Hybrid appraisals becoming more common in real estate transactions

WASHINGTON — Property appraisals, a critical part of real estate transactions, have customarily been done in person by an experienced appraiser. However, with advancements in technology and the rise of big data, alternatives to the traditional appraisal field are beginning to become more prevalent in the U.S.

That is according to panelists at the real-property valuation forum that took place during the 2019 Realtors Legislative Meetings and Trade Expo last week.

Traditional appraisal alternatives, such as hybrid appraisals (a combination of inperson and computer-desktop overviews of a property), broker price opinions and data-driven automated or desktop valuation models, can be incredibly useful and cost-effective tools. However, many people in the industry, including the National Association of Realtors, urge caution when waiving traditional on-site appraisals for home-purchase transactions in order to ensure that purchases are based on sound financial principles and do not put undue risk on consumers or the market.

During the forum, Peter Phelan, deputy assistant secretary for capital markets for the U.S. Department of the Treasury, discussed how data and technology are bringing rapid change to the financialservices industry and driving innovation. Because of this, it is vital that responsible experimentation with these new technologies — from hybrid appraisals to digitized mortgages — is facilitated for new and exciting market participants.

“The adoption of these new financial technologies is not a matter of if, but when,” Phelan said. “And with a new generation of tech-savvy homebuyers, this digital revolution will be necessary.”

Michelle Czekalski Bradley, a certified appraiser and broker with Czekalski Real Estate Inc., said she agrees that appraisers need to be ready to embrace such new technology because it is already affecting the industry.

“Change is not going to happen; it has already happened. And it is going to continue to happen,” Bradley said. “At some point, we are going to move beyond hybrid to something completely new.”

Timothy O’Brien, general manager of Clear Capital’s appraisal-management company, said he believes hybrid appraisals will create more choices rather than lead to the end of appraisers. Consumers can decide on a scope of work that does not include an appraisal if the information provided by data collectors is adequate, saving homebuyers time and money. However, the quality and amount of data is key to making these products viable.

“A lot of markets have really good data, and this system works most of the time. In other markets, the data isn’t there, and it might work 10 percent of the time,” O’Brien said. “But appraisers will always be needed, whether for field or desktop work.”

O’Brien also suggested that these models might bring new people to the appraisal field — those who were not interested in a career that required a lot of travel or those who have problems with mobility.

“My father is 70 years old, and he is still a practicing appraiser. He cannot go up a flight of stairs, but he can still

do desktop appraisals,” O’Brien said.

John Torvi, vice president of marketing and sales for Landy Insurance Agency, discussed the liability and legal issues that arise when appraisers and agents adopt these new appraisal products.

“The No. 1 question I get asked by appraisers is, ‘Am I covered?’” Torvi said.

Insurance companies are slow to adapt to these advancements, so before appraisers begin taking on hybrid appraisals, they should check their insurance plan to make sure they are covered, in order to avoid a lawsuit.

Additional information and resources for real estate professionals about appraisals can be found at www.nar.realtor/appraisal-valuation.