New Valuation Trends that are Disrupting the Real Estate Industry

20 May, 2019

Real estate appraisal is a key part of many real estate professionals' marketing mix, as well as its own business system. Valuations are important parts of the sales cycle, but what trends do real estate owners, salespeople, and appraisers need to be aware of in the area of valuations and appraisals?

Current valuation trends that are disrupting the real estate industry include the continuing appraiser shortages, changes in the regulatory environment, an increasingly diverse technological tool-set, and the growth of artificial intelligence (AI) leading to more accurate analysis and forecasting.  

Appraiser Shortages

There has been a shortage of appraisers in the past, and according to the Bureau of Labor Statistics, the next ten years should see faster than average growth in the marketplace for qualified real estate appraisers. A shortage of appraisers means that many individuals in the industry will have to pay more for appraisals or use people who are not as qualified an appraisal. Granted, many Realtors and other professionals are able to do their own appraisals, but when an independent appraisal is needed the shortage of professionals will impact the real estate industry.

Changes in the Regulatory Environment

While the general Uniform Standards of Professional Appraisal Practice (USPAP) have been the law for some time, globalization and digital trends both continue to disrupt appraisal regulations and industry standards. Current real estate regulations require that a house in the United States that is bought or sold for more than $250,000 to have a licensed appraisal. Because of the growth of computer-driven information, Congress and regulatory agencies started discussions last year to raise the minimum for licensed appraisal to $400,000. 

Among other changes in the regulatory environment, this is geared towards helping ease the shortage of licensed appraisers while providing easier access to middle-income home purchases as the real estate industry grows in price and more people are buying houses over $250,000. 

Unique Valuation Tools Disrupting the Market

From online search tools and real estate aggregators like Zillow, to newer algorithms offering genuine, albeit currently unlicensed, competition against the NMLS, appraisal technology is disrupting the market more than any other factor. When individuals can do their own records search from the comfort of their home, much of the leg work an appraiser did in the past has been replaced. 

However, there are still many opportunities for appraisers. Even if the proposed regulations go into effect, there are still many homes that sell for over $400,000 and would require a licensed appraisal. Also, appraisers who serve customers will be worth more than any algorithm indefinitely because an appraiser can walk the property, talk to the owner or prospective purchaser, and become a resource for them beyond the ticket price.

The AI Revolution

One of the most significant trends in the general marketplace that looks to impact real estate valuations now, and in the future, is the growth of AI-driven software. AI is the system where computer programs are designed to be self-checking and correct algorithms towards a mean when given large data sets. While their creativity is still somewhat lacking (read Botnik's Harry Potter AI writing for a good laugh), AI bots are able to collect and analyze market datasets that are humanly impossible to manage. 

While there will always be room for professional appraisers on the human end of valuations, data management is most likely going to become the realm of programs and AI over the coming decades. It is predicted that professionals are going to use AI for analyzing and forecasting sales trends, property values, and the value of renovations. 

For more information on the current and upcoming trends in real estate valuations, or about recent updates that are impacting your business, set up a seminar with Velocity Title.  

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