Find out what it's worth

The collateral valuation business is one of the most interesting aspects of the U.S. home finance industry, at least to me. Part of that is probably because I have a number of friends who work in this space and who I value highly, both personally and as good sources of industry information. But I think it's also because this is one part of the business where there are no facts, just opinions.

I'm sure I just send a lot of coffee through the noses of some very serious industry professionals out there who will surely tell us that the estimates of value they assign to a property and place over their signature on a valuation report are based on many iron clad facts. While I'm sure that's true, they are also based on comps and market trends, both of which are fluid and subject to the whim of the mob.

When it comes to the valuation we put on a piece of property, it's all about our best guess. That can be a scary place to work, but I've found that the people who have built their careers in this space are very comfortable with putting those values down on paper. If you ask someone like Elizabeth Green or Joan Trice about how much faith we should put in these opinions, I think I know what they would say. They've both spent the bulk of their careers working with and around professional appraisers and they know how seriously these professionals take their craft.

But if things don't change, we may see this important business taken out of the hands of professional estimators of value and given over to computer models.

I know a lot of people who work on such software and not a single one I have ever spoken to will admit that the goal is to replace an appraiser. I only suggest it because the typical professional appraiser is a member of AARP and probably looking at retirement as a short-term probability. The way this industry is set up, the only people who can afford to bring in and train the next generation of appraisers are those who are ready to get out of the business, and a lot of those guys are tired now and not eager to take on the task.

For some readers of this notebook, I'm sure that a world in which computers assigned property values without the aid of a professional appraiser is way too "2001: A Space Odessy". Of course, those folks would probably not be familiar with firms like Platinum Data, Veros or Magellan or Fannie Mae.

None of those companies are working to replace appraisers either, to my knowledge, but they are all expert at pulling together the data and analytics that make real estate valuation make sense. 

Hopefully, the industry will find a way to attract, recruit, train and excite the next generation of real estate appraisers. In the meantime, I expect we can look forward to more appraiser-assisted valuation tools and, very likely, an increase in the use of alternative valuation tools. Though perhaps not all of them will be tech based.

If you have an opinion about this business and the short-term changes you think we can expect here, I hope you'll comment or at least point me to something you find interesting by placing a link in the comments below.