Contact Us

Why Technology Could Never Replace The Human Element Of Real Estate Appraisals, Valuations

Technology is bringing commercial real estate out of the stone age, making it more efficient for brokers to find and conduct deals, for landlords to manage properties and for investors to raise funds to bet on assets.

One area of the industry that remains largely untouched by tech is the real estate appraisals and valuation business.


That is not to say that tech innovations have not made appraisers’ jobs more efficient. The use of technologies like Google Maps to measure buildings, drones to inspect large surface areas and software programs to automatically populate data into report templates have all aided in the valuations process, but none have completely eliminated the man hours required to physically inspect buildings to determine a property value.

“Technology does not replace the appraiser, even though there are some automated valuation models out there, you still need the human element involved. What technology has done is make the appraiser far more efficient in their process so they can complete an assignment with less human error and much quicker,” Appraisal Institute President Jim Murrett told Bisnow. Murrett is also the director of Appraisal Standards and Audit Services for Colliers International. He oversees the Northeast region and is based in Buffalo, New York. 

Recent innovations by PropTech startups could reduce the need for humans in appraisals. 

Jacksonville, Florida-based eVest Technology, an investment management tool that uses artificial intelligence to help commercial real estate sponsors raise capital for projects and connect with thousands of high net worth individuals, launched in August. The startup recently created a tool to provide real-time valuations for commercial properties across the U.S. 

“It’s crazy when you have Netflix, Amazon, Google and self-driving cars, but still have old-fashioned appraisers charging you a left lung for appraisals — it’s nuts,” eVest Technology founder and CEO Dan Summers said. “We decided to think outside of the box and create an instantaneous platform.”

Screenshot of an eVest Technology valuation report

The valuation tool — which is available for free to customers who license eVest Technology software — provides real-time valuations for buildings across the nation. Summers and a team of engineers and appraisers identified numerous application program interfaces, which allowed for the aggregation of data points into a machine using various algorithms to generate valuations. 

“We put together all of the typical benchmarks and data points that an appraiser needs to generate an actual appraisal — everything from socioeconomic trends and tendencies, to the granular side of it,” Summers said. “There was a lot of human effort involved and we’ve taken that out by writing the correct algorithms to grab the data, push it into a machine that has learned how to correlate that and utilize predictive analysis to push out a valuation — that’s how the process works.”

EVest is not the first to attempt to automate the valuations process for commercial assets. 

Knotel and CompStak recently teamed up to create an automated valuation model for offices that roughly resembles Zillow’s residential property valuation tool Zestimate. Flexible office space provider Knotel will collaborate with CompStak to evaluate office building values based on their income-generating potential. The tool is expected to roll out sometime in 2019

“For far too long, commercial real estate has been trapped in the dark ages, as far as valuation is concerned,” Knotel CEO Amol Sarva told Commercial Observer.

Whether or not these automated valuation tools can completely remove human involvement from the appraisal process remains to be seen. 

“I think it would be naive to say that someone couldn't just sit at a desk, push buttons and come up with a number. However, a machine is a machine — the output is only as good as the input that goes in,” Murrett said. 

In commercial real estate, valuing properties is a very nuanced process. 

Murrett said the length and costs associated with appraisals and commercial valuations depends largely on the intended use of the appraisal. Once a valuations expert is clear regarding the intent of the valuation — whether she or he is evaluating an asset to determine its market value, investment value or insurable value — the appraiser can assess costs, which vary case by case.

“Really in the commercial world, [there] is not a typical fee like it may be in residential,” he said. “It really does depend on each individual [case].”


Depending on the purpose of the appraisal, there are three primary processes an appraiser might take, Murrett explained: the sales comparison approach, the income approach and the cost approach. 

In the sales comparison approach, an appeaser measures the sales price of similar assets in a neighborhood to determine a property’s current value. The income approach, which Murrett said is more widely used in commercial real estate, is centered around the income generated by the subject properties. The theory here is the higher the rental income generated by the property, the higher the value. Appraisers use a number of metrics when measuring a building’s income, including location, quality of the building, rental rates in the area, efficiency of the building and data from numerous public documents. 

“That’s not to be confused with business income, like in a hotel,” he said. “When you go in and pay $200 a night for a hotel room, that does include the real estate. However, it also includes use of the furniture and the fixtures in the business — the television, the bed, the furniture. And the business is you may go to the restaurant to have dinner. The income approach is typically just the real estate only, even though appraisers can appraise the businesses in a hotel.”

The costs approach is a little different in that it is often used to appraise specialty properties that don’t generate rental income — like a church or fraternity house. When determining value for these assets, Murrett said appraisers take the site improvement costs and land value of the property and subtract it from all forms of depreciation, including physical, functional or economic. The subjectiveness of this approach makes it somewhat challenging, he said. 

“In the commercial world, economics come into play that a machine doesn’t pick up, and you really do need eventually the human element to really measure condition, location, [etc.]. So, again, I don’t mean to say the machines can’t do it, but I don’t think the machines will ever totally replace appraisers,” Murrett said.