Tectonic Transformation: Technology’s Influence on the Future of Valuation

guest-blogger-banner-1By Mark R. Linné, MAI, SRA, AI-GRS

As appraisers, we are perceived to be the experts in valuation. As experts, we are at an inflection point from changes resulting from new technologies and big data, as well as changes in our core business model.

Not only are these changes exponential, digital and combinatorial, but most of the gains and changes are still ahead of us. Technology creates possibilities and potential, but ultimately, the future depends on the choices we make.

Appraisers and other professionals are part of a social contract, often called the “Grand Bargain.” Society rewards privileges, remuneration and powers to these keepers of specialized knowledge in exchange for specific knowledge important to the functioning of society.

That grand bargain appears to be changing due to the rapid breakthroughs in data and technology, which now offer alternatives that can displace some of the current professional workforce, including appraisers.

Services performed by professionals are at price points the market seeks to reduce. These services can be demystified and performed by non-professionals and even machines.

Disruptive innovation continues in the financial services industry, impacting appraisers and brokers. In each case, technology can make expertise more accessible to consumers, leaving a smaller role for human experts. These changes provide more access to expertise, and therefore more power and autonomy, for clients rather than service providers.

Appraisers should evaluate our profession, and the systems and people who might replace us.

I believe that big data, machine learning and, to a lesser extent, artificial intelligence will have many benefits and will lead to some profound changes in the way professions are organized and delivered. But they are unlikely to address the bigger issues of collateral valuation, and the key issues of the knowledge and skills needed that will not yield so easily to big data and artificial intelligence solutions.

Some steps for valuation professionals to consider:

  1. Embrace Big Data. Use the data and tools to provide more market insight to current and potential clients.
  2. Provide value-adds for consumers. Give them insight and guidance, and open entirely new client opportunities.
  3. Reduce your dependency on traditional lenders. Diversification is smart, so get out there and meet new people, pursue varied educational opportunities and take advantage of opportunities to network with those who might provide business opportunities in the future.

Appraisers will need to be more adaptable and flexible in our functional place in the greater financial services environment. We need to seize new opportunities where machines complement and augment human capabilities. We must make do and prosper in an entirely different landscape, a landscape in which we are but one of many players, all of whom seek to enable financial transactions.

We must seek to creatively demolish and re-imagine the status quo and create the fabric of an adaptable and sustainable business model for the future. Our failure to do so could very well mean the continuing decline that we have seen in many aspects of our own profession. This is not the acceptance that such decline is inevitable. What is inevitable, however, is that we must change to avoid such a dystopian future.

The advent of technology and data and machine learning all provide the potential ingredients for a bright and meaningful tomorrow. Valuation professionals should embrace this creative destructive innovation and ride the wave to a brighter and more engaging future, by recognizing the role we can play as professional experts.

Linne Photo 2016

Mark R. Linné, MAI, SRA, AI-GRS, is a principal at Chrysalis Valuation Consultants LLC in Lakewood, Colorado. He is the author of “Visual Valuation: Implementing Valuation Modeling and Geographic Information Solutions.”

Comments

  1. says

    Coming from the insurance side, it really isn’t any different than what you outlined for appraisers’ approach to now and the future. In just a couple of years, it is projected that there will be about 20% to 25% less insurance agents. Insurance is constantly dealing with the commoditization of property & casualty. Just as you recommended, agents/agencies need to provide value-adds for consumers and realize there is a large market that is very price sensitive and won’t respond to that but at the same time there is also a large market of consumers who are willing to pay extra (how much extra is to be determined) for the personal expertise and professionalism.