This article was in the archives from almost 20 years ago. The original article was published in the Appraisal Buzz Newsletter on August 27th, 2001. It’s amazing to see what has changed and what has stayed the same in the industry! Read below for look back into a time when appraisers were more worried about AVMs taking over the industry.
Do you remember where we got ice before refrigerators were invented? The answer is from the local ice plant. Every town in America had an ice plant.
I grew up in a town of about 500 people and even we had an ice plant. They were all over. Today, you would be hard pressed to even find the location where the last one stood. Why? Because refrigerators made them obsolete. The question is, why didn’t the ice plant owners stay in business by switching to making refrigerators? Why didn’t any of them make the leap in technology from making ice to the technology of making refrigerators? Think about this: why isn’t at least one of the ice plant owners one of the largest manufacturers of refrigerators in America today? The reason is because the ice plant owners were in the ice making business. They should have been in the cooling or refrigeration business. If they had been in the “cooling” business, they would have been on the lookout for any technology that improved their ability to sell “cooling” or refrigeration. Instead they were in the ice making business and went out of business.
Let’s take another example – trains. Does Amtrak own the leading airline in America today? The answer is no. But, why not? Trains were moving people across the country. Why didn’t the train people readily adopt, buy, or build airplanes to help them move more people faster, better, and cheaper across the country? The reason is because the people who owned the trains were in the railroad business. They were in the train business. They should have been in the transportation business. If they had been in the transportation business, they probably would have snapped up every new transportation related technology that could help them improve their ability to transport people and cargo from one place to another. Unfortunately for the railroads, they were in the railroad business and as transportation technology moved forward, they were left behind.
Today, the appraisal industry is facing the same kind of leap in valuation technology that was faced by the railroad industry and the ice making industry. I am talking about AVMs. Is the new technology a friend or foe? It depends on the business you are in. If you are in the ice making business, the people in the cooling business will put you out of business with better cooling technology. If you are in the railroad business, the people in the transportation business will relegate you to the heavy cargo business. If you are in the appraisal report processing business, AVMs will put you out of business because they produce reports instantaneously. If you are in the data gathering business, you may always have a job because AVMs need fresh data. If you are in the valuation business, they are a threat. They are also an opportunity. Just like the invention of the airplane was a threat to the railroads and the invention of the refrigerator was a threat to the ice plants; it is also the next step in the evolution of technology.
As appraisers, what can we learn from history? Put yourself in the place of the railroad owner. If we were railroad owners, should we be thinking of boycotting airports? Should we tell everyone that trains are safer than planes, that 85% of the time planes are ok, but 15% of the time they crash and burn? We could, but it would not stop the evolution of this new technology. Airplanes would eventually turn into jets and send trains into the hazardous chemical cargo business.
As appraisers, we should be in the valuation business. We should embrace any technology that helps us evaluate collateral better, faster, and cheaper. We need to make the leap to this new technology, understand it and make it better and most importantly use it to our advantage. Think of a person in the transportation business that owns a train and an airplane. Imagine all the different types of services they can offer their customers – first class, coach, scenic, etc. They would own 100% of the transportation business.
Think of the services an appraiser could provide if one of their tools was an AVM for performing low risk, low cost valuations. Think of the quality of that AVM if it was hooked up to your personal high-quality market database. Imagine if you could provide your client with the speed and convenience of today’s AVMs, but with higher credibility, showcasing your expertise and experience.
Today, appraisers are at a crossroads. On the horizon is technology that can put many of them out of business, but that can also catapult them into a new level of valuation service. A service level that is far better for their customers than today’s service levels.
Over the next few years it will be interesting to see what business appraisers are in. Are they in the valuation business or the 1004 report processing business?
As an update to this original article, replace the thought of AVMs with the GSEs Appraisal Modernization initiative. This initiative is an opportunity and a threat. Whichever path you take will depend on what business you are in.
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