consumer Financial Protection Bureau (CFPB) announced it intends to issue a proposal to regulate the use of automated valuation models based on the concern that models may rely on biased data, resulting in inaccurate valuations.
You may be wondering: if we can’t trust either people or machines to be unbiased, how can we ever know the realvalue of a home?
For real estate agents who are devoted to the best interest of their clients, this is a troubling conundrum. But while computer generated valuations may not be perfect, they offer a better chance of removing bias from the equation.
First, let us recognize that automated valuations are not natively biased. Predictive models themselves, unlike humans, lack emotion and therefore inherently lack the associated biases. Yet, it is important to understand that models are only as good as the data they ingest. There is a long history of humans undervaluing homes in minority neighborhoods dating back to the 1930s when redlining became a standard practice. This has had a profound effect on housing values and data in certain neighborhoods even to this day. And so, even when using automated technology, biased data can impact values if not remediated.
The good news is that with advances in data engineering and modeling, we now have the technology and tools to begin correcting these issues. Some solutions lie in tools designed to identify and eliminate bias in the historical data set, and in creating fresh data that is free from human bias.
Several of these solutions are embedded within geniusprice technology, a one-stop property intelligence platform provided by Red Bell Real Estate, LLC. This next generation pricing technology empowers agents to better understand the value of homes and allows them to generate personalized reports in a fraction of the time it takes to create a traditional comparative market analysis (CMA). The geniusprice technology leverages sophisticated modeling and artificial intelligence (AI) that work to enhance market data and deliver more equitable, less biased, and accurate conclusions:
- Computer Vision AI – Groundbreaking computer vision AI analyzes property images in real time to assess the condition of a home without the need for human input. We can now automate what was previously performed by an appraiser and eliminate unintentional human bias.
- Machine and Deep Learning (ML/DL) – Sophisticated algorithms not only analyze data to look for and identify patterns, but also auto-correct and refine their conclusions based on new and changing data. In this way, machines can learn to exclude inaccuracies and focus on the most relevant information that consistently delivers the most accurate valuations with less bias.
Using these methods, geniusprice technology has the potential to help reduce valuation bias. AI and automated valuation solutions may not eradicate human bias in the broader housing industry, but they can go a long way to giving agents modern tools to ensure their buyer or seller is receiving a fair value.
The homegenius family of companies, a Radian Group Inc. business segment, combines an array of title, valuation, asset management, and other real estate services into a full-service ecosystem. homegenius offers innovative experiences from search to close, enabling lenders, investors, consumers, and agents to benefit from integrated and personalized solutions leveraging advanced technology and the latest developments in data science, machine learning and AI. Learn more at homegenius.com.
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