Rural Man...From the Future

The next several months will be, in my opinion, the most consequential ever faced by the appraisal profession. We are on the verge of a new epoch, one where data analytics will underpin results and where artificial intelligence and improved modeling will reduce the demand for human-performed appraisals – be they traditional or hybrid in nature. Driven by the shift to UAD 3.6, appraisers will put down the pencil and pick up the tablet – ready or not.

I say this because it’s already happening, just not in spaces you expect. Last week, I attended the Appraisal Foundation Advisory Council’s (TAFAC) joint meeting with the Industry Advisory Council (IAC) and Council to Advance Residential Equity (CARE). As part of our daylong event, we heard a keynote talk from Kirk Manker, VP and Chief Appraiser at Farm Credit Services of America.

There is an assumption among those who practice in urban and suburban areas that data-driven tools like AVMs and appraisal waivers only work in high-volume, homogeneous areas – think suburban housing tracts from a single builder, or rowhouse neighborhoods in a city center.

Kirk demolished those assumptions and showed a new reality: Rural is leading on technology.

Not only is Farm Credit Services of America using technology, but they are also developing in-house tools with the stated goal of having a collateral decision on 80 percent of all lending activity in 24 hours.

Already, nearly a third of decisions (especially on unimproved land or land with minimal improvements) are being made through AVMs. While 80 percent is a stretch goal, there is one sentence that has stuck in my mind all week.

Truck keys are the most inefficient tool for an appraiser. (Consider this a paraphrase, not a quote.)

And Kirk is right, to the chagrin of many who still cling to the idea that the best way is the way it was done decades prior – by one person, on paper, and on site for the inspection. Every minute an appraiser spends away from the place they conduct analysis is another minute of productivity lost, especially when the process becomes driven by data-supported analysis.

Almost as a badge of honor, some appraisers hold fast to inefficient processes because they feel the inefficiency somehow lends to better credibility in assignment results. That allowing someone other than themselves (or a trainee under their supervision) to contribute to the process makes the conclusions less tenable.

The doctor’s office analogy is worn but valid. Medicine is already slow enough at times but expecting the doctor to complete every step of the process when a skilled and available workforce exists to perform first order would be madness. Yet somehow in AppraiserLand, this idea persists.

I asked Kirk where he sees his staffing needs going in the coming years as technology further infiltrates the process. (He has ~99 appraisal staff today.) His answer was telling: Not that the number of people needed will go down – as the business grows, scale drives need – but that the skills required to be successful and the type of work involving human intervention will change significantly.

I walked away from Kirk’s talk confident in something I already felt and occasionally shared. The “what” in what appraisers do every day is going to change fundamentally. Simple assignments? No more. Basic adjustments lacking support? Unacceptable. Not using technology from start to finish? Anachronistic.

I first saw this coming – ironically – from the rural appraisal sector nearly a decade ago ,where many established practitioners were saying new entrants to the field were incredible with tools, technology, and data, but simply did NOT want to get out from behind the desk and drive to subject properties. While this was baffling to them at the time, it was a harbinger of things to come.

Today, Farm Credit Services of America remains at the unexpected forefront of where the profession is headed: Using technology to reduce inefficiency in a collaborative, focused team environment, saving the skills of its best and brightest for the largest and most complex valuation challenges.

This brings me to one last point: If this all – data analytics, AI, AVMs – can work in the rural and agricultural lending space, then perhaps it’s time for the rest of the profession to be less myopic about why it cannot work in urban and suburban areas. It can, it will, and it’s coming.

Does this make appraisers less valuable? NO! It means you are more valuable in assignments where professional judgment is critical to a credible opinion of value. Especially with robust digital tools supporting your work every step of the way.

Some see this as means to reduce the number of appraisers – and they are right, but not in the ominous conspiratorial way. Expectations, especially from the GSEs, will require appraisers to leverage technology in ways not broadly adopted before. Those who adapt will thrive, and those who cannot will either move into non-lender work or leave the profession entirely.