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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

Current Appraisal Institute Efforts to Have Broad Impact on Valuation Profession

April 27, 2012 by Appraisal Institute Staff

blog_presidentheadersA number of exciting initiatives are under way at the Appraisal Institute that will impact both members and the valuation profession at large.

Candidate Signup is Coming

The Candidate for Designation program will take effect Jan. 1, 2013, and all current State Certified Associate members (or equivalent) can sign up beginning June 1. Webinars have been held for chapter leaders, and a webinar for all members will be scheduled in the coming weeks. This is an ideal time for nonmembers to take that next step in their careers and join the Appraisal Institute.https://www.youtube.com/watch?v=Jd9E-Kz7aKM

Click here to learn more about the Candidate for Designation program, and to download the recorded webinar.

Candidates for Designation will receive:

  • Dedicated advisors to help them on the journey to designation,
  • Program support from local chapters and
  • Structured timelines with milestones to help keep Candidates on track.

Emails, postcards and other communications with all the information needed to sign up will be coming soon. [Read more…]

Filed Under: Appraisal Institute, Candidate for Designation Tagged With: Appraisal Institute, Appraisal Institute Annual Meeting, Candidate for Designation, opinion of value, Opinions of Value

AVMs No Substitute for Real Estate Appraisals

February 18, 2012 by Appraisal Institute Staff

With lenders facing myriad challenges and consumers seeking cost reductions, it might be tempting to take a shortcut with real estate valuation — but the negative impact could be significant and long lasting.

Some lenders utilize automated valuation models in certain cases. However, AVMs are not real estate appraisals; the two are not comparable. An actual appraisal typically requires the appraiser to visit the property and to perform a visual inspection. This enables the appraiser to accurately report property information, which they then verify. Appraisers use their experience, expertise and education to determine which comparable sales to use and what adjustments, if any, to make. A qualified, competent appraiser conducts thorough research and thoughtful analysis to develop a reliable, credible opinion of value.

blog_image_2_28_12

AVMs, on the other hand, largely aggregate data from public records, which are often inaccurate, incomplete or outdated. AVMs are an unregulated method of obtaining opinions of value that undermines federally created appraisal standards. Lenders’ use of AVMs put both banks and consumers at risk of receiving unreliable valuations. [Read more…]

Filed Under: Appraisal Institute, The Appraisal Institute Tagged With: Appraisal Institute, AVMs, opinion of value, the Appraisal Institute

Article in The Appraisal Journal Says Market Knowledge Key to Preventing Delays

December 22, 2011 by Appraisal Institute Staff

In today’s real estate market, a variety of issues can cause delays, which can result in appraisers being tasked with providing a credible, reliable opinion of value under challenging circumstances.

The appraisal process can cause delays in a property’s development or sale, according to an article published in the current edition of The Appraisal Journal, reinforcing the need to have appraisers with local market knowledge provide reliable opinions of value – especially in the current market.

[Read more…]

Filed Under: Appraisal Institute Tagged With: Appraisal Institute, opinion of value, the Appraisal Institute, The Appraisal Journal

Don’t Shoot the Messenger: Appraisers Not to Blame for Real Estate Woes

December 12, 2011 by Appraisal Institute Staff

Many in the real estate industry have tried to blame the market’s distressed condition on appraisers, saying that appraisers are at fault for producing opinions of value that don’t match a home’s contract or sales price, delaying a recovery in the housing market. But appraisers don’t set the market; they reflect what’s happening in the market.

 

It’s important to keep in mind that appraisals completed for mortgage transactions are not provided to confirm a sales price; they are used to assist lenders in making lending decisions. It’s troubling that some homebuyers and sellers (not to mention some real estate agents, home builders and others) assume that an appraisal is somehow “wrong” if it doesn’t match the listing or contract price. This is simply not the case. There’s no reason to assume the contract price is the “correct” price simply because it is higher than the appraisal.

house12_12_11 [Read more…]

Filed Under: Appraisal Institute Tagged With: Appraisal Institute, comparable sales, distressed sales, opinion of value, the Appraisal Institute

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