Opinions vary as to whether the appraisal industry is in for any kind of revolutionary change in the next few years. Some say the business as a whole is in grave danger, from automation and decreasing profits. Others say it’s evolving as any business does, and the appraiser simply needs to adjust to change. Jo Traut, appraisal curriculum and content specialist at McKissock, says she’s generally optimistic about the direction the profession is taking, but she emphasizes that the individual appraiser will have to stay alert. She says the right combination of diversification and specialization might be the key to success.
“Diversify your business beyond typical lending assignments by adding specializations,” she recommends. “Identify yourself with certain types of properties and assignments. You might specialize in luxury homes, green buildings, litigation assignments—or appraisal review, which is a really up-and-coming segment.
“We hear about ‘Big Data,’ which makes appraisers nervous because they worry that algorithms might replace the human appraiser. Instead of fearing those algorithms, we should embrace them, and look at how we can use them in our reports to gain accuracy and efficiency. We can base our appraisals more on data analysis than on gut feelings. Especially in lending, you’re seeing more alternative valuation products—like desktop appraisals, without onsite inspections—for home equity lines of credit. Those products may be used more frequently for loan evaluation, replacing the traditional appraisal to some degree, so become familiar with these products and learn the benefits and risks so you can make an informed decision on whether to add this product to your mix.
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Tips to set yourself up for success in the next five years
How else can appraisers set themselves up for success in the next five years? Traut offers the following suggestions.
1. Anticipate change and respond to it before it hits you. Stay on top of technology that might affect the appraisal business, and adopt it early. When you hear of a new regulation or a change in lending policy that might affect your business, immediately consider the various ways it might do so. Then ask yourself, “How can I turn this to my advantage?”
2. Remember the personal touch. Remind your clients and other people with whom you interact in your business, that you’re there. Send them friendly emails just to say “hi,” periodically. Remember their birthdays. Ask after their children or pets. Don’t be excessive about it, but get a reputation as a real person, not just one of many. It will pay off in all kinds of ways.
3. Provide more than just a completed form and a value statement. The value-adds that you can provide include in-depth, detailed descriptions of the property and neighborhood; analysis of the property’s potential for improvement and/or repurposing; analysis of how a home’s value might be affected if it’s non-conforming.
4. Don’t depend entirely on business from lenders, but investigate other options. Network with estate, tax, and divorce attorneys, and they might start throwing some work your way. Offer your services as an expert witness for litigation. Look at regulatory agencies, appraisal organizations, and licensing boards: they might present other opportunities.
5. Don’t fear big data: use your increased access to information to choose the best comps. Use that information to become more familiar with trends in the local market and to learn about appraising more complicated or speculative properties.
6. Indeed, embrace those complicated, hard-to-value properties! A computer model might be fine for valuing tract houses in garden-variety neighborhoods, but it takes a sophisticated human expert to appraise an unconventional home, an under-tenanted shopping center, a farm that could be re-purposed, or undesirable land that has potential to someone who can think outside the box. The more unusual a property is, the less useful an automated model will be.
7. You might have access to more data than you think. Thanks to the Internet, you can easily learn how landscaping, unusual in-home finishes, high-efficiency features, and other factors might affect the value of a home.
8. Analyze market data—not just for the part of the country in which you operate. Pay attention to forecasts of population shifts, property development, and job growth. Be mindful of where people will be buying homes five or ten years into the future. Predict where you can anticipate growth in home purchases and refinancing, and find ways to grow your business in those markets, even if they’re some distance from you.
9. Stay current with the technology. It’s easy to fear automation—but it’s just as easy to make automation your friend. Make the most of automation for your routine work, and look to add value to the more complicated transactions.
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Article by Joseph Dobrian. Joseph Dobrian has been writing about commercial and residential real estate, and real estate-related finance, for more than 30 years. His by-line has appeared in The Wall Street Journal, The New York Times, The New Yorker, Real Estate Forum, Journal of Property Management, and many other publications. He is also a noted novelist, essayist, and translator. His website is www.josephdobrian.com, and he can be contacted at email@example.com.