What Would Happen if There Were No Appraisers?

Will Appraisers Be Replaced?

Unintended Consequences of no appraisers

Over the last several years appraisers have been faced with the threat of being replaced by computers and big data. We’ve all read the buggy whip analogies that illustrate the point that if we do not adapt to new technologies and processes we will see the demise of our industry.

I personally believe that appraisers will be around for a long time but we will need to be able to adapt and adjust our skill sets to the new norm. I don’t think that the appraisal profession will look like it does now, especially for mortgage lending, but that is not always a bad thing.

The importance of a third party unbiased opinion of value for valuation issues cannot be overstated. With that being said, there are some groups in the home buying process that still believe that appraisers are a necessary evil and that we get in the way of the mortgage lending process.

These same people seem to have tunnel vision and can only see from their own perspective. The point of view that they fail to see is that of the public.

Today I thought I would share my thoughts on what it might look like if there were no appraisers. What would happen if an unbiased third party was not available to provide a neutral human perspective on the market value of a home in the mortgage lending transaction?

I would like to hear your take on the matter so leave a comment below.

7 Consequences of Eliminating Appraisers From Mortgage Transactions

1) Questionable accuracy due to faulty county records- All automated value estimates are based on one key piece of information and that is the living area of the home being valued. If this is wrong then the value estimate will not be reliable.

Most valuation models calculate the price per square foot of sales by dividing the sale price by the square footage of the home. This square footage usually comes from public records, which has a history of being wrong.

The inaccurate price per square foot is then multiplied by the subject property square footage (which could be wrong) to arrive at an estimated value that is most likely not very accurate.

Do you get the picture? Automated valuation models (think the Zillow Zestimate) have the potential to provide a very inaccurate value estimate because they do have the capability of collecting and verifying accurate data.

2) No reconsideration of values- If you have computers spitting out value estimates what happens when one of these value estimates is less than the contract amount? Currently, it is possible to request a reconsideration of value. This occurs when there is a disagreement about the value arrived at.

If the computer is providing the value, will it be written in stone with no possibility of being changed? What if additional information is provided that supports a higher value? Will the computers value be the de facto answer?

3) No critical thinking that takes into consideration nuances of the market- There are a lot of thought processes that go through an appraiser’s mind when developing their opinion of value. It is not just a matter of applying a price per square foot to a home’s square footage.

Appraisers look at the range of value provided by the sales as well as things such as the popularity of the area, supply and demand, and other subjective factors. An AVM only looks at black and white features and cannot reason with the other gray areas.

4) Quality and condition can be subjective but how can a machine be subjective?- Without appraisers, the human eye is removed. How is quality observed and measured?

How will high-quality building components be taken into consideration? Solid surface counters such as granite or quartz cost a lot more than a lower quality laminate material.

It’s also important to consider the condition of a house. Appraisers take into consideration the effective age of a home which considers its condition.

A home that is in good condition due to updates and renovations will typically sell for more, so it is important to take this into consideration.

5) What about intangible items?- AVM’s can measure tangible features such as age, bedroom and bath count, square footage (if from a reliable source) but it’s not very good with items like I mentioned above.

The appeal of a property has to be viewed by the human eye and then measured against other properties in the area and this would not be possible if there were no live appraiser. As noted in a recent article published by Realtor Magazine these things are important because people buy homes not computers.

The appeal, or lack of appeal, of a house is hard to quantify, therefore it has to be analyzed by a human being.

6) What about appraisal contingencies?- If the appraiser is replaced by an AVM in a mortgage transaction this could potentially hurt the buyer. These types of evaluations are done primarily for lender purposes and do not take into consideration the buyer.

An AVM only looks out for the lender and not the buyer. They are restricted in scope and only verify information pertinent to lender risk.

If an appraisal contingency is included in the contract this type of evaluation would probably not suffice. It is possible to include an appraisal contingency based on a full appraisal that the buyer got on their own.

This type of product would give a value estimate that the buyer could rely on to make an informed financial decision.

7) Less stability in the real estate market- I believe that if there were no appraisers the real estate market would be less stable due to questionable valuations. Just as the market was unstable during the last recession due to differences between the actual market value of the home and the appraisal this could occur again.

If appraiser-less valuations are not accurate the personal portfolio of homeowners/buyers will be in question. Banks will also be at risk if they are over loaned on properties that did not receive an accurate valuation.


As you can see there would most likely be numerous unintended consequences if appraisers were to be phased out and replaced with computer evaluations. In the race to be quick and cheap, I believe that borrowers and the financial markets would be adversely affected.

Appraiserfest Helps Appraisers Become More Relevant

AppraiserFestI recently attended the first ever Appraiserfest 2018 in San Antonio, Texas. This conference was advertised as being an advocate for appraisers and it did not disappoint.

The conference provided continuing education to help make the appraiser more relevant in today’s changing market. With governmental agencies and lenders working to make the appraiser less a part of the process we were given various ways that we can provide value to the public.

In addition to education, appraisers had a chance to network with friends that they have already known for years through online forums such as the 100% Appraisers Facebook page.

I had the opportunity to finally meet two appraisers I have known for the past 8 years, but only online. By networking and building stronger relationships the appraisal profession can work together to enact change in our industry.

Many appraisal coalitions were represented and veteran appraisers were honored for their service to the country. I believe Appraiserfest 2018 more than accomplished its goals and I look forward to attending others in the future.

If you attended the conference please leave a comment below and share what you liked most about it. As always, thanks for reading.

If you liked this post subscribe by email (or RSS feed). Thanks for visiting.


  1. Steve Kahane says

    Tom, I enjoyed reading your What Would Happen if There Were No Appraisers post. I agree with all that you wrote but would add a couple thoughts to your first point about county records.
    Valuation by price per square foot ($PSF) has more problems than just an incorrect number of square feet. It is an over-simplification of valuation. It places all the value into the number of square feet contained in a house. Lots, garages, pools, views and all the other property characteristics that add value and are accounted for on a comparable grid are not considered.
    Another problem is there is no reconciliation or judgment. Comparable Market Analyses (CMAs as they are called in my market) are like AVMs in that they typically take the mean or median of the comparable properties or their value characteristics. An appraisal reconciles the comps and data to determine which are most indicative of value rather than a simple mathematical average.
    Lastly, as you point out, some characteristics of value are non-numeric. Differences in quality, condition, view, design, amenities, etc. cannot be accurately quantified by numbers. No number, no consideration in a regression analysis.

    Thanks for the post. I look forward to reading more of them.

    • Thanks, Steve. I agree with you 100% about price per square foot and have written other posts about this very thing. I believe that anytime you only look at one metric you can leave out other important factors that go into appraising. Most of the AVM’s are only one dimensional and leave a lot of room for error.

  2. Great post. Removing independent appraisers from Mortgage transactions is a complete lack of consideration for the consumer and the tax payers who end up bailing some of these large institutions out.

  3. Hey Tom! I love the perspectives you gave. I totally agree with all of your points. Appraisers will definetly need to adapt to the changes in our profession. I do believe that there will always be a need for appraisers in many situations. It was so nice to meet you in person at the Appraiserfest! I loved the practicality of the instruction at the fest. But I enjoyed meeting and visiting with you and other great appraisers in person the most!

    • Thanks, Jamie. Same here. To finally meet fellow appraisers that I have interacted with online was just as much a pleasure as the curriculum, which I thought was spot on.

  4. Well done, sir. You hit all the right notes in this song. And, Appraiserfest, somehow that made me happy as in it’s about time. 😀

    • Thanks, Sheila. Appraiserfest was the first appraiser conference that was focused on the appraiser and how we can provide additional services beyond lender work. I think it was a great success and can’t wait until the next one.

  5. Hi Tom. Nice meeting you at the Fest. I do think you left out a very important item and that is the rampid fraud there would be with out us

    • Thanks, Dan, for your take. You are exactly right. I’m sure more fraud would occur without appraisers being involved. There are always people out there trying to game the system and I am sure if computers were the only valuation tools involved it would probably be exploited. Glad to see you at the ‘fest as well.

  6. Great points Tom-Appraisers are the only Independent part of the process. It was great to meet you at Appraiser Fest.

  7. Great post and thoughts about taking the appraisal out of the picture. I agree with you that appraisers will still be around and needed but we do need to adapt and change. Appraiserfest looks like a great time! Wish I could have been there but definitely have plans of making it next year.

  8. It’s a good idea to have appraisers. Let’s keep that going. Big banks are the ones who are trying to benefit without appraisers. Let’s be real about that. Hey, it was great to meet in person at AppraiserFest.

  9. Matt Nolan says

    Hi Tom. It was a whirlwind 3 days for me. I had my girlfriend with me and mostly went out on the town at night with her. I didnt get a chance to meet you. Maybe next time. What a great event. Now I plan on implementing what I have learned. I enjoy your newsletter. Keep up the fine work.
    Matt Nolan
    Parkwest Property Appraisals, NJ

    • Thanks, Matt. Yes, it did go fast and I wish I had been able to meet more people. That will be a goal next time. We should all try to stay in touch so we can keep the momentum going.

  10. Hi Tom,

    Great post as usual. I suspect that the unintended consequences of removing appraisers from residential lending will be large. Great to meet you too st Appraiser Fest. Can’t wait for the next one.


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