Appraisal Process on the Brink of Technological Revolution

Appraisal Process on the Brink of Technological Revolution

Everyone who’s ever bought or sold a house knows the important role played by appraisers. They look at recent comparable sales in the neighborhood, visit the house to confirm the square footage of finished and unfinished space, walk the lot lines, note any serious structural problems and/or improvements to the property, takes photographs, and in general provide an objective appraisal of what the house is worth. Because your loan is tied to the worth of the property, and any loan backed by the government requires an appraisal, it is a key factor.

A new survey of appraisers, however, suggests that the traditional routine is changing. Computershare Loan Services surveyed its network of appraisers and learned that 70 percent of the nearly 450 who responded plan to use “desktop appraisals” – using computer research tools and digital data resources to do more of their appraisals in the future, reducing the time needed and the costs involved.

“Property appraisals are facing a … technology crossroads,” says “Embracing New Technology to Reinvigorate the Industry,” a white paper written by Compushare focused on the survey results. “An industry heavily dependent on old-school methods, lots of paper and institutional memory can’t expect to thrive in our modern era. The good news is that the industry has shown a willingness to adapt to new technology – the question is whether that will become a full embrace as technology advances further.”

In the survey, 35 percent of the appraisers said they already use desktop technology for some aspects of their appraisals, using public records (property tax records, land surveys, previous home value, comparable sales, building permits) and other online tools to determine property values, and even drones to document physical aspects of a property.

The trend toward desktop appraisals – or hybrid appraisals that combine some aspects of standard appraisals and some that are data-based – is partly driven by supply and demand, the white paper says. Statistics in the 2017 annual report from the Appraisal Subcommittee of the Federal Financial Institutions Examination Council show that the total number of appraisers has fallen each year since its high of just over 120,000 in 2008. Five years later, in 2013, the number had fallen to just over 100,000; by 2017, the number was just over 95,000. That’s more than a 21 percent drop since 2008.

“In 2017, more than six million homes were sold in the U.S. and there were more than two million licensed real estate agents,” writes Compushare. “By contrast, there were only about 80,000 appraisers – outnumbered 25-to-1by real estate agents.” If those six million home sales were divided evenly among the 80,000 appraisers, it would mean every individual would have to appraise 75 homes per year – a process that, when done the traditional way, can take a week or longer.

“Time and cost is also a factor for today’s appraisers,” writes DSNews about the report. “Citing Property Solutions data, the company revealed that an appraisal in some parts of Washington state took nearly four weeks to complete at a cost of $1,800—while in suburban Illinois this was decreased to less than a week and $450.”

Not everyone is enthusiastic about ceding a lot of the job to technology.

“The future for appraisers specializing in residential mortgage work is coming to an end,” wrote Brian Weaver, who works at the appraisal licensing board in Illinois, in a recent newsletter that was featured in Bloomberg Businessweek. “No bang. Not even a whimper.”

Appraisal Institute President Jim Amorin sees the big picture, but is concerned that accuracy may be at issue with more automated appraisals.

“There’s no replacement for an appraisal in most cases,” Amorin said in an interview with the website Curbed. “Many of the computer models use public information that hasn’t been verified. Even Zillow will tell you it’s an estimate, not an appraisal.”

Computershare opens its white paper by citing another industry that has been transformed by technology: photography. Polaroid’s creation of the first instant camera was just the first in a long line of developments that today puts digital photography as close as your smartphone.

“Like many professions, property appraising currently faces some interesting challenges as well as the emergence of significant technological changes,” said Nick Oldfield, CEO of Computershare. “However, our white paper shows that, by embracing new methods, whether desktop appraisals, cloud computing or the use of drones, the industry can dramatically increase its efficiency and overcome other issues, such as declining numbers and a shortage of new appraisers entering the industry.”