It’s inevitable that more changes will be coming to the appraisal profession in 2019. But as many will attest, it’s not the actual change that can negatively affect the appraiser, it’s how well they adapt to those changes that can mean the difference between a profitable or struggling business for the duration of the New Year.

One change that’s already been introduced into the valuation industry is the concept of hybrid appraisals. Those in the industry categorize hybrid appraisals as “polarizing,” with AMCs introducing this alternative into the business in rapid-fire fashion, while independent appraisers hope such automated valuation models (AVMs) will make life a little easier.

It’s still a concept that has been met with some resistance, with the standard argument being that the appraiser should be the one arriving at the value of a property. Many do not trust the fact that technology is making that decision.

But as one executive pointed out, the wise choice for appraisers would be to get on board with this method, and embrace it.

“AVMs have done and will continue to do a lot for the industry,” FirstClose Product/Vendor Management Director Jorge Ponce told Valuation Review. “In order to get to hybrids, we have to address AVM technology, which is somewhat of a predecessor to the hybrid appraisal. AVMs have been around forever and were very prominent during the pre-financial crisis days. The crisis made everyone afraid of AVMs and this type of technology.

“After the crisis, much of the market shifted back to traditional appraisal methods,” Ponce added. “The AVM technology was not to blame, the blame needed to be placed on the people, and what they did or did not do with the technology. A lot of lenders were and still are resistant to this method, but as the technology improved, more information became online, and the technology started to evolve.”

Ponce said for a while appraisers and others wondered why they weren’t using hybrid technology. And he believes that is when the hybrid valuation was born.

The thought was, according to Ponce, if appraisers can properly utilize this technology, the industry may have something.

Most lenders still engage in traditional valuation forms for about 80 percent of their loans. Today, the lender is asked to adapt these types of appraisals but they can’t get comfortable around the idea of not having a person involved, according to Ponce.

Lenders don’t really understand the technology and how sub-models work, or how those models arrive at data. Lenders are still not willing to embrace that, Ponce said.

“The industry will say, with regards to hybrid appraisals, that if you’re not willing to embrace the concept, okay, you can still have some appraisers view data and get property information such as pictures, and therefore still have an opinion of value by the appraiser using the technology,” the FirstClose director said. “Overall, this hasn’t taken off as quickly as it should, but as time progresses, and we get deeper into the 2019 year, a lot of lenders will adopt this notion so as to move forward. There will be a higher rate of adoption in 2019 for hybrid appraisals, higher than we’ve ever seen before.

“There is a learning curve, and lenders have to get past that,” Ponce added. “To really embrace this, I think what will drive the rate of growth and adoption of this product is just the pressure lenders are going to see in 2019.”

Ponce pointed out that homeowners have the highest amount of available equity since the early 2000s.  However, consumers that don’t really need the money will not be taking out home equity lines because of the recent increases in interest rates. That particular volume of consumer is gone, and there is a smaller customer base that needs these types of valuations, with lenders finding themselves competing for that smaller group of consumers.

What will distinguish one lender from the other, he said, is how much it will cost and how quickly appraisers get paid. That is the beauty of hybrids, he said, which address both of those circumstances that faces the lender.

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