The Decline of the Appraisal Industry: An Unsustainable Future

[Yuanyin]

What is missing from all these brilliant articles is the following: if AI is so amazing by 2040, then it would overtake many fields, throwing people out of work - so who, exactly, will have the income to to buy or rent the properties that AI is predicted to be so amazing at valuing ?

The few billionaires and shareholders can not rent an own every single property out there - where are the buyers and retned going to come form with masses of people thrown out of work?

(though AI will have its limitations and need oversight,

Why would commercial buildings need daily AI updates if they only sell once every ten years?

AI can predict all it wants, but as long as humans remain the dominant sentient species ,a lease or sale is negotiated per , even in commercial negotiations, not just cold numbers but the party's need, greed, individual circumstances etc.,

What is missing from all these brilliant articles is the following: if AI is so amazing by 2040, then it would overtake many fields, throwing people out of work - so who, exactly, will have the income to to buy or rent the properties that AI is predicted to be so amazing at valuing ?

Throughout history, when tech moves forward, it shakes up entire sectors. New innovation doesn't just destroy jobs it builds new ones also. the need for traditional appraisers ( and radiologists and so many other fields) might dwindle, but it's going to open up a whole new world of jobs, not just in other areas but even within the appraisal game and the wider real estate market.

The few billionaires and shareholders can not rent an own every single property out there - where are the buyers and retned going to come form with masses of people thrown out of work?

It does not mean that all wealth will be concentrated at the top.

Why would commercial buildings need daily AI updates if they only sell once every ten years?

They won't need daily updates, but it will be available b/c all the data is in the software which can update itself in real time. AI can track trends, forecast rent fluctuations, and assess risk for lenders or investors. Even if a building sells infrequently, lenders and investors still benefit from real-time valuation updates.

AI can predict all it wants, but as long as humans remain the dominant sentient species ,a lease or sale is negotiated per , even in commercial negotiations, not just cold numbers but the party's need, greed, individual circumstances etc.,

A detailed analysis can help support a decision in negotiation. And I have no doubt that some of these models will have vastly more data than what is being generated today.

While these models won't completely take appraisers out of the picture it reduce the roll and I can imagine a time when an appraiser sits at their deck and reviews the generated model and looks for anomalies and simply approves the report or calls for further analysis. They will be knocking out 20 a day. This is they type of efficiency lenders would love to see now and they'll probably have it in the future. EX: MRI reports used to take upwards of an hour to read. Now they can be read in 15-20 minutes, and that's without AI. That's just basic software enhancements.

 

[J Grant]

Throughout history, when tech moves forward, it shakes up entire sectors. New innovation doesn't just destroy jobs it builds new ones also. the need for traditional appraisers ( and radiologists and so many other fields) might dwindle, but it's going to open up a whole new world of jobs, not just in other areas but even within the appraisal game and the wider real estate market.


It does not mean that all wealth will be concentrated at the top.


They won't need daily updates, but it will be available b/c all the data is in the software which can update itself in real time. AI can track trends, forecast rent fluctuations, and assess risk for lenders or investors. Even if a building sells infrequently, lenders and investors still benefit from real-time valuation updates.


A detailed analysis can help support a decision in negotiation. And I have no doubt that some of these models will have vastly more data than what is being generated today.

While these models won't completely take appraisers out of the picture it reduce the roll and I can imagine a time when an appraiser sits at their deck and reviews the generated model and looks for anomalies and simply approves the report or calls for further analysis. They will be knocking out 20 a day. This is they type of efficiency lenders would love to see now and they'll probably have it in the future. EX: MRI reports used to take upwards of an hour to read. Now they can be read in 15-20 minutes, and that's without AI. That's just basic software enhancements.

I personally do not think AI, including generative AI will ever be that good - however, the efficiency always comes at a cost, and if the cost is massive job loss, the price is too steep - will see, clearly with fewer jobs then economies tank with fewer consumers able to sustain the efficient industries - when fewer workers are needed and that might be the greatest form of population control ever. Right now, the world is overflowing with people; refugee camps have millions born and die there because no state or nation wants them- let AI figure that one out!

We might not like AI's cold solution to the problem, which, honestly, would be mass suicide. Most AI programs are made to avoid the most unpleasant outcomes. They won't even accept certain words or concepts as too violent and tend to offer platitudes.

Leding is more efficient now than ever - faster valuations, faster title work, money transferred digitally, etc., and yet business has shrunk, and many lenders are starving. AI and efficiency are not a cure-all or benefit in many cases , but yes, they can help in some fields and guide with decision-making - and make us smarter -those who remain.

 

[Yuanyin]

I personally do not think AI, including generative AI will ever be that good - however, the efficiency always comes at a cost, and if the cost is massive job loss, the price is too steep - will see, clearly with fewer jobs then economies tank with fewer consumers able to sustain the efficient industries - when fewer workers are needed and that might be the greatest form of population control ever. Right now, the world is overflowing with people; refugee camps have millions born and die there because no state or nation wants them- let AI figure that one out!

We might not like AI's cold solution to the problem, which, honestly, would be mass suicide. Most AI programs are made to avoid the most unpleasant outcomes. They won't even accept certain words or concepts as too violent and tend to offer platitudes.

Leding is more efficient now than ever - faster valuations, faster title work, money transferred digitally, etc., and yet business has shrunk, and many lenders are starving. AI and efficiency are not a cure-all or benefit in many cases , but yes, they can help in some fields and guide with decision-making - and make us smarter -those who remain.

We'll I don't know how you don't think it won't be that good yet. It's just started. I recently saw something where horse traders said cars wouldn't be that good.

I'm not saying AI is a solution for all the worlds problems. I'm simply saying that it will affect the appraisal profession and especially any new entry to the field may want to really understand the future of this industry.

 

[Elliott]

CPA's Preamble

"Fundamental principles governing conduct
Registrants have a fundamental responsibility to act in the public interest. The public’s trust and
reliance on sound and fair financial and management reporting and competent advice on business
affairs - and the economic importance of that reporting and advice - impose these special obligations
on the profession. They also establish, firmly, the profession’s social usefulness.

The CPA Code is derived from five fundamental principles of ethics - statements of accepted conduct
for all registrants whose soundness is, for the most part, self-evident. These principles are
fundamental to the conduct of all registrants and are as follows:

Professional Behaviour
Chartered Professional Accountants conduct themselves at all times in a manner which will
maintain the good reputation of the profession and serve the public interest.
In doing so, registrants are expected to avoid any action that would discredit the profession."
...........................

USPAP's Preamble:

"The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public
trust in appraisal practice by establishing requirements for appraisers. It is essential that appraisers develop and communicate
their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading."

"An appraiser must promote and preserve the public trust inherent in appraisal practice by observing the highest standards
of professional ethics."

.............................

Appraisers fell off the rail when they had their soul attached to the 'intended user.' Its how GSEs twisted us into pretzels. Appraisers should primarily serve the public interest.

 

[J Grant]

CPA's Preamble

"Fundamental principles governing conduct
Registrants have a fundamental responsibility to act in the public interest. The public’s trust and
reliance on sound and fair financial and management reporting and competent advice on business
affairs - and the economic importance of that reporting and advice - impose these special obligations
on the profession. They also establish, firmly, the profession’s social usefulness.

The CPA Code is derived from five fundamental principles of ethics - statements of accepted conduct
for all registrants whose soundness is, for the most part, self-evident. These principles are
fundamental to the conduct of all registrants and are as follows:

Professional Behaviour
Chartered Professional Accountants conduct themselves at all times in a manner which will
maintain the good reputation of the profession and serve the public interest.
In doing so, registrants are expected to avoid any action that would discredit the profession."
...........................

USPAP's Preamble:

"The purpose of the Uniform Standards of Professional Appraisal Practice (USPAP) is to promote and maintain a high level of public
trust in appraisal practice by establishing requirements for appraisers. It is essential that appraisers develop and communicate
their analyses, opinions, and conclusions to intended users of their services in a manner that is meaningful and not misleading."

"An appraiser must promote and preserve the public trust inherent in appraisal practice by observing the highest standards
of professional ethics."

.............................

Appraisers fell off the rail when they had their soul attached to the 'intended user.' Its how GSEs twisted us into pretzels. Appraisers should primarily serve the public interest.

The only way appraisers could primarily serve the public interest would be if the public, though the govt was the one master - such as FDA inspectors are hired by govt, not by the same meat companies they are supposed to screen out harm for -

I would be for it, it seems a bit late in the game, and I doubt that public trust over profit would ever prevail - it has not yet in the lender/GSE entities realm.

 

[Sadie]

Not necessarily.

Exactly. One of the lenders I worked with, and who is still around making loans, keeps the ARM's on their books and sells off some of the fixed rate loans (depending on the interest rate environment), without the 'benefit' of F/F.

Who wil lthey sell to? With F/F out of the pricture, there is a huge gap in the secondaty market.

 

[Yuanyin]

The only way appraisers could primarily serve the public interest would be if the public, though the govt was the one master - such as FDA inspectors are hired by govt, not by the same meat companies they are supposed to screen out harm for -

I would be for it, it seems a bit late in the game, and I doubt that public trust over profit would ever prevail - it has not yet in the lender/GSE entities realm.

The public trust element of the Uniform Standards of Professional Appraisal Practice (USPAP) seems more like a farce than a reality. Grant's analogy hits the mark: "FDA inspectors are hired by the government, not by the meat companies they're supposed to protect us from." A few years ago, I found myself in a court case where there were two appraisals , including one that I conducted. The defense introduced the second appraisal, which explicitly stated on the first page, "This appraisal was not conducted under USPAP guidelines." When the attorney brought this to the judge's attention, it was as if he was stating something completely obvious and irrelevant. The judge and jury showed no concern or regard for USPAP, indicating its complete lack of importance or influence on legal and public perception.

 

[Terrel L. Shields]

where are the buyers and retned going to come form with masses of people thrown out of work?

 

[Terrel L. Shields]

EX: MRI reports used to take upwards of an hour to read. Now they can be read in 15-20 minutes, and that's without AI. That's just basic software enhancements.

MRI? I had 2 recently. Doc tells me it ID'd 2 spots that were potentially cancerous and scheduled a bio-op. Go for pre-op on Thurs, bio-op Monday. Friday panicked call from hospital. Radiologist cannot read the MRI. Other radiologist had quit. So, I return on Friday for new MRI. Waste an entire afternoon. Biop shows no cancer. Really? WTF? If the first MRI was unreadable, how did they ID 2 spots? And did the second confirm that or was it clear and they biopsied me anyway? Six weeks between the two MRIs... Inquiring minds want to know. Maybe the machines are stupid.

 

[TC]

MRI? I had 2 recently. Doc tells me it ID'd 2 spots that were potentially cancerous and scheduled a bio-op. Go for pre-op on Thurs, bio-op Monday. Friday panicked call from hospital. Radiologist cannot read the MRI. Other radiologist had quit. So, I return on Friday for new MRI. Waste an entire afternoon. Biop shows no cancer. Really? WTF? If the first MRI was unreadable, how did they ID 2 spots? And did the second confirm that or was it clear and they biopsied me anyway? Six weeks between the two MRIs... Inquiring minds want to know. Maybe the machines are stupid.

I'm sure you'll find a conspiracy somewhere. I'm glad you're cancer-free.