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AI in Real Estate Appraising: Embracing the Future Together
by Jim Amorin, McKissock Learning
The growth of artificial intelligence (AI) has sparked excitement and possibilities across various industries, and real estate appraising is no exception. From image recognition and data analysis to automated valuation models (AVMs), AI’s capabilities present an opportunity to enhance the efficiency and accuracy of appraisal processes.
To help illustrate why, let’s explore how AI can complement and augment the work of appraisers. We’ll also address some common concerns and highlight the unique value that human expertise brings to the table. Together, AI and appraisers can shape a future where technology and human judgment seamlessly coexist, delivering superior valuations and services.
AI as an Appraiser’s Ally
AI technologies are rapidly evolving to offer powerful tools capable of streamlining and enriching real estate appraising. Let’s look at three areas of impact.
Image Recognition: AI can analyze property images to identify features and property conditions, and even estimate dimensions with remarkable accuracy. This technology can accelerate the inspection process, allowing appraisers to focus their expertise on more nuanced aspects of the valuation in which their experience and judgment are most critical.
While some may worry about image recognition taking away from the appraisers’ skills, it is more useful to see it as a supplement to your own eyes. The visioning capabilities of AI can reinforce your own observations. By using the generative capabilities of a large language model such as ChatGPT, coupled with the visioning tools, some of the narrative description of the property can be streamlined for the appraiser.
Data Analysis: AI algorithms can sift through vast amounts of market data, uncovering trends and patterns that might not be immediately apparent. This capability empowers appraisers to make more informed decisions based on comprehensive market intelligence.
Automated Valuation Models: AVMs leverage AI to provide quick property value estimates based on data, such as recent sales, tax assessments and property characteristics. While AVMs offer a valuable starting point, they are elevated by the professional judgment and contextual understanding that appraisers bring to the table.
Addressing Appraiser Concerns
It’s natural for appraisers to have concerns about the impact of AI on their profession. Let’s address some of these, while also highlighting how human expertise brings unique value.
Accuracy and Reliability: While AI can process and analyze data at incredible speeds, it is not infallible. AI systems rely on historical data, which may not always reflect current market conditions or account for unique property characteristics. Appraisers bring critical thinking and contextual understanding that AI cannot replicate, ensuring accurate valuations.
Human Judgment: Experienced appraisers draw on their knowledge, intuition and expertise to assess properties accurately. AI cannot replicate the nuanced judgment that comes from years of field experience and personal interaction with clients.
We all are aware of the three primary approaches to value: the cost approach, the sales comparison approach and the income capitalization approach. But there is also a very real fourth approach to value, and that is metaphorically sitting on the curb across the street from the property after your analysis is done and really thinking about the property and what impacts it. Did your analysis cover everything? This is the value of the human agency on valuation that artificial intelligence models cannot replicate.
Complex Property Valuations: Certain properties, such as those with historical significance or unusual features, require a level of discernment that AI cannot provide. Appraisers are skilled at evaluating these complexities and making informed adjustments that AI might overlook.
Job Displacement: While conducting research for my book, The Generative Shift: Preparing Appraisers for Artificial Intelligence Models like ChatGPT, I found that the fear that AI might replace jobs, particularly within the appraisal industry, has been prevalent for decades. As early as 1995, The Appraisal Journal highlighted these concerns, noting:
“Residential appraisers in particular are anxious that they may lose their main source of income. This anxiety is driven by the widespread belief that AI-powered software could take over their roles.”
Even today, these worries are pertinent as AI’s skills in recognizing patterns, analyzing data and predictive modeling continue to advance. Nevertheless, the challenge for real estate appraisers is to embrace AI as a tool to boost their efficiency and precision, rather than viewing it as a competitor in their field.
Frankly, if you can be easily replaced by artificial intelligence models, you are likely not doing a very professional job as an appraiser.
Potential for Bias: AI systems, particularly those involving machine learning, learn from large datasets to make predictions or assessments. If these datasets contain biased information or reflect historical inequalities, the AI could inadvertently perpetuate these biases. In real estate appraising, this could manifest as discriminatory practices in valuation that could adversely affect minority communities, reinforcing economic disparities.
For instance, an AI model trained primarily on data from neighborhoods with certain demographic characteristics might undervalue properties in ethnically diverse or economically disadvantaged areas. This is where the experience and practical knowledge that an appraiser brings to bear on the appraisal process can add real value that computer models simply cannot replicate.
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AI as Powerful Assistant
Rather than replacing appraisers, AI can serve as a powerful assistant, augmenting their capabilities and elevating their services. For example:
• Efficiency: AI can handle time-consuming tasks such as data collection and preliminary analysis, freeing up appraisers to focus on detailed evaluations, client interactions and value-added services.
• Accuracy: By providing appraisers with comprehensive data and insight, AI helps reduce human error and enhances the precision of valuations, ensuring clients receive the highest quality assessments.
• Market Trends: AI can quickly identify and analyze market trends, offering appraisers valuable information that supports their decision-making process and allows them to provide clients with the most up-to-date market intelligence.
Here are two real-world ways in which appraisers have unlocked the power of AI as a collaborative tool:
• Streamlined Appraisals: In one case, an appraiser used AI to prefill forms with data from public records and recent sales. This streamlined the appraisal process, allowing the appraiser to spend more time on site inspections, client consultations and delivering personalized insight.
• Enhanced Reports: Another appraiser leveraged AI tools to generate detailed market analysis reports. These included data visualizations and trend analysis that provided clients with a deeper understanding of the market, which ultimately enhanced the appraiser’s service quality and client satisfaction.
The Future
As AI technology continues to evolve, its role in real estate appraising will likely expand, presenting new opportunities for innovation and growth. However, the partnership between AI and appraisers will remain essential. Appraisers who embrace AI tools will find themselves better equipped to deliver accurate, efficient and insightful valuations, while maintaining the personal touch and professional judgment that clients value.
There are multiple, industry-related platforms that harness the power of AI to create comprehensive property profiles. By seamlessly integrating diverse data sources, these resources offer an unparalleled, 360-degree view of real estate assets. This holistic approach empowers buyers, sellers and industry professionals with deeper insight and more informed decision-making capabilities.
For quality assurance, some vendors are leveraging AI to elevate the standard of appraisal reports. These advanced systems meticulously review each report and are designed to not only ensure pinpoint accuracy but also full compliance with industry regulations. This application of AI technology can instill greater confidence in the appraisal process and uphold the highest professional standards.
The commercial real estate sector is also reaping the benefits of AI advancements. Some platforms are revolutionizing strategic planning using predictive analytics. By forecasting property sales trends and maintenance requirements, these tools equip investors and property managers with invaluable foresight, enabling them to navigate market dynamics with unprecedented precision.
AI is also refining specific tools used by appraisers. Some AVMs, for example, serve as a reliable cross-verification method, complementing traditional valuation techniques. This integration of AI-driven AVMs with human expertise represents a significant leap forward in achieving more objective and accurate property valuations.
Efficiency gains are another hallmark of AI’s impact on the appraisal profession. Some innovative solutions are streamlining workflows, allowing appraisers to complete their tasks with greater speed and accuracy. These productivity enhancements not only save time but also improve the overall quality of service provided to clients.
While these examples showcase the transformative potential of AI in real estate appraisal, they represent the tip of the iceberg. From advanced analytics to improved project management and enhanced client engagement, AI continues to open new horizons for innovation in the field.
Conclusion
AI should not be considered a threat to appraisers but a powerful ally. By leveraging AI’s capabilities, appraisers can enhance their efficiency, accuracy and overall service quality. The unique judgment, expertise and contextual understanding that appraisers bring to their work are irreplaceable. Embracing AI as a tool helps ensure that appraisers will continue to play a vital role in the real estate industry, delivering unparalleled value to clients and shaping the future of real estate appraising.
Forward-thinking professionals are expanding their skill sets beyond traditional appraisal techniques, exploring areas such as data analytics, critical thinking and advanced communication strategies. By mastering these new AI tools, appraisers can unlock their full potential and maximize the benefits of this groundbreaking technology.
The path to success in the AI era requires a proactive approach. By embracing and adapting to AI technologies, appraisers can deliver services that are not only faster but also more precise, providing exceptional value to their clients. The future holds immense promise for those who evolve in tandem with these technological advancements.
However, striking the right balance is crucial. While excessive resistance or pessimism can hinder progress, a measured approach that acknowledges both the challenges and opportunities presented by AI is most beneficial. By maintaining this equilibrium, appraisers can navigate the AI-enhanced landscape of real estate valuation with confidence, uncovering new avenues for professional growth and innovation.
In this transformative era, those who adapt, learn, and leverage AI effectively will be well-positioned to thrive, leading the way for a dynamic and exciting future of real estate appraisal.
About the Author
Jim Amorin has been a real estate appraiser since 1988 and currently holds a certified general appraiser license in Texas. An appraisal instructor for McKissock Learning. Jim specializes in property tax, litigation support and condemnation. He’s also the author of The Generative Shift: Preparing Appraisers for Artificial Intelligence Models Like ChatGPT, a guide that outlines the details of AI evolution, specifically generative, large language models and their practical applications in real estate and appraisals.
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