Automation and artificial intelligence are rapidly evolving and threatening to replace countless jobs by simply doing things cheaper and more efficiently. Appraisers may be next, as multiple noteworthy companies are making moves towards using computer-based appraisals.
A Bloomberg report published two months ago suggested that computer-based appraisals are just as dependable as human appraisers. According to author Joe Light, the 73,000 people employed in the appraisal industry face an uncertain future. “The future for appraisers specializing in residential mortgage work is coming to an end,” he wrote in a recent newsletter for peers. “No bang. Not even a whimper.”
Companies like Zillow and Freddie Mac are beginning to implement automated appraisal systems. Zillow’s Zestimate tool can accurately predict a home’s value using machine learning technology, public records, MLS data and brokerage information. As Zillow continues to improve the tool, human appraisers will be hard-pressed to keep up with its time- and cost-efficiency.
Earlier this summer, Freddie Mac also announced a new program called Automated Collateral Evaluation (ACE), an algorithm which determines a property’s collateral risk by pulling and analyzing data in a similar manner to Zestimate. ACE also evaluates whether it has sufficient data to calculate an accurate appraisal. If it doesn’t, it will notify the user that a human appraisal may be necessary. The program was initially only available to borrowers looking to refinance. As of September 1st, the program was made available for home purchases.
The Appraisal institute, however, claims there are still parts of the job only a human can do. The organization points out current programs’ lack of ability to take into account variables like low-flying planes, street noise or repair negotiations.
It’s still uncertain how fast these technologies will evolve and adapt. Zillow admitted their error rate with Zestimate was still around 5%. The industry, however, seems to be making a push towards automation as its often the cheaper, more efficient and faster option. With the rate technology is evolving today, we might see automation overtake the appraisal industry faster than expected.