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4 Fundamentals for Effective Appraisals - The Importance of the Human Touch

4 Fundamentals for Effective Appraisals – The Importance of the Human Touch

There’s no question that technology plays a vital role in the appraisal process. Automated valuation models and collateral reviews are not only commonplace in today's market, but they are extremely helpful in understanding a property’s true value. Meanwhile, the amount of property and market data available to appraisers has grown exponentially, and data analytics has become essential to interpret this data. However, getting the most out of these tools still depends entirely on experienced human experts who know how to use them.

 

Here are four very good reasons why the human element in valuations remain critically important, even as the industry becomes more technology driven.

 

Computers don’t know everything

We’ve seen astonishing advancements in appraisal technology in recent years. It’s unbelievable how accurate some automated valuations can be just by reading and compiling available data. Still, computers can’t see what appraisers see—nor can they make the sort of judgments that come from an appraiser’s visual inspection of a property and the surrounding neighborhood. There are many factors that can impact the value of a property beyond a simple crunching of the numbers, no matter how much data is available. The functionality of floorplans, super adequacy issues and limitations of site configuration are just some examples of factors that can affect value yet are not likely to be “readable” by a computer. They must be seen and assessed by real, live experts.

 

Someone needs to interpret the data

Every year, the amount of data and analytics available about residential property continues to grow. Just because it’s available, however, doesn’t mean it’s utilized efficiently. Current and future generations of appraisers must be adept at handling increasingly larger data sets, which means they need to apply tools and analytics that can translate this information into real insights. Appraisers must also be able to add value by placing such data in context with all of the ingredients that determine value, and be able to make adjustments as needed in their reports.  

 

Local market expertise

Human experts are also needed to ensure every valuation was created by appraisers who know the local market. Hopefully, your partner automatically checks whether the assigned appraiser has local market expertise every time they receive an appraisal order. This might sound like a challenging task, but it really isn’t, especially with the tools available today. Innovative solutions are available that can establish the proximity a subject property is to an appraiser’s office, as well as the level of experience an appraiser has in a neighborhood or with comparable properties.

 

Quality and compliance

Finally, a trustworthy appraisal partner must have a system capable of reviewing every appraisal for quality. Prior to delivery, a quality review should be conducted and supported by a certified appraiser who can determine whether the appraiser who inspected the property considered all the available data and chose the best possible comparable sales. While the human element is important, humans aren’t perfect. Mistakes involving incorrect or missing data will not only threaten the transaction, but creates risk for the lender and hurts everyone’s integrity.

 

So why the big deal about human experts? With appraiser shortages beginning to affect some markets, I fear there may be a tendency for some to rely too heavily on technology to do the appraiser's job. Taken to extremes, this trend could place the entire housing industry at risk for another disaster. The bottom line is there is no substitute to using appraisal professionals with a deep understanding of the local market and the broad range of influences that affect a property’s value.

 

That’s why Valuation Partners places such a premium on the appraisers we choose to work with, and why we created a system designed specifically to ensure every appraisal order is supported by human expertise from start to finish. In our view, it’s not just the best way, but the only way.