The fusion of technology and human expertise will transform how properties are valued.
How so?
Artificial intelligence gets increasingly integrated into real estate appraisals, bringing speed, efficiency, and unparalleled accuracy.
But does this mean the end for traditional appraisers, or is there room for a powerful partnership between humans and machines?
To answer this and other questions, I will discuss in today’s article…
- What AI appraisals are
- Seven general benefits of using AI in real estate appraisals
- Three benefits of using AI in real estate appraisals for real estate marketing
- AI and human appraisers: a powerful combination?
- Four challenges, concerns, and limitations in AI appraisals
What Are AI Appraisals?
AI appraisals usually refer to real estate or home appraisals done with the help of artificial intelligence.
So, in the end, it’s determining a property’s market value with this technology.
Traditional appraisals are usually carried out by a professional appraiser assessing a property and considering factors like location, size, condition, and comparable sales.
As you may well know, they are often needed when buying or selling properties, refinancing mortgages, or settling legal disputes.
Now how do different types of artificial intelligence and/or machine learning come into play with appraisals?
It’s like having a digital brain that can analyze large amounts of data to identify patterns, trends, and other factors influencing property values.
Imagine this technology as your appraiser assistant working behind the scenes. Hence, you get more accurate data in a shorter time.
Since I used “AI” and “machine learning” together, you may wonder whether there is a difference between the terms. Some use the terms as synonyms, but they are not.
Machine learning is a subcategory of AI (artificial intelligence).
The latter includes various techniques and approaches to creating intelligent machines, one being machine learning.
And machine learning is more focused on developing algorithms allowing machines to learn and improve from experience.
Because of that, they don’t need to be explicitly programmed because they can program themselves.
7 Benefits of Using AI in Real Estate Appraisals
If you are still determining how you may benefit from AI-powered real estate appraisals, I prepared a list of benefits you may want to consider below.
Let’s first start with the general benefits and then move on to the ones related to real estate marketing.
7 General Benefits of Using AI in Real Estate Appraisals
1) Speed and Efficiency
Depending on the situation, you may have to wait several days for an appraisal report. According to this source, it’s one to two weeks.
In contrast, AI software specialized in real estate appraisals can do this in a flash since it can process vast amounts of data much faster.
You would need not just one appraiser but a large team working around the clock to get up to this speed.
2) Cost Effectiveness
Since labor-intensive tasks can be done in a fraction of the time with AI and appraisals are usually labor intensive, it will also lead to cost reductions in this category of work.
So if you are an appraiser using AI, you can offer your service at a lower rate.
And if you are a real estate pro needing appraisers, you will likely get these services at reduced costs too.
However, from the appraiser’s business perspective, they must increase the number of orders to generate the same revenue as before.
The concern is that there is only so much demand for appraisers in the market, so the number of orders they get may not increase at a rate that fully compensates for the cost reductions and efficiencies brought by AI.
You could mitigate this by providing additional services (e.g., real estate consulting, property investment advice, or market analysis).
Additionally, as an appraiser, you may need to focus on skills complementing AI technology in areas that require human expertise (e.g., unique situations and complex property evaluations).
And finally, you could also explore opportunities in different real estate niches, such as industrial or commercial real estate, where human expertise is likely in higher demand.
3) Remote Access
Suppose you have a property you would need a helicopter or machete to access.
AI can help by assessing property conditions using remote data sources such as satellite imagery. This remote accessibility can also be helpful during a crisis or a pandemic.
4) An Increased Accuracy
Humans are not perfect and tend to make mistakes and thus may overlook specific trends or patterns.
Unless the AI is buggy, it won’t make the same errors since it can analyze many large datasets and stay accurate with its valuations.
5) No or Almost No Bias
If you read my article discussing whether AI will replace real estate agents, I already wrote about reduced bias as one of the benefits.
The same applies to appraisers since they are also humans. And humans, by evolution, are prone to cognitive biases. Just look at this long list, and you will not know if you should laugh or cry.
When AI algorithms are designed without bias, they can minimize them. Thus AI appraisals would come close to being objective.
6) Continuous Learning and Adaption
Since AI is designed to keep learning, AI solutions in real estate appraisals can refine their models based on new data and feedback from the real estate market.
7) Integration with Other Apps
AI models can be integrated with other technology and apps.
For instance, an AI appraisal system could be integrated with a property management system and online real estate marketplaces.
This combination could give investors and other market members helpful and faster insights.
3 Benefits of Using AI in Real Estate Appraisals for Real Estate Marketing
1) Quicker and More Accurate Property Valuation
How would quicker and more accurate property valuations benefit real estate marketing?
Well, speed and precision can translate into better marketing materials and more compelling sales pitches (e.g., you can emphasize the accuracy of your marketing message).
While AI is still fresh and has not been adopted by a majority, this can give you a competitive edge.
Sometime in the future, it may be the default expectation of clients to have access to AI-powered appraisals.
2) Helps to Better Target Marketing Campaigns for Real Estate Lead Generation
Since AI appraisals can provide valuable insights into market trends and property characteristics, this data can be leveraged to create targeted marketing campaigns.
For instance, by carrying out an AI appraisal, you may find a trend, such as buyers preferring a particular neighborhood.
This information could be used to market to potential sellers in the area to generate seller leads.
3) More Trust and Credibility
Suppose you show or communicate to potential clients that you use cutting-edge technology in home appraisals.
In that case, it can boost your credibility in the eyes of potential clients, whether you are an appraiser or a real estate agent.
Why? For instance, potential sellers may perceive you as someone committed to using cutting-edge technology or service providers to provide a better service.
It’s basically an added value you bring to the table.
You can also use this in your marketing messages or real estate sales copy to generate leads. In the context of the 3 Ps of (real estate) marketing, it’s the product part: you improve the product, which would be your service as an appraiser or real estate agent.
AI and Human Appraisers: A Powerful Combination?
As I discussed earlier, AI appraisals can hurt the revenue per appraisal service offered since you will be able to output more appraisal reports in the same amount of time.
This would be the consequence of appraisers incorporating AI.
It will be worse for those reluctant to use it and integrate it into their workflow.
They may be out of business, provided they are not in a pretty specialized and complex real estate niche where human expertise is still needed, and no AI solution is viable (yet).
So the key to AI appraisals is finding the perfect balance between human expertise and AI capabilities.
But how could a symbiosis of human appraisers and AI-appraisal solutions look like?
1) Collaboration
Here you can think of AI as a powerful tool that enhances the appraiser’s skillset.
While AI can quickly analyze large datasets and generate valuable insights, human appraisers bring their experience, local knowledge, and understanding of unique property characteristics.
It’s like having the ultimate appraisal dream team, where humans and AI work together to create accurate, comprehensive valuations.
2) Quality Control and Oversight
Have you ever played around with the various AI tools on the market already (e.g., OpenAI, Jasper, Midjourney)?
If yes, you will know that it’s not a set-and-forget thing.
AI might be fast and efficient, but it’s not infallible.
Human appraisers play a crucial role in overseeing the AI-driven appraisal process. They can review AI-generated reports, verify data accuracy, and identify anomalies or inconsistencies.
3) Interpretation and Contextualization
AI can provide data and trends, but human appraisers can put that information into context.
By understanding the nuances of the local market and interpreting AI-generated data, appraisers can paint a complete and accurate picture of a property’s value.
For instance, imagine an older home in a historical district with unique architectural features.
The AI-driven appraisal system might analyze the data, including square footage, lot size, and the number of bedrooms and bathrooms, and provide a value based on comparable properties in the area.
However, an experienced human appraiser can recognize this home as having unique characteristics that the AI may only partially consider.
For example, the appraiser knows that the historical district has specific zoning restrictions and that the unique architectural features add significant value to the property.
They can also account for the local market’s appreciation for such distinctive homes.
The appraiser can create a more accurate valuation by combining the AI-generated data with their knowledge of the local market and the property’s unique qualities.
They can present this information to clients as a compelling narrative highlighting the property’s distinctive value proposition.
In this case, the appraiser could explain that the home’s unique charm and historical significance make it a rare gem in the market, justifying a higher valuation than the AI system might suggest.
So, the human appraiser’s role is to add context and depth to the AI-generated data, ensuring that the final valuation accurately reflects the property’s actual value.
4) Building Trust and Relationships
Since we deal with high-stake real estate decisions, as you know, this industry is more than any other business, a people business.
Therefore, human appraisers are essential to building trust and fostering client relationships.
They can communicate complex information in a relatable way and address any concerns or questions clients might have. It’s like having a trusted advisor who guides clients through the appraisal process with empathy and understanding.
As I mentioned in my article about AI replacing real estate agents, unless you don’t get to the level of AI resembling a real human robot, at least in real estate, you will still likely need real humans for high-stakes situations.
5) AI Improvement Powered By Human Appraisers
AI algorithms can learn and improve over time, but human appraisers provide the feedback necessary for this growth.
By monitoring the AI-driven appraisal process and identifying areas for improvement, appraisers can help refine and enhance AI capabilities.
I see, however, an inevitable conflict of interest here.
At least the ones reluctant to AI and hurt by rate cuts likely will not want to help to further enhance AI’s appraisal capacities.
4 Challenges, Concerns, and Limitations in AI Appraisals
While ending this article, I will leave you with four challenges and concerns regarding AI appraisals.
As you can read, AI home appraisals hold great potential but come with their fair share of challenges and concerns. Some are the reduced revenue for appraisers, which I already discussed earlier.
Let’s explore some additional stumbling blocks:
1) Data Quality and Accuracy
AI follows the garbage in garbage out principle from computer science. It’s only as good as the data it’s fed.
So access to high-quality, up-to-date, and accurate data is essential for AI-driven appraisals. It’s like giving a chef the finest ingredients to create a culinary masterpiece.
2) Algorithmic Bias
While AI can help reduce human bias, it’s not immune to bias.
Algorithmic bias may arise from biased training data or flawed design, leading to unfair outcomes.
So again, it’s the garbage in, garbage out principle.
3) Legal and Regulatory Challenges
AI-driven appraisals may face legal and regulatory hurdles as laws and guidelines struggle to keep pace with technological advancements.
Adopting AI in appraisal processes requires navigating complex legal landscapes.
So if you think of integrating it into your workflow, you may also risk jumping too early on the train. Imagine having it integrated at high costs and time investments. Then, a few months from now, you are no longer allowed to use it.
It’s a real risk since Italy, for example, already forbid Chat GPT in some areas (source).
4) Technological Limitations
There may be a little hype right now regarding AI, especially Open AI’s Chat GPT. However, it still has limitations.
For instance, AI might struggle with interpreting unique property characteristics or understanding the context of specific neighborhoods. Human expertise remains essential to fill these gaps.
By the way, in my article about real estate AI companies, you will also find a provider for real estate appraisals.
This article has been reviewed by our editorial team. It has been approved for publication in accordance with our editorial policy.
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