Do you want to do something that will make you question your career and every life choice you have ever made? Look up how likely you are to be replaced at your job by artificial intelligence. The upshot: no one is really safe.

In a 2013 report by Carl Benedikt Frey and Michael Osborne titled The Future of Employment: How susceptible are jobs to computerization? appraisers rank in the “doomed” category, with a 90% chance that their jobs will be taken over by machines.

But then again, the report’s estimates, which implement the Gaussian process classifier, show that about 47% of total U.S. employment is at risk, so appraisers are not alone. And some occupations in the mortgage finance industry have an even worse forecast. Real estate agents, for example, have an 85% chance of being replaced and loan officers have a 98% chance.

A website that compiles the data used in the study, willrobotstakemyjob.com, used data from the U.S. Bureau of Labor Statistics to determine that as of 2016, about 60,770 people were employed in the appraisal industry and that number is expected to grow by 8% by 2024.

The good news is that appraisers might still have a long lead time – the report does not give any kind of time frame on when it predicts we will all be taken over by machines.

Of course, this is just a fun study, but the truth is, like it or not, the valuations industry is being disrupted.

In the midst of changing technology and the rise of the digital mortgage, valuation tools have become a key topic as lenders and buyers push for a faster home-buying process.

Some appraisers, however, are struggling with where they fit. When navigating this new landscape, appraisers and valuation technology providers have to keep in mind the evolving needs of consumers balanced against the safety of the housing finance market.

Several experts in the valuations field shared their insights on the evolution of this technology over the past several years with HousingWire. While the valuations industry is certainly facing several hurdles, these companies are confident that there are ways to overcome them, and are working to create a better service for borrowers. 

About 17 years ago, Clear Capital began as a technology company, however, back in 2001 and 2002, it struggled to sell valuation technology, which was seen as unnecessary in the mortgage market.

“Since we couldn’t sell the technology, we decided to become a valuation company, and we used that technology to fuel the interfaces for our staff, our vendors, our supply chain, our Realtors and appraisers and our clients,” Clear Capital President Kevin Marshall said. “We’ve had this very tech-oriented approach to valuations since day one.”

Marshall explained that with Clear Capital’s experience in the tech space, it recognized the value of big data early on, and the changes it would bring to the workflow process.

And Clear Capital isn’t the only company bringing changes to the valuation market. Assurant Mortgage Solutions is also making changes, and is using IBM Watson, a supercomputer which combines artificial intelligence and sophisticated analytical software, to transform the valuations industry.

Kevin Raney, managing director of valuations at Assurant, explained that once Clear Capital’s valuations team began to implement Watson technology, they were able to transform the appraisal process and provide much-needed tools.

As part of providing appraisers with added technology and tools, Assurant offers packages where appraisers can utilize as much or as little data in their process as they choose.

Raney said part of the success Assurant has seen with the implementation of its tools can be attributed to letting appraisers keep the valuation process in their control. While the machines do much of the data work for them, it is still within appraisers’ power to accept or reject the final results.

A LOT IS AT RISK

Many appraisers are hesitant to accept new technology based on their past experience.

“Appraisers have a lot of risk in that if they mess up on something by trusting somebody’s tool, that’s their license,” Marshall said. “They lose their license, they lose their livelihood, so we recognize that the slow pace of adoption that can sometimes be frustrating, it’s not just a hesitancy with technology, it’s a protection of someone’s livelihood and their ability to feed their family and we take that really seriously.”

Marshall said the best way to change the industry and bring technology to appraisers is to create a product that works, and let appraisers hear about it through a word-of-mouth process where they learn from other appraisers that the tool works. He said Clear Capital is able to utilize this process effectively because it tests its products in its internal operations before releasing them onto the market.

But there is one more important factor to remember when trying to innovate the valuations market – time.

Bringing technology to the appraisal industry isn’t something that will happen overnight. As appraisers work with third-party technology providers to bring about change, it will come slowly as they approach each new tool with caution.

“We do respect the slow process, and when you meet someone with that level of mission and we’re able to iterate and learn alongside our staff and our peers, we have a higher chance of people adopting that technology that can have a positive impact on lenders and their borrowers,” Marshall said.

But the amount of control appraisers have over the product or even fear over losing their license by trying a product that hasn’t been tested aren’t the only factors keeping appraisers from adopting new technology. All the  talk about whether or not technology will eventually replace appraisers hits close to home for many in the appraisal industry. Fannie Mae and Freddie Mac have introduced appraisal-free mortgages to their list of offerings and within some mortgage products lenders are beginning to utilize big data to complete their valuations, rather than hire an appraiser.

Raney insisted that while some valuation tools function by going around the appraiser, that is not what Assurant strives for, and not what he sees as the future of the valuation field. He explained that valuation technology will serve to make appraisers faster and better at what they already do.

Marshall said that whenever someone talks about replacing appraisers, it’s important to define the time frame. While Marshall doesn’t see technology replacing appraisers at any point in the near-term, in 100 years that could all change.

“There’s obviously a lot of movement and a lot of talk and a lot of pilot programs trying to figure out how to make appraisers more efficient and some of those are actually reducing the number of appraisals needed,” Marshall said.

“But my opinion is that no, I don’t think technology in the near term is going to replace appraisers because our understanding of collateral and some of the more subjective aspects of collateral are just really hard to estimate given the available data that we have out there.”

There are many subjective conditions that can’t be accurately assessed with any amount of data or technology. Some of these include whether there are odd smells, different types of damage to the foundation or the sheetrock or other subjective things that could have a wide ranging effect on a home’s value.

While Clear Capital estimates that someday technology and data could become advanced enough to overcome these challenges, for the next 100 years or so, appraisers are probably safe.

“I don’t think there’s going to be in the next couple years a wholesale replacement of appraisers,” Marshall said. “The technology is just not there, and there’s a deep-seated respect for the appraiser in the industry.”

THE CHOICE

The bottom line, according to Clear Capital, is that the clear path forward for the valuations field is through new technology. Appraisers who want to remain relevant in the field must decide to be part of the solution and become part of the development of new but safe valuation tools.

“As you start to look at the outside perceptions of the appraiser industry, it’s really important for lenders that are involved in the valuation process, appraisal firms, AMCs and appraisers to all recognize that if we don’t fix ourselves, someone else is going to fix our industry for us, and that a really scary thing,” Marshall said. “It’s always better to define the future for yourself than to allow a third party outside to do that.”

He said it’s important for the appraisal industry to understand what’s causing people to push for change in the valuations space. He said the industry should ask questions such as, “Is it too slow? Is it not accurate enough? Is it too expensive?” and find a way to fix the problem.

“Either we can dig our heels in and stay the same, and try to defend how historically things have worked, or we can say no, I want to be part of the future solution,” he said. “I want to be part of making the appraisal industry vibrant and strong going forward.”

Raney agreed that appraisers have to be on board with technological solutions in order to successfully bring about change, but he emphasized that it’s important for appraisers to be given the right kind of tools that will help them instead of doing their job for them.

Technology isn’t the only thing that needs to change in the appraisal industry, however. Marshall pointed out that despite inflation, rising costs of living and even increasing wages, appraisers are not being paid higher fees for their services.

“Over the past few years we have all asked appraisers to do more, more data, more analysis, we really haven’t given them the tools, and to be fair to appraisers, we really haven’t paid them more,” he said. “The industry hasn’t paid them more or given them a raise for the number of hours worked for a report in a number of years.”

But increasing technology could help take some of the burden off appraisers, allowing them to do more appraisals in less time, with less effort.

“On the AI side, the machine learning, the artificial intelligence side, the access to data, whether its property data, market trend data, geographic data, point of interest data, all these things affect property values, real estate market conditions or buyer preferences,” Marshall said.

 “There’s more and more of that data available, and now with all the data, whether it’s good or bad, that smartphones are gathering, social media is gathering, there is a lot more opportunity for us to analyze that data to help make appraisers more efficient and help provide more context on the markets they’re appraising in.”

Overall, it’s important that every member of the industry – lenders, real estate agents, appraisers and everyone else involved in the home-buying process – remember who it is that they’re trying to serve.

“As soon as we lift our minds off of the ultimate customer, that’s when dysfunction can creep in, so we’ve been very purposeful about always remembering when we’re tackling hard problems that we’re all here serving the homebuyer, the borrower, and we’re eager to partner with GSEs lenders, appraisers and our competitors to help solve problems because when the borrower is better served, we have a healthy industry,” Marshall said.

But before any other changes can take place, there is a crucial first step. “The first step is highly admissional,” Marshall said. “People have to want to be a part of rethinking how the world works.”