There is no denying that technology is the future, and that algorithms are changing the face of a number of different professions. But a recent trend in the real estate market has some appraisers on edge. The profession is already losing people, with only 78,000 licensed US appraisers in business in 2017 compared to the 120,000 who were available in 2012. The extensive training and fees required to become – and remain – an appraiser is part of the issue, but the other part hinges on fewer appraisals being ordered due to technological advances in home valuation.
Are the Machines Really Taking Over?
Machines and technology are not taking over the appraisal field just yet, but the trend is moving toward a melding of humans and technology. While that might not be a bad thing, appraisers must also take the time to adapt to it. The other serious concern with this change is that machines are not as accurate as human beings in assessing the true value of something. Public data and MLS information is primarily what technological algorithms use to determine a home’s value. Companies like Redfin and Zillow provide valuation estimates, but these are not meant to take the place of appraisals.
In some cases, these are very close to true appraisal value, and in other cases they are not even close to what an appraiser would certify is the accurate value of a particular home. While algorithms are getting better at valuation, they have not arrived at the ability to provide what a human appraiser can offer. However, some mortgage companies are starting to offer certain types of loans based on any appraisal from the past five years, or based on automated estimates of the home’s value. This is taking work away from appraisers, with fewer appraisals being ordered.
Appraisers should not necessarily be against technology. It can be a great tool to help them collect data, and also to help them process that data for more accurate values. In short, it is useful. But it is not designed to replace what a human being sees when looking at a home.
Nothing Compares to Human Effort and Understanding
It has been said that the devil is in the details, and the details are one thing that technological advancements in home valuation consistently miss out on. While automated programs can explore the differences between homes based on their MLS information and public data, they cannot compare smaller things that also matter. The curb appeal of the home, the quality of the finishings inside of it, and the attractiveness of the paint color or the view out the bay window are all things that a human being must see. These can be hard to put a price on, but trained appraisers understand that there is value in these subtle differences between homes.
The true value of human appraisers to provide the valuation of a home is in those details, and how they all add up to make a house into a home where buyers will want to live. Yes, the mortgage has to be a good one and the numbers have to work. It is completely understandable that any mortgage company does not want to take a risk on the value of a house because of the color of the brick or the way the sunlight plays across the hardwood floor in the upstairs hallway.
But technology will never see and admire these things, and will never understand how small differences can be very important when it comes to what a home is truly worth. Only a human being can look carefully at the subtleties and see them for what they are and the inherent value they have, and that is something technology will never be able to replace.
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