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The Importance of Big Data to Small Town Appraisers

by Administrator on Dec 28, 2014 Technology 1528 Views

Are you concerned that your clients and competitors now have or will have access to more data than you do?  That they will be better informed about real estate sales and trends?  That they can analyze their superior datasets with superior analytic tools and render more timely and more accurate opinions than yours?  Yes and robots with artificial intelligence will eventually replace humans as the superior beings on the planet earth, yes . . but you probably won't be around to see that happen in your lifetime either.

When you hear and read that more data is available to everyone and that it is and will in the future be analyzed using superior analysis tools, I'm sure that those statements are true.  There is already an AVM program available to local Realtors here in Las Vegas that provides factual property information, selects comparable sales, several pages of market information and the model concludes a value based on a great deal of multiple listing service (MLS) information.

Like its popular online brethren I haven't found one of the property value opinions expressed by that AVM to be within 10% of the market value opinions that I concluded for the same properties.  Since the model is claiming only a 72% accuracy, it appears to me that even though it is looking at more data (about 18 to 24 sales) the model is doing a poor analytic job.

I am all for having the best available data and the best analytic tools to analyze it.  Why else would I reference the model when I appraise a property?  I don’t want someone waving it in my face when I’m done claiming that I missed some of its well-founded, zip code specific market data pointing to something specific about the area that I would have otherwise missed.  The question is as of the 2015 new year, have we as appraisers reached a point, or are we about to reach a point, when computers do a as good a job of analyzing data and concluding accurate market value opinions as those provided by a professional appraiser?

From what I have seen so far the answer to the accuracy question is still no, AVM's are still a far cry from appraisers with regard to accuracy.  Will big data uploaded to cloud servers and the most powerful statistical / analytic tools make a difference?  I don't think that the problem with AVM's has been the quality and quantity of the data available, it's with the analysis, and using the most sophisticated programs doesn’t substitute for an experienced appraiser.

When appraisers form real property value appraisal opinions it’s not just about having good market data and comparable sales.  While it may look that way if you just look at an appraisal report there is much more going on than just the facts being considered. 

Appraisers begin considering a myriad of factors about the area, the neighborhood, the site and the building improvement that are not talked about in most appraisals.  Residential appraiser convey facts about a property by checking boxes that are supposed to provide complete details about; equipment, finish and ancillary improvements, but in fact there are many things that just don’t have a box.  

There are thinks like curb-appeal, the relative quality and the quantity of landscaping, exterior color, doors, baseboards, community amenities, roadway width and literally hundreds of small details that never get into a report.  I’m sure that someone ordering a form appraisal thinks that an appraiser should include every possible detail, but it’s simply not possible, and that’s why the summary form was designed, but appraisers don’t ignore what they see.

The qualitative aspect of the appraisal is often ignored in favor of the quantitative and that is why there will continue to be a gap between appraisal opinions and advanced models.  When artificial intelligence finally understands what an appraiser considers during the appraisal process maybe then you can simply take computer with you and it will finally come to a similar conclusion as an appraiser.

For more appraisal information contact Glenn Rigdon, MA, MRICS, ASA a Las Vegas / Henderson Nevada appraiser via email at grigdon@cox.net or via his business website Horizon Village Appraisal (http://www.horizonvillageappraisal.com), or you can also click on “Contact Us” on the home page of this website.

Article source: http://www.appraisalarticles.com/Technology-for-Appraisers/4524-The-Importance-of-Big-Data-to-Small-Town-Appraisers.html

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