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Technology Can Aid, Not Replace, Appraisers

February 17, 2022 by Appraisal Institute Staff

This post was written by Appraisal Institute President Jody Bishop, MAI, SRA, AI-GRS

New and exciting technology is all around us: we can speak to our cars, use robots to clean our floors, and control our heating from an app on our phones. Big data and artificial intelligence have changed how integrated our lives are with tech. At the Appraisal Institute, we’re hardly tech phobic, in fact, appraisers use technology frequently in their daily work. The typical software packages used by appraisers leverage an assortment of technologies and resources that help appraisers analyze local markets, including practical applications of “big data.”

We’ve seen several companies, however, developing software intended to mimic or supplant human appraisal, with Zillow being the most prominent example. Through their “Zestimate” platform, the company argued it could make real estate investment decisions based on their automated valuation model. When it comes to the biggest purchases in our lives – our homes – an expert who sees, walks, and touches a home to understand its individual value on the market will almost always generate a more credible, reliable opinion of value than what a tech model can offer. At the Appraisal Institute, we say that an appraisal should mirror the market, not speculate on it. When it comes to AVMs, we shouldn’t guess, either.

For so many of us, the COVID-19 pandemic has accelerated the use of technology to ensure safe access to the goods and services we need. In the appraisal profession, this has also been the case, especially in the residential market. To ensure safety of all involved, it makes sense that appraisers would take advantage of the benefits that technology and, in some cases, an off-site appraisal can provide.

Appraisers can rely on hardware such as drones, or applications such as FaceTime or Zoom, to see the exteriors or interiors of a property if it is unsafe to visit a home in person. Appraisers should carefully examine these technologies, however, to assess fraud or data flaw risks and potential liabilities before relying on them.

Ultimately, there are fundamental differences between an AVM and an appraisal. Our Designated Members bring a high level of quality and control that outvalues an AVM, and even in the pandemic, appraisers can use technology to help keep them safe, without technology cutting out all the benefit an appraiser brings to a valuation.

An AVM’s primary assets are relatively low cost and a comparatively quick turnaround time. But you get what you pay for. Think of an AVM as a piece of information about a property, which is based on various public records or multiple listing service data, and little else. Often, both sources have incorrect, outdated, and unconfirmed data that reduces the reliability of the information. AVMs are completely unable to inspect a property to determine quality and condition. They also cannot evaluate complex issues, such as whether a property faces any economic or physical obsolescence that might dramatically impact the salability and value of that home.

A home purchase is a serious undertaking and deserves accuracy and detail that only an expert appraiser can bring. Appraisers use their experience and education to determine which comparable sales to use and what adjustments, if any, to make. They are trained to apply the most applicable methodology when generating an opinion of value, and that training helps ensure a property’s value isn’t above – or below – what it should be. Appraisers dedicate themselves to being lifelong learners – and are constantly learning about the new trends and policies in appraisals through required courses and volunteer trainings.

Appraisal Institute professionals with the MAI, SRA, AI-GRS or AI-RRS designations provide demonstrated knowledge well beyond the minimum that licensing, or certification implies. Tools can be helpful, but secondary, to a well-trained appraiser’s education, experience and ethics.

Buying or selling a home is most people’s largest financial transaction – and knowing the true value of a property is crucial in setting prices or making offers that credibly reflect the specifics of a single home within the market. AVMs such as the “Zestimate” perform most accurately on homes with few updates or upgrades, such as floor plans and in communities where there are many houses of the same style. Yet, what they miss are the details – details that expert human appraisal will identify and which can be the reason why a home’s value is higher, or lower, than its neighbors. The closer you zoom in, from a city to a community, to a block, to your home – the less reliable an AVM model gets.

Even in the pandemic, we continue to believe that a traditional appraisal with a full inspection by our highly-trained Designated Members is the gold standard of security for all parties involved in a real estate transaction. At the Appraisal Institute, we stand by our appraisers, and the significant value they provide to lenders and consumers.

Filed Under: technology and valuation, The Appraisal Institute Tagged With: appraisal technology, appraisals, Appraisers, AVM, big data, data flaw risks, designated appraiser, home purchase, home value, opinion of value, property inspection, real estate, salability, technology, value

How Data is Changing the Appraisal Profession

January 8, 2014 by Appraisal Institute Staff

In the organization’s latest video, the Appraisal Institute invited Mark R. Linné, MAI, SRA, chief analytics officer of ValueScape Analytics, an appraiser and software developer, to discuss how data is changing the appraisal profession and what appraisers need to know about the next generation of valuation technology.

AI: Why should appraisers care about data and technology?data_analytics

ML: So much of our work is dependent on data, yet until fairly recently, appraisers have had incomplete data about the real estate industry. Now, we have more data than we ever dreamed possible, and it’s critical that we have the tools and understanding of markets to utilize it. Data — and the technology to analyze it effectively — is perhaps the greatest single trend the valuation profession can take advantage of. It will serve as the foundation for the profession as we move forward. [Read more…]

Filed Under: Appraisal Institute Tagged With: appraisal profession, big data, cloud computing, data, mobile technology for appraisers, trends

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