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Is Tech-Knowledge the appraisal “approach” of the future?

Yes.

Two main reasons:

  1. The legacy “three approaches” were each enabled through the technology of that day.
  2. The legacy “three approaches” were each motivated by the valuation needs of the of that day.

The Technology motivations:

  • The cost approach, first on the scene, was driven by industrialized construction and insurance needs.
  • The income approach formalized with 20th century investment theory and capitalization models.
  • Sales comparison grew from more documented reliable information of comparable sales.

In each case, the technology of that day enabled and bolstered the related use, its market demand.

The Market (demand for appraisals) motivations:

  • The cost approach appeased both human intuition and the economic principle of replacement.
  • The income approach appealed to the logic of investment income and price gain motives.
  • Sales comparison built on the appeal of personal market familiarity and substitution.

In each case, the motivation came from the market need for credible advice and information.

As an aside, prior to the formalization of the “three approaches” in the 1987 USPAP, there were several “looser” approaches, methods, models, and specialized techniques.  (An example is the DCF -discounted cash flow – which is actually a forecasting method.)

I have used several of these other “approaches,” with no real attempt to classify rigorously to within one of the three official, standardized, regulated, accepted “approaches.”  In some cases, the analysis was a combination of two or even more of these not-an-approach approaches.  As appropriate and relevant!

An Appraisal Institute seminar once noted the “inbreeding” that can take place as between the three official approaches.  For  example, obsolescence and depreciation for the cost approach depends on sales comparison.  The income approach depends on similarity.  And the sales comparison approach has been cited to include the GRM (gross rent multiplier).

So.  Given that technology and market needs have “led the parade” of how appraisers approach and report “worthy of belief” opinions – what do today’s technologies and markets call for?

Today’s technologies enables systematic analysis, repeatable procedures, visual and numerical data comprehension, and ways of calculating and reporting actual reliability, risk, and forecasting results.

Today’s technology connects human understanding of human behavior and economic theory, and market information.  Understanding.

Today’s technology can meet today’s market needs for risk measurement, reliability sense, reproducibility, and even auditability.  Public policy can initiate great public benefit.  It must start now.

Some portions of today’s market have been carved out by AVMs and other partial substitutions for full integration of human intelligence and artificial intelligence.

AI integration, combined with enlightened value econometrics and expert tech-knowledge are the best for the safe future of the good of the public, and other housing-related participants.  It is called data science.

Learn Market Analysis from the Creator of Evidence Based Valuation, using data science, now with AI.  Find out more and Register for Stats, Graphs, and Data Science here.