This article was first published in the Appraisal Buzz magazine. Subscribe now to receive your edition of the Appraisal Buzz Spring 2019 Magazine!
Some love it, some detest it; nevertheless, change occurs. Over the last 10 years or so, the residential mortgage sector of the appraisal profession has changed significantly. And by most accounts, it appears poised to keep doing so.
Frankly, it has been a challenge for many of us “seasoned” appraisers. For example, the concept of performing an appraisal based on an inspection of the subject property by someone else is heresy to some. It is a strange phenomenon, but even appraisers who regularly perform desktop assignments that include no inspection at all seem to be less comfortable with hybrid assignments involving an inspection by another party (this holds true even if that party might be, for example, a licensed building inspector).
Are appraisers concerned because they lack confidence in obtaining information about the subject property from a source other than their own eyes? If so, why then do appraisers have such little concern about obtaining information for comparable sales which the appraiser has not personally inspected? Why? Because it is different from “the way it’s always been.”
Not all of us are resistant to change, however. Indeed, some appraisers see these new types of assignments as real opportunities. Those in this camp contend that an appraiser’s primary value (no pun intended) is the ability to analyze, not to inspect. For example, many appraisers believe that Automated Valuation Models (AVMs) are suspect in many cases due to shortcomings in the AVM’s ability to properly analyze the available data (while an AVM also does not “inspect” a property, the lack of an inspection is generally not the main concern). The “rubber meets the road” for an AVM in the area of analysis, which should be consistent with what appraisers have to offer.
Nevertheless, some appraisers steadfastly hold on to the belief that a personal inspection (interior and exterior) of the subject property is necessary. In fact, Advisory Opinion 2 (AO-2), Inspection of Subject Property1 anticipates such a need in some assignments:
The appraiser must ensure that the degree of inspection is adequate to develop a credible appraisal. An appraiser cannot develop a credible appraisal if adequate information about the relevant characteristics of the subject property is not available. When adequate information about relevant characteristics is not available through a personal inspection or from sources the appraiser believes are reliable, an appraiser must withdraw from the assignment unless the appraiser can:
- modify the assignment conditions to expand the scope of work to include gathering the necessary information; or
- use an extraordinary assumption about such information, if credible assignment results can still be
While AO-2 acknowledges that a personal inspection may be required for some assignments, it also recognizes it may not be necessary in others. The language referenced above, “…a personal inspection or from sources the appraiser believes are reliable,” clearly acknowledges the 1 Uniform Standards of Professional Appraisal Practice, 2018-19 edition, p. 72 possibility of obtaining necessary information about the subject property’s relevant characteristics without performing a physical inspection.
Given today’s technology, it is not difficult to envision a process whereby an appraiser could be provided with information that might be superior to that which could be gained via a personal inspection. For example, an appraiser may receive the results of a drone inspection of the exterior of the improvements and the entire site. The technology that exists today allows a drone to perform multiple “fly-bys” and when complete, deliver a 3-D image of the house, garage, outbuildings, etc. And the drone does not just render 3-D images, but also calculates height and length dimensions of exterior walls, roof areas, and square footage (with impeccable accuracy).
“Okay,” skeptics say, “but what about the interior?” Have you seen those “virtual 3-D tours” of the interior of houses used to market properties? It is easy to imagine that a cottage industry could arise, consisting of individuals doing nothing more than conducting “inspections.” Simply arrive at the property, obtain the owner’s permission, set loose the drone and begin walking through the property to record the “virtual tour.” Upon completion, a complete visual record of the interior and exterior of the home would be available, ostensibly to the appraiser.
Is it feasible that an inspection, such as that described above, could provide an appraiser with the relevant characteristics of the property needed to produce credible assignment results? I suspect the answer is yes. Does painting such a scenario make some appraisers’ skin crawl? I suspect the answer is yes to that as well. But like it or not, this scenario (or one much like it) seems inevitable.
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