Flip a coin: Should you use a human home appraiser or try robot?

In the real estate battle of technology vs. traditional, there’s no looking back to the old-school way of doing things. Anyone who does so will be stuck with an unsold property or left on the wrong side of a deal (leaving big bucks on the table).

Yet, even with rapid advances in tech, home appraisals haven’t followed suit — although that could be changing very quickly…

Cue the robots

In the U.S., federal regulators have proposed a change that would allow for the majority of home appraisals to be prepared electronically. That would mean cutting the licensed human appraiser out of the picture.

Instead of limiting online home appraisals to values under $250,000, the proposal would increase this amount to $400,000 — which could amount to an additional $68 billion worth of homes to benefit from using the technology side of the coin.

Now, this doesn’t mean that physical robots are doing the appraisals, but there would be some very advanced technologies at play. Big data sets that factor in home purchase and sale prices combined with artificial intelligence and machine learning algorithms are all part of the big picture. And they are only getting smarter.

Of course, there are two sides to every coin…

Heads: Benefits of a Computer Appraisal

Speed is a big win for this technology. Instead of waiting days or weeks to get a home appraisal appointment, your online valuation can happen in minutes. Cutting out those delays means you can get to market faster — and that time can put you ahead of competition. This is especially important after the housing bust last decade led to a 21% decline in US appraiser credentials, leaving less than 96,000 qualified humans to fill the demand.

The cost of an appraisal is also greatly reduced with technology. Rather than spending up to $900 to get an average single-family home appraisal, you can get an equivalent online valuation for $100 or less. Cheap and cheerful is the business model, and that puts a smile on the faces of many property owners and real estate brokers.

Keeping things honest, the computer world also brings the benefit of an unbiased opinion. Online valuations will be based on data and calculations, along with criteria that can’t be easily swayed by human perception. This also eliminates human error that could easily derail your plans after an improper valuation.

Tails: The Downside of Technology

Of course, human appraisers are naturally sceptical, with good reason to provide their notes of caution.

Aside from losing business, the human element factors in many subtle (and not so subtle) elements to an appraisal that a computer can’t yet process. Is the house sandwiched between two loud and messy neighbours? Is there a rodent, termite or other sneaky problem? Has there been unreported structural damage? And does the valuation factor in unpleasant aromas that would drastically reduce any buyer’s offer price?

If your home appraisal isn’t accurate, there are also damaging repercussions. Appraisal too high? You might owe a lot more on that mortgage. Appraisal too low? Any lender who uses the property as collateral could wind up without enough value to cover expenses if, for example, the property owner were to default on a loan.

Even if you side with technology, the option may not be available to you. In the US, home mortgages through massive corporations such as Fannie Mae and Freddie Mac may still require you to go through the traditional process. Although the standards and requirements may change, this still leaves current homeowners and lenders forced to call just one side of the coin.

Making the right call

Regardless of whether you call for heads or tails in the technology vs. traditional debate of home appraisals, one thing is certain — you must minimize risk to make smart real estate decisions.

Ensure any appraisal factors in the right criteria including location and neighbourhood, property size, square footage, condition of the structure along with other aspects such as real estate forecasts and comparable sales where applicable. By understanding key criteria that goes into a valuation, you’ll be better prepared to evaluate the home appraisal you receive so that you can buy or sell to make the biggest financial gain.