What does big data mean for the future of the appraisal industry?
Jun 29th, 2021 | By FCT
Ask the average person in the real estate industry what an appraiser does and they’ll tell you it’s property valuation—visiting a property to gather information on it and assess its value. But not only does that answer sell short the scope of what appraisers do, it misunderstands the true skill appraisers bring to the real estate industry: analysis.
The real value of an appraiser
While often thought of as data collectors, appraisers are really data analysts. They use comparisons between thousands of properties, looking for patterns and seeing how a given property fits into them. Not only does this let them determine a property’s market value but can help decide whether a renovation or expansion is worth the investment, help set rent schedules, or even estimate damages in the case of environmental contamination. Valuations form an important part of an appraiser’s job, but even valuation comes down more to how an appraiser leverages their data than how they collect it.
Doing things the old-fashioned way
Appraisers usually have databases of properties from past valuations to help inform current projects, but they still need data from the property they’re working on. Traditionally, that means heading out to a given property in person—often more than once—and collecting the necessary information. Appraisers’ undeserved perception as mere data collectors might come from the fact that they’re most visible to the client during in-person data gathering.
But the valuations industry is primed for change. Huge databases now exist for property data, comprehensive enough that, in many cases, appraisers using these databases don’t need to visit the property they’re assessing and manually compile its basic data.
Is big data in real estate a threat to appraisers?
Any time a new technology comes along to replace part of a job function, those in that job are rightly skeptical. But the advent of deep real estate data offers nothing but opportunities for appraisers. By offsetting the legwork of basic data collection, these new resources offer two key advantages to the modern appraiser:
- More time for what matters: Appraisers’ true value lies in their experience and their ability to analyze data and offer their clients insights. Appraisers inform strategy and help clients avoid pitfalls. The new technology doesn’t replace an appraiser’s expertise in interpreting complex data—it enhances it.
- More business: By saving time on data collection, appraisers can perform more valuations in the same amount of time.
Performing valuations in rural and remote communities
The time savings effective data solutions can bring appraisers become more pronounced the greater the distances involved. Manitoba is a perfect example, with a population density of 2.1 people per square kilometer and numerous rural and remote communities that are sometimes difficult to reach—especially in winter. Using traditional data gathering methods, a diligent appraiser might have to visit a property more than once, adding even more time to the valuation and potentially delaying the deal’s closing. Data tools offer appraisers an alternative, with comprehensive data for the property already collected, eliminating the need for a long haul up to The Pas or a flight into Shamattawa.
What challenges are appraisers facing in using data?
Quebec has proven a strong early adopter of real estate data, with at least two major industry players as well as the provincial government compiling data from residential sales. But so far, the application of this data has been aimed at realtors and homebuyers. It’s helped buyers make more informed bids and helped realtors smooth their operations significantly. But so far there isn’t an appraiser-first data solution in the province, despite the clear value the Quebec market is putting on real estate data. One other significant gap in real estate data solutions is that they are localized. If an appraiser from Quebec moves to New Brunswick or wants to expand their reach into Ontario, they’d need to juggle multiple data providers.
The future of the valuations industry promises a move to more powerful digital tools to help appraisers better leverage data. Find out how FCT is providing appraisers and other valuations professionals more solutions.
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