As technology advances, artificial intelligence (AI) has become an increasingly common tool in real estate valuation.
Automated Valuation Models (AVMs) have been around since at least the early 1990’s. In the last two decades the development of Zillow’s Zestimate and Redfin’s home value estimates have been used by consumers and professionals alike, with the promise to provide quick, data-driven assessments of property values.
However, when it comes to accurately determining the worth of a home, nothing replaces the expertise and judgment of a certified real estate appraiser.
Here’s why an actual appraiser is more trustworthy than AI when evaluating a property.
1. Experience and Human Judgment
An appraiser brings years of experience, training, and market knowledge to each valuation. That experience includes actually looking at properties, measuring them, analyzing their location, condition, and understanding the local market area.
On the other hand, AI relies on algorithms and historical data, yet appraisers use their “in-the-trenches” expertise to assess factors that may not be quantifiable, such as a home’s unique architectural features, curb appeal, and market desirability. They can also distinguish between cosmetic improvements and substantial upgrades that genuinely add value.
2. On-Site Property Condition Evaluation
AI models analyze public records, past sales, and market trends to generate an estimated home value, but they cannot physically inspect a property. More recently there has been a push primarily by Fannie Mae, Freddie Mac and others to replace the on-site inspection of a home with an unlicensed, untrained and uninsured individual (referred to in the industry as a “Property Data Collector”) to obtain this visual data and pass it along to an appraiser that can be located outside of the market area.
But, a human appraiser performs a thorough on-site evaluation, knowing what to look for that affects value both positively and negatively, identifying crucial details that AI may overlook. Factors such as structural integrity, recent renovations, deferred maintenance, and even neighborhood changes can significantly impact a home’s value—something only physical observations made by a trained and experience professional appraiser can accurately assess for determining their effect on value.
3. Local Market Expertise
Appraisers have deep knowledge of local markets, are often required to also be Realtors for MLS access, and interact with Realtors, Brokers and Agents on a daily basis, understanding micro-market trends that AI often misses. They consider neighborhood dynamics, school district ratings (including school district changes), road traffic pattern changes, proximity to amenities, and recent comparable sales in a way that AI struggles to replicate.
Additionally, appraisers adjust for fluctuations in demand that may not be reflected in historical data, providing a more accurate and up-to-date valuation.
4. Regulatory Standards and Accountability
A licensed real estate appraiser must adhere to strict industry guidelines, such as the Uniform Standards of Professional Appraisal Practice (USPAP). These standards ensure appraisers maintain ethical integrity and accountability in their valuations.
AI-generated estimates, on the other hand, lack regulation and oversight. The AI has no accountability. A lender's decision based on AI has no chance to be revised or reconsidered, leaving consumers with reduced lending choices. When banks, lenders, and courts require an appraisal, they trust certified professionals over algorithm-based valuations.
5. Accuracy for Complex or Unique Properties
AI valuation models are most effective when analyzing standard properties in areas with high transaction volumes – called “cookie cutter homes” by real estate professionals.
However, they struggle with unique homes, luxury properties, historic houses, and rural areas with limited comparable sales.
An experienced appraiser understands how to adjust for these complexities, considering factors such as custom features, land size, and zoning regulations, which AI might inaccurately assess. Those adjustments may not be readily reproducible with existing data, and that is where the “opinion” of an appraiser’s opinion of value comes from.
The appraiser through other sources, including but not limited to statements from market participants, Realtors, and City building departments can provide the necessary information to make credible decisions that affect their opinion of value, something the AI will never be able to do.
Final Thoughts
While AI-powered home valuation tools provide a convenient starting point for estimating property values for a bulk of properties (such as for taxation or an investor’s bulk loan purchase from a lender), they should not be relied upon for critical financial decisions on an individual property valuation. AI-powered valuation tools have a place in the industry. Just not for individual home appraisals.
The expertise of a certified appraiser ensures a more precise, reliable, and contextually accurate valuation, considering both the qualitative and quantitative aspects of a property.
For homeowners, buyers, lenders, and real estate professionals (the real "market participants"), trusting a human appraiser remains the most dependable way to determine a home's true market value. What do you think?
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