Friday , 22 November 2019

Tech Software is Changing the Appraiser Profession

As we all know, the whole appraisal industry has been changing with technology (whether we like to or not). Now more than ever, the increase in technology has a huge impact on the future of appraisers. With a proposal pending approval and new ways to appraise rapidly growing, the entire profession could be at risk. 

A Proposal Approved

Back in November of 2018, the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the Board of Governors of the Federal Reserve proposed to change the threshold of which homes can be appraised by AVMs. Since 1994, the threshold has been $250,000. These regulators want to raise it to $400,000. So far, despite backlash from appraisers in a recent hearing, two of the three groups have approved the change. Once the Federal Reserve approves, the change will go into effect. 

Types of Tech

So, what exactly are the types of technology looking to overthrow the industry?

Algorithms: Algorithms have always been used for Automated Valuation Models (AVMs)–think Zillow’s Zestimate as a prime example of an AVM. But what do we know about the formulas? Not every AVM uses the same algorithm; they can be adjusted to include as much or as little as the company likes. For example, some AVMs are geared more toward consumers, and may include more information than is relevant; some AVMs are focused more for lenders and may not include irrelevant information that could skew the value. 

Drones: Drones are now also being used to gain information for evaluation. The photos collected from the drones can be used in addition to the other info drawn from public sources. Not to say that the use of drones are not helpful for appraisers in certain situations. For example, they can be used to see parts of a home and it’s estate where you can’t get to due to physical or environmental restrictions. However, a drone to fully replace the field work of a human appraiser? That seems like a stretch!

iBuyers: Companies like Zillow Offers are considered iBuyers, who can now “appraise” a home by using info collected from AVMs and having homeowners send in photos to get an offer. Some iBuyers will send an appraiser later in order to create a final cash offer to the homeowner. However the ibuying process and intention is to cut out a majority of the roles of appraisers and other real estate professionals from the buying and selling process. In cases where an iBuyer isn’t willing to use an appraiser, they may rely heavily on AVMs and other tools to get an appraisal finished.

Appraiser vs. Technology: Who’s Better?

There are definitely some positives about the use of technology, such as promptness and gathering data that cannot always be found by human appraisers. While quality and scope of work is up for interpretation. This leads into the question of ethics. An appraiser’s fundamental mission is to be non-partial towards any parties involved when completing an appraisal. With iBuyers and companies like-minded, there is the question of whether or not they will remain faithful to that kind of mission when they can have full control over who, what, and how they are completing appraisals. 

Like what was mentioned above, drones and AVMs can be useful in certain cases, however, a majority of the time it will be useful to have a real appraiser (like yourself) perform the evaluation too.  Even with the updates in technology, nothing can replace the human eye and expertise needed to appraise. Appraisers and technology in this field have their own unique strengths and weaknesses, but combined together would be more appropriate rather than trying to replace one for the other.

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