Are you wondering which appraisal trends may impact you?
Here are the latest appraisal trends that every homeowner and realtor should know.
The real estate industry is constantly changing and it’s challenging to keep up with the appraisal trends.
Here are the most recent trends and what they may mean for you as a realtor or homeowner.
After you read this post you are going to be aware of what to look for the next time you need a real estate appraisal.
This post is all about the latest appraisal trends that every homeowner and realtor should know.
Appraisal Trends in the Real Estate Industry
The real estate appraisal industry is quickly evolving due to changes in technology, market demands, and regulations.
With these changes, appraisers are adapting to stay ahead of the curve.
Let’s explore the latest appraisal trends in the real estate industry and how they’re shaping the future of appraisals and house value.
#1 – Increased Use of Technology
Just as with any other industry, technology is transforming the way appraisals are done.
Traditional paper-based methods are becoming a thing of the past and are now replaced by digital tools that make the process faster and more efficient.
Our own office has been paperless for several years now.
Here’s how other digital technology is changing the industry.
- Automated Valuation Models (AVMs): AVMs use algorithms and data to provide quick property valuations. They get information from publicly available records, property databases, and recent sales to estimate a home’s value.
While these models are not a replacement for traditional appraisals, they are often used for mortgage pre-approvals or low-risk transactions.
Since the information used for this technology is often incorrect, most real estate appraisers do not consider an AVM to be reliable.
- Drone Technology: Drones are becoming more common in taking aerial photos of properties, especially large commercial spaces or homes on big lots.
- 3D Virtual Tours: 3D virtual tours allow appraisers to assess the interior of a home without having to be at the property in person. This became especially popular during the COVID-19 pandemic and is still used in certain cases today.
- Mobile Apps for Appraisers: During site visits, many appraisers now use mobile apps to collect data. These apps allow real-time data entry which reduces errors and speeds up the process. (We use these mobile apps in our office)
#2 – Hybrid Appraisals
Hybrid appraisals, which are similar to desktop appraisals, is when an appraiser evaluates a property remotely using data collected by third parties.
This appraisal trend works well when the third-party data collector is also an appraiser.
But, it presents problems when the data collector is not properly trained.
Many lenders will use hybrid appraisals for low-risk mortgage transactions or refinancing, and will send data collectors who are not appraisers to save money.
However, these types of appraisals are not reliable.
Here’s why: the person collecting the data is rarely trained properly and the information provided is often incorrect.
Related Article: How Do I Know I am Getting A Qualified Appraiser?
#3 – Environment and Sustainability
Green building practices are becoming increasingly popular and sustainability is playing a larger role in appraisals.
More and more appraisers are considering environmentally friendly building materials and energy efficient features like solar panels in appraisals.
Having these features might result in higher home prices in the market.
You can read more about the property value impact of solar energy that every homeowner should know about.
#4 – Appraisal Trends: The Rise of Data Analytics
There are vast amounts of data that are easily available to appraisers which can help them in their appraisals.
Using data analytics tools, appraisers can precisely analyze market trends, comps, and neighborhood data.
- Large Datasets: Appraisers can now analyze large amounts of data to understand market trends and other factors to help them make a more accurate prediction of a property’s future value. These datasets include housing demand, depreciation, and market reaction to improvements.
- Geodata: Geospatial data technology helps appraisers evaluate properties based on their location and related factors in that area like schools, transportation, and environment.
More information about understanding local market trends can be found in our article here.
#5 – Regulation Changes
Regulation changes in the appraisal industry, together with changes in government policies, greatly impact the way appraisals are done.
- Appraisal Modernization: The Federal Housing Finance Agency (FHFA) introduced several modernization initiatives to improve the appraisal process and shorten the turnaround time. These include alternative appraisal methods and the expanded use of desktop and hybrid appraisals. Many appraisers are not on board with this initiative.
- Bias in Appraisals: There is an increasing effort from the government and industry organizations to address bias in appraisals when it comes to ethnic and racial differences in property valuations. Increasing transparency and accountability are seen as some steps to addressing this issue. This is politically driven. To date, there have been zero cases where the appraiser has been found guilty of this accusation.
- Licensing and Education Requirements: As the appraisal industry becomes more data-driven and technology-focused, appraisers must quickly adapt to these changes to remain competitive. Appraisers are also faced with stricter licensing requirements and continuing education.
Read about appraisal regulations from FDIC.
#6 – Supply and Demand for Appraisal Services
The demand for appraisal services related to mortgage financing continues to fluctuate depending on market conditions.
High housing demand and low-interest rates increase the demand for appraisal services as more people buy or refinance their homes.
When the market cools, the demand for appraisals decreases.
However, appraisal services for personal use such as divorce, wealth management, and settling an estate will always be needed and the demand remains steady.
#7 – Remote Work and Virtual Appraisals
Due to the COVID-19 pandemic, remote work has become the trend and the industry has adapted by offering virtual services.
Now, there are many appraisers who do property evaluations using virtual tours, video calls, and detailed property reports from homeowners, real estate agents, and property inspectors.
These trends may continue as more and more clients see the convenience of virtual appraisals.
Plus, remote appraisals are a very good option in many cases.
However, for more complex properties, in-person inspections are still the best way to collect the information required to provide an accurate opinion of value.
Every situation is unique and it’s important to work with an appraiser who can offer options to suit your needs.
#8 – Increased Focus on Customer Experience
Appraisers are now focusing more on improving the customer experience to stay on top of the ever growing competition.
Clients are not just looking for appraisers who deliver accurate valuations. They are now also looking for a smooth, stress-free experience.
The appraisal firms that offer more transparency, encourage clients to ask questions, and focus on excellent communication with clients are rising to the top.
How Appraisal Trends Affect Our Clients
Changes and advancements in technology, market conditions, and regulations drive significant changes in the real estate appraisal industry.
To provide faster, more accurate valuations while also improving customer experience, appraisers have to quickly adapt to new tools and approaches.
The stereotypical “old school” appraisers will have a tough time providing accuracy + efficiency + friendly customer service.
To remain competitive in today’s market, appraisers need to stay on top of these ever changing trends.
Whether it’s embracing new technology, understanding sustainability or adapting regulatory changes, the future of the real estate appraisal industry is all about innovation, efficiency, and quite frankly just being nice to people.
