Setting The Stage

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28 | Th e M Rep o RT Feature art form,'" Petkovski said. "I want more science in my profession. I want things to be better defined." Petkovski isn't alone in seeking more science in appraisals. Pretty much every mortgage lending institution is demanding the use of analytics, algorithms, and big data to quantify a sensible and objective value for a house. Houses have clear, discernible, easily quantifiable characteristics that can be standardized. "Those factual characteris- tics impact value, and we all now know that there are some sophisticated analytical programs that can indicate a value just based on that," Bradford said. Pre-computers and the avalanche of data, pricing those "factual characteristics" was more difficult. But today there are any number of software programs and high-tech tools that can slice and dice data into neat, accurate groupings. The first iteration of those tools—the Automated Valuation Model (AVM)—arrived on the scene in the early 1990s and is still being used today. AVM calculates property value by us- ing mathematical modeling that includes comparable properties sales and several other data points. But it has limitations. "The AVM didn't get up this morning and read that the plan- ning commission is going to put a landfill behind the subject prop- erty," Richard said. "The AVM didn't look at that. Every house on that street could be sold, and the AVM would never know there was some substantial change that just happened. You need boots on the ground to do that." And the people wearing those boots are appraisers, includ- ing their subjectivity. Actually, through all the talk of technol- ogy and big data, no one is really suggesting an appraiser's experience and subjectivity should be completely exorcised from the appraisal formula. Most agree it's an important part of the appraisal's special sauce. It just needs to be dialed down. "I think technology is an incredible thing, but it has to be blended with the human element," said Jim Silva, CEO of EMC2 Data in Denver, Colorado. "What we need is consistency with your numbers." Technology is great, Petkovski agreed. But appraisers need to be plugged into it because they are the local market subject experts who can identify elements of comparison that would be the primary driving force at the sub- market level. "That is something that I haven't seen an algorithm do yet," Petkovski said. "We've got that going for us." Another thing the industry could have going for it is technol- ogy companies like Bradford's that understand the value of an ap- praiser's experience. Bradford isn't interested in retiring appraisers. He wants to empower them. "You still need that local guy who knows the builders and which are better than the others," Bradford said. "You still need boots on the ground. But now you arm them with really good analytics." The company is currently writing software that will eliminate the need for an ap- praiser to trudge off to public re- cords, pour over multiple listing services, drum up three compa- rables, do an analysis of the in- formation, come up with a value, and write a report. Instead, the software will automatically ac- quire 12 different national sources of data. Everything from permit history to aerial photos are deliv- ered to the appraiser's desktop in just five minutes. "We bring all kinds of things to help them understand the market and support their conclu- sions," Bradford said. Of course, blending all that great technology with the hu- man element won't work if the human element doesn't embrace the technology. So a lot of the current discussion may actually be future-focused when a new, college-educated, tech-savvy breed of appraiser takes over. Most will come with degrees in finance, economics, or real estate; but they will still need to be trained as appraisers. That will mean changes to the current curriculum to include more real-world training. Software builders will have to work with appraiser trainers to figure out how to leverage tech- nology so an appraiser's knowl- edge of the market intersects with the data to provide a lender the most useful information. There are several other ways appraising may morph in the future. Some think the profes- sion may bifurcate, that is some appraisers will do physical inspections on a property and hand off their work to another appraiser who will analyze the information and conclude what a home is worth. "You will still need analysts to interpret what the data means, and that's where appraisers come in," Petkovski said. "But we have to get rid of the antiquated pieces so that we can focus on what the profession will look like once the next generation takes hold. And it's not going to be clipboard, I can tell you that." Technology is great, but appraisers need to be plugged into it because they are the local market subject experts who can identify elements of comparison that would be the primary driving force at the sub- market level.

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