Advances in technology, such as artificial intelligence (AI), have significantly shifted the way appraisers value properties, increasing both the speed and accuracy of appraisals.
AI-driven valuation models are “really focused on getting appraisals done more efficiently,” says Michael Taylor, Partner, Financial Services Advisory, who also leads BDO’s real estate appraisals practice. “In the past, reports were very manual and relied on human data entry. Now, these machine learning algorithms can help generate a lot of that content for you based on set parameters, which we find is helping to free the appraiser up for more value-added conversations with our clients.”
Reduced errors and delivery time
In any manual process, there is a risk of human error. However, with its reduced reliance on manual inputs, AI minimizes the number of human errors and makes real estate appraisals more reliable.
Not only is there better consistency in reports that use AI, but the technology significantly shortens delivery times for appraisals. Where appraisals once had delivery times of four weeks or more, clients can now often receive them within three or four days. This reduction in time is essential for clients who are arranging financing or a sale where a shorter timeline can help maximize profit or opportunity.
AI tools can quickly analyze vast quantities of data and extrapolate key property information like square footage, number of units, physical characteristics, and zoning. By using machine learning capabilities and advanced algorithms, AI has helped minimize the time spent on research, as databases are now being built to help appraisers identify similar properties that have been appraised in the past and instantly provide comparable transactions that can lead to improved decision making in appraisal reports.
With its reduced reliance on manual inputs, AI minimizes the number of human errors and makes real estate appraisals more reliable.
Maintaining human insights and input
Using AI, appraisers get answers quicker, which can lead to cost savings for clients and allow appraisers to spend more time on valuable analytical thinking without compromising the quality of the appraisal. Although there are many benefits, AI will not replace the human element or the need for human interaction, as the expertise of appraisers is still required to ensure property valuations reflect the most relevant information available.
“Appraisals aren’t science but a combination of art and science” notes Kris McCoubrey, Senior Manager, Financial Services Advisory, who is heavily involved in the technology aspect of BDO Canada’s appraisal practice.
The importance of an appraiser really comes to the forefront when the market is slow and very little market data is publicly available. This is especially evident in today’s real estate environment as market conditions continually fluctuate. McCoubrey adds “While data provides historical information, the opinions and insights of appraisers are still required to provide an outlook on properties for when market data lags”.
Appraisers can provide clients with much more relevant information and communication than the outputs of a computer. Taylor states “While AI helps appraisers get data much more efficiently, we have to dissect it and present it to a client in a way that makes sense.
It is also important to remember that AI technology is still in its infancy and relies greatly on the accuracy of input data, making it vital to verify the AI-generated information. Taylor adds “The overreliance that people are placing on these tools can be a potential pitfall, particularly in the early adoption of the technology.”
Accessing property views with aerial technology
AI isn’t the only new kid in town when it comes to appraisals. Drones have greatly improved the quality of on-site property visits, an important aspect of appraisals. Their benefits are especially evident when appraising offbeat properties in rural areas, such as on islands in cottage country. “In the past, you might not even have been able to get to some of these places, but now you can use these drones and fully see a property,” adds Taylor.
In more urban settings, drones can be used to provide a sense of surrounding neighborhoods and nearby developments quickly and efficiently. BDO is also developing proprietary software tools that will improve the efficiency of data collection and summaries and provide the firm with opportunities to gain a competitive advantage.
How BDO can help
Jameson Bouffard, National Leader for Real Estate and Construction at BDO is bullish about the need to embrace technology “Time efficient and accurate reports are a baseline expectation for clients. What they really value is the relationship with our team that enables us to provide elevated solutions customized to their needs. Technology allows us to focus on what is truly important without compromising quality. We are committed to adopting, adapting, and innovating technology that can give our clients a competitive edge.”
We provide appraisal reports on all types of commercial real estate and asset classes, from office buildings and industrial developments to retail and vacant land. In addition, the firm appraises a wide range of specialty assets including retirement homes, hotels, golf courses, and marinas.
Our team also consults on several issues, including highest and best use analyses, feasibility studies, market studies, and lease negotiations. In addition, we advise on situations such as financings, estate planning, transaction advisory, financial reporting, and expropriation.
Contact your BDO advisor to help you make informed decisions about your property.
Michael Taylor
Partner, National Practice Leader, Real Estate Valuations
Kris McCoubrey
Senior Manager, Valuations & Modelling Financial Advisory Services