Innovation, technology, automation. These words might light up the eyes of business-owners — but they rarely have the same effect on the professionals they employ, who might see redundancy on the horizon.
However, not all automation directly replaces people because not all jobs are as simple as pulling a crank or pushing a button. Despite the invention of autopilot, we still keep a trained expert in the flight deck at all times.
The future of appraisals will be no different.
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The modern ubiquity of information about practically every transaction and commodity has caused us to rethink the mechanics of most industries, yet it hasn’t toppled one of the last holdouts — real estate. The inability to reliably appraise a property without boots on the ground has been sand in the gears of the real estate engine, ultimately hindering liquidity and creating market inefficiencies.
But that holdout won’t last forever. Today, an industry that was once governed by limited access to information is seeing that data democratized.
Innovative startups are finally making property data uniformly accessible, from metropolitan statistical areas (MSA) down to the block level — but the immense quantity of properties and transactions can make it hard to usefully interpret.
It’s like Morse code: The data are the beeps — and we have more of them than ever before — but if you can’t decipher the signals, you can’t understand the message. The data are the ingredients, the analytics are the recipe, but people will still need to stir the pot.
This combination of more data and better analytics, integrated into capable software, is rapidly increasing the accuracy of Automated Valuation Models (AVMs). Our ability to digitally identify where the property market is currently settled and predict where it’s headed is better than ever before, and it’s drastically changing the the parameters of the appraisal process.
Fannie Mae and Freddie Mac’s recent announcements that they will be offering Property Inspection Waivers and Automated Collateral Evaluations, respectively, are bringing automation into the news, but these alternative valuations still only apply to a small (but growing) fraction of the appraisal universe. The importance and particular challenges of property valuation, especially for unique properties, is causing Fannie and Freddie to be cautious about entirely removing human expertise from the appraisal process, but they are bringing alternative valuations into the mainstream.
Though valuations may be nearing autopilot, the potential consequences of bad valuations mean that, for many properties, we still need an expert to man the plane — and good data and analytics can inform exactly how much human expertise is required to refine data-backed valuations.
There was a time when, to be a stock trader, you actually had to put on pants, tie your shoes, and head down to Wall Street. Of course, for bonds and equities, that ended years ago, making way for the trading desk. Suddenly, you could buy and sell stocks and bonds from an office anywhere in the country, or even from the comfort of your bed, at a predetermined price that all parties agreed upon.
These advancements are finally reaching real estate investment.