The next time you need an appraiser, it could be a robot. Technology is improving our lives in many ways, but it is also taking some things away, like jobs. When it comes to real estate appraisals, some technology forecasters say robots could replace humans in as little as five years.
There’s a new website that calculates the risk of losing your job to a robot. It’s called “Will Robots Take My Job?” You can plug in your job title and up pops a page with an “automation risk level”. For real estate appraisers, the website simply says: “You are doomed”.
The automation risk level is 90% for this profession. That means there’s a 90% chance that robots will invade the appraiser work space and take over in the near future. That’s bad news for some 60,000 people employed as appraisers. Although this is just speculation.
At the very least, automated appraisals could help address what some say is an appraiser shortage. A recent Urban Institute blog says the appraisal workforce is aging and shrinking, and the process of appraising a home has become longer and more complicated. It says those two factors are making it tough for some homeowners to hire an appraiser when they need one, and that “data, analytics, and technology” could help fill the gap. That’s just a more formal way of saying “robots”.
The alleged appraiser shortage a contested issue, however. While some say there are not enough appraisers to meet the demands of the real estate industry, HousingWire writes that appraisers often say there are just not enough quality appraisers willing to sell themselves short. Some complain they are offered too little money, or that appraisal management companies are keeping too much of the fee. They say appraisers today are often paid less than they were 10 years ago.
They say there’s a big difference between appraisers who are certified but unwilling to work for a low fee, and an appraiser shortage. Of course, as HousingWire points out, the fact that there’s a lack of appraisers available to do the job, for whatever reason, “is the very definition of a labor shortage.”
Appraiser Troubles Began in 2007
The appraiser’s job got tougher after the housing crash. Bloomberg writes that before the crash, appraisers were often pressured to meet the sale value of the home, so that a lender could close on a deal. When the housing market went bust, they were blamed for failing to keep “reckless lending” in check.
That resulted in tougher regulations for the appraiser industry. Current requirements typically include a four-year college degree, hundreds of hours of training, and another two to three years of apprenticeship. Appraisers must also pass state licensing exams. Also, they are often employed by appraiser management companies, who take part of the fee. The management companies are meant to provide a buffer between the lender and the appraiser to remove any “pressure” for hitting a certain value.
Bloomberg writes that the number of appraisers has dropped substantially over the last ten years. It says in 2007, states granted more than 121,000 credentials for residential real estate appraisers. That number is now down to about 96,000. There are few trainees in the pipeline due to all the educational requirements. With this new forecast that robots will take over the industry, there could be even fewer people wanting to enter the industry. Let’s take a look at what technology is offering.
The Technology Fix
Bloomberg writes that lenders are becoming increasingly impressed by the results they get from computer programs. Lenders say the automated appraisals are giving them almost as much protection as human-generated appraisals. The robotic ones are faster and cheaper.
Zillow has been working on automated valuations for quite some time, and says its algorithms are becoming smarter. It says the system can not only capture raw data about properties and neighborhoods, but can also customize a valuation with specific features like hardwood floors and granite countertops. In the future, it may also include things like street noise.
The chief analytics officer at Zillow told Bloomberg that engineers are constantly pouring through photos of homes on the website, looking for features that should be recognized by the algorithm. Bloomberg writes that they are looking both inside and outside of homes, including things like mature trees that are casting a shadow on the front lawn.
The Zillow valuations are not used as official appraisals, yet. They are posted for free on the Zillow website as Zestimates. It also says, Zillow plans to introduce an upgraded algorithm later this year.
There is at least one official use of automated appraisals. Freddie Mac just began using them in June for some refinancing loan. It hopes to expand their use to home loans in the near future. Freddie Mac and Fannie Mae normally require on-site appraisals to make sure the buyer isn’t paying more than the home is worth. That protects the mortgage companies from a loss, if they have to seize the home due to foreclosure.
Demand for Humans
HousingWire says there’s a lot of pushback against the robot idea. North Texas real estate agent, Jeff Johnston, told the blog that: “Most people want and need the reassurance and expertise of a professional human.” He says he doesn’t understand how a robot can handle inspections or negotiations for repairs or valuations and that “as long as humans buy and sell homes, most buyers and sellers will prefer another human” to help close the deal.
As for real estate investors, it looks like robots are not even on the radar. I put that job title into the website, and it didn’t even come up on the list. Financial Analysts did come up but the risk is only 23%. Real Estate Agents may have something to worry about however. That risk factor is 86%.