Thursday, 21 October 2021 | The Latest Buzz for the Appraisal Industry

Even Today, No Algorithm Can Fully Replace Appraisers

In hindsight, I didn’t choose the easiest profession.

Over the last 40 years at my job, I have come to the realization that there aren’t that many people who do what I do. In fact, I only know of four professions where people earn their living by stating their opinions: doctors, judges, economists, and professional real estate appraisers. I’ll let you guess which one I am.

Over the years, I’ve found being an appraiser to be a challenging but highly rewarding occupation. For four decades now, I’ve never spent a single day without a paying job.

While everyone has an opinion, and most of them stink as the old joke goes, people like me, and presumably you, make a living by putting our reputations on the line with every appraisal we complete. It can lead a person to favor his or her own opinion over those of others, especially when those others are suggesting that our industry needs to modernize.

Sure, our business has always been clogged up with manual processes, making us inefficient and forcing us to work harder than we should for the fees we charge. There’s a great deal of handholding and back and forth with our clients and the inevitable pushback when the number isn’t what they’d hoped to see. Things could go a lot smoother.

But some of our colleagues worry that new technologies will supplant the human appraiser, pushing us out of our jobs in favor of some computer algorithm.

If all I’d ever done in my career was to file appraisal reports for real estate transactions, I might be more concerned about being pushed out of a job by some future technology. But I’ve done a lot more than that.

After earning my Bachelor of Business Administration in Finance, I started working as an appraiser. Boots on the ground, as they say. By the mid-90s, I was a senior appraiser at the Bank of Boston, where I served for many years before the bank merged with another but left me and most of my team out of the deal.

After that, I took a job as Deputy Assessor for the City of Worcester. I only held that job for a couple of years, but it drove home how vitally important real estate valuations are to the sound fiscal well-being of a community. Carefully managing the tax overlay was key to protecting the municipality from overvaluation lawsuits. Getting the numbers right required us to really know the community and understand all the influences that contribute to the creation of value, including the expansion of our skills to deeply analyze data. It was while I was in Worcester that I was encouraged and supported to attain the MAI designation from the Appraisal Institute.

Understanding the community and all of its related influences is something no algorithm is going to be able to do, not the way we do, especially when you consider the needs around complex and unique properties. Sure, the appraisal business has been data-driven for 100 years, but a pile of data is not enough. In many cases, the elements must be culled, refined, and fully understood before an accurate opinion of value can be deduced.

If new tools make us better at helping the lenders we serve to manage their risk, quality control, and quality assurance functions, it’s worth considering. That’s something I learned working as the Director of Collateral Risk for Santander Bank, post Great Recession.

Our customers have problems that we can help them to solve. Problem solving is what appraisers do. Understanding the problem is the first step. That’s what I want to discuss with you in future columns. What should our strategy be for modernizing our profession?

After all, if you’re not strategizing about how you are going to operate in the future, you’re probably not going to be operating a business in the future.

Let’s talk about this. I’m going to be speaking at the upcoming Valuation Expo, September 8-10, 2021 at The Bellagio Hotel in Las Vegas. I’d love to see you there.

Responses

  1. Good article, however, there are many professionals who are paid for their opinion besides the four you mentioned. Mentors, Analysts in all sorts of fields, consultants, trainers, designers, architects, advertisers, travel agents, if I wanted to I think I could go on and on for a lot longer. Sorry I just felt that limiting to four professions that got paid their opinions was not supportable. However your point being that being valued for your opinion is priceless.

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