Human Real Estate Appraisers Unnecessary?
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“Real estate appraisers will not exist in the future.” – Reasons Behind Matt Rider’s Projection and Why He’s Wrong
Technology in real estate is advancing to a point where any user can “pull up a property’s data together” and create an appraisal. This is the main point raised by Franklin American Mortgage’s Chief Information Officer Matt Rider in his interview with National Mortgage News. He claimed that as a result, real estate appraisers wouldn’t exist in the future. See interview here.
Rider’s projection seems to be based on society’s increasing dependence on Big Data and artificial intelligence (AI). According to Forbes contributor Jason Mitchell, appraisal methods have remained archaic, as they are still based on assumptions and the appraiser’s subjective opinion. Relying too much on these methods may lead to lost deals or wasted money due to inaccurate estimates. Technology is making it easier to avoid these scenarios. This is the same case across many industries, such as the stock market or any other system where decisions are made based on values.
Another factor that Rider pointed out is age. As of 2016, the Appraisal Institute Research Department revealed that 62% of appraisers in the US are 51 years old and above. The supply of new appraisers is not as high as it used to be, mainly because getting an appraiser certification is harder nowadays. In the 1990s, a real estate license was all that was needed. But now, a four-year college degree became an additional requirement in most states. Although that’s not a bad thing, stricter regulations make real estate appraising less appealing for many job seekers. That’s because with a college degree, you have many other options in terms of a career.
Then there’s the lack of national standard in the appraising processes. Hamp Thomas previously pointed out that it creates discrepancies between valuations, which supports the idea that appraisals are less objective than they should be.
But will all of these really make human real estate appraisers unnecessary? The short answer is no.
…human appraisers deliver more precise information…While automated processes may be efficient, they are not completely reliable for determining actual mortgages. This is where the input of appraisers is crucial. In fact, Marketwatch revealed that appraisers are required for mortgages backed by the Federal Housing Administration, Fannie Mae and Freddie Mac. Collectively, they provide mortgages that correspond to 70% of the market in terms of loan volume. According to many people in the industry, human appraisers deliver more precise information because they visit development sites and see properties in person.
Appraisers can also use technology to improve their services. In New York City, the country’s most valuable real estate market, the listing platform Streeteasy allows sellers to disclose information about their property. This form of user-generated data is invaluable today not just for buyers and sellers, but also for professionals in the sector. It wasn’t long before the real estate database company Zillow noticed this necessity, and in 2013, Yoreevo notes that the firm bought Streeteasy for $50 million to strengthen their presence in the city and reach more users. Appraisers can take advantage of these tools for the benefit of their clients.
To sum everything up, real estate appraisers won’t be redundant in the coming years. What the industry may see instead are better appraisers as more advanced real estate technologies become available. Computer-generated data is useful in analysis and reporting, but when it comes to understanding the behavior of homeowners, no machine can beat a real person.