Collateral risk analysis (appraisals being a key element of that) is partially art, partially science. Those two facets are blended inseparably, like a soup…the ingredients can’t be separated. While computers can undeniably perform certain tasks better than humans (such as the handling of large amounts of data) appraisers can perform other absolutely critical aspects of the process better than a machine. The appraiser can actually see the property to be valued, they can utilize their human senses, they can use their judgement based upon what they observe by physically being at “ground zero” (the Subject property), and can then apply their experience. The appraiser can see the improvements or remodeling efforts made by a homeowner, assess it’s condition, and determine any functional obsolescence of the dwelling’s room layout. A computer cannot.
While the machine may provide large amounts of data, the appraiser has the ability to verify that data, assess the validity of those verifications, and filter the data into what is, or is not, pertinent to a specific property. The experience of the appraiser in the marketplace can not be duplicated by any machine.
It has been said that computer generated home values are not subject to human bias. That is simply not true. Home “values” generated by computers are not actually values, but are instead simple home sales price models. And those models are based upon the algorithms upon which the sales price model is based. In turn those algorithms and their programming are performed by humans. They can be “juiced’ to produce results which are more “satisfactory” or pleasing to their lender/client, with no consideration given to the consumer of the mortgage product, namely the homeowner or borrower.Learn more about algorithm bias here.
This also leads to another critical question: What regulatory protocols are in place to oversee the computer? Are there any at all? Can a machine be held accountable for unreliable (or worse, corrupted) output? In contrast appraisers are licensed professionals and subject to strict oversight on each and every valuation assignment they perform.
Large amounts of data, and it’s analysis, is not in any way foreign to appraisers. They understand that humans with machines is a productive and useful paradigm. However ultimately, when it comes to the financially critical task of placing a value on your home, the appraiser cannot be replaced by a machine.