Just an interesting response to a generic question.  Most of this every appraiser already knows, but I’m continually impressed with the amount of data and the way that these LLM’s organize it.

MY QUESTION: What are the biggest threats to the current residential appraisal industry?

ChatGPT said:

The residential appraisal industry faces several significant threats—some long-standing, others rapidly emerging due to technological and regulatory shifts. Here are the biggest ones as of 2025:

  1. Automated Valuation Models (AVMs) and AI
  • Threat: AVMs (like Zillow’s Zestimate or Freddie Mac’s HVE) and AI-powered tools are increasingly being used for lending decisions, bypassing human appraisers for certain property types or low-risk loans.
  • Impact: Decreased demand for traditional appraisals, especially for refinance loans, hybrid products, and low-LTV transactions.
  • Reality: AVMs still struggle with unique properties, rural areas, or rapidly changing markets—but their use is growing.
  1. Alternative Valuation Products
  • Examples: Hybrid appraisals, desktop appraisals, evaluations, and Property Data Collection (PDC) reports.
  • Threat: These products require less appraiser input or shift the role to data review rather than full valuation.
  • Impact: Lower fees, reduced scope, potential for reduced appraisal volume for full 1004/70 forms.
  1. Regulatory Changes and GSE Modernization
  • Fannie Mae and Freddie Mac: Increasingly allow appraisal waivers, hybrid models, and use of third-party data collectors.
  • FHA and VA: Have started adopting or testing some of these models.
  • Impact: The role of appraisers is shifting from fieldwork to analytical review and risk management—but only if appraisers can adapt.
  1. Lack of New Appraisers / Aging Workforce
  • Threat: There’s a shortage of new appraisers entering the field, and the average age remains high (late 50s+).
  • Impact: Reduced capacity may increase reliance on alternatives like AVMs and PDCs.
  • Irony: While it seems like fewer appraisers would drive demand, lenders may prefer scalable tech solutions instead of struggling with workforce shortages.
  1. Litigation and Liability Concerns
  • Threat: Appraisers are increasingly being sued or reported to licensing boards for alleged bias, discrimination, or valuation issues.
  • Impact: Increased E&O premiums, stress, and exit from the profession. It also affects how appraisers approach assignments (more conservatism, risk aversion).
  1. Pressure from Lenders and AMCs
  • Threat: Low fees, high turn-time expectations, and inconsistent scope-of-work demands from AMCs and lenders.
  • Impact: Appraiser burnout, quality concerns, and difficulty attracting new talent to the profession.
  1. Public Perception and Misinformation
  • Threat: High-profile media stories about appraisal bias or “Zillow says my house is worth X” cause the public to question the value of a human appraiser.
  • Impact: Eroded trust in the profession; fewer advocates for its necessity.
  1. Technology Gaps and Resistance to Change
  • Threat: Some appraisers struggle to adopt newer tools, like mobile inspection apps, 3D scanning, or regression modeling.
  • Impact: Those who don’t adapt may be left behind, while others become more efficient and take on new roles as valuation analysts or consultants.
  1. Economic Volatility
  • Threat: Housing market cycles—when interest rates are high, loan volume drops, which directly affects appraisal order volume.
  • Impact: Reduced income, especially for appraisers reliant on lender work.
  1. Consolidation and Institutional Buyouts
  • Threat: Larger firms, AMCs, and tech startups are consolidating market share and lobbying for looser appraisal requirements.
  • Impact: Independent appraisers have less control and negotiating power.

Would you like suggestions on how to future-proof your practice or capitalize on new opportunities in the changing landscape?

 

(Yes please!)

 

How to Future-Proof Your Residential Appraisal Practice

  1. Embrace Hybrid and Desktop Appraisals
  • Why: GSEs and AMCs are increasingly ordering these products.
  • Action:
    • Familiarize yourself with tools like Clear Capital, Solidifi, and Class Valuation platforms.
    • Position yourself as a review analyst—providing valuation expertise for desktop products rather than just boots-on-the-ground inspections.
  1. Leverage Technology
  • Use modern tools: Mobile inspection apps (e.g., Total for Mobile), laser measurers, drone photography, or LiDAR scans.
  • Excel mastery: Keep refining your ability to visualize and model trends (which you’re already strong at).
  • Optional AI adoption:
    • Use ChatGPT, regression tools, or Tableau to build advanced, customized neighborhood analytics.
    • Develop pre-written report language using automation to improve report speed and consistency.
  1. Expand Beyond Mortgage Work
  • Why: Diversification protects you from slowdowns in lender demand.
  • Target audiences:
    • Attorneys: Divorce, estate, and litigation support.
    • CPAs: Retrospective valuations for capital gains and gifting.
    • Homeowners & investors: Pre-listing, buy/sell decisions, or fractional ownership analysis.
  • Tip: Build packages that are visually polished and jargon-free—many non-lender clients need more hand-holding but value your insight.
  1. Develop Expert Niche Status
  • Opportunities:
    • Waterfront, historic homes, rural land, luxury estates, or green-certified homes.
  • Why: AVMs and inexperienced appraisers struggle with these.
  • How: Write articles, speak at events, or create downloadable guides on your specialty. Build a personal brand around it.
  1. Stay Informed & Credentialed
  • Why: GSEs and AMCs will increasingly favor appraisers with demonstrated competency and adaptability.
  • Actions:
    • Take CE courses in statistical modeling, ANSI measurement standards, or bias and fair housing.
    • Subscribe to resources like Working RE, Appraisal Buzz, and the GSE seller guides.
    • Consider reviewing USPAP-level assignments or becoming a supervisory appraiser to bring in trainees.
  1. Offer Litigation Support or Expert Witness Services
  • Why: These jobs pay well and require deep expertise—fewer appraisers are qualified.
  • How:
    • Market your testimony experience (or interest) to attorneys.
    • Learn to write bulletproof reports and prepare for depositions.
    • Join local bar associations as a vendor or sponsor.
  1. Build Direct Relationships
  • Why: Reduces dependence on AMCs, which are fee-pressured and increasingly automated.
  • Actions:
    • Network with real estate agents, attorneys, and lenders who don’t use AMCs.
    • Create a simple website or landing page to attract direct assignments (with lead capture).
    • Offer free PDFs or tools like “How to Prepare for an Appraisal” in exchange for emails.
  1. Price Based on Value, Not Time
  • Strategy:
    • Stop thinking in terms of flat fees for form types.
    • Charge more for rush orders, unique properties, or complex zoning or ownership situations.
    • Offer add-ons like market graphs or rent analysis.
  1. Use Data as a Service (DaaS)
  • Opportunity: Offer neighborhood or ZIP-code-level sales trend reports to investors, agents, or brokerages.
  • How: Automate and brand your Excel-based charts, or use a BI tool like Power BI or Tableau for recurring reporting packages.
  1. Consider Forming a Small Appraisal Firm
  • Why: Spread the load, increase marketing, and share costs for tech and marketing.
  • Value-add: A team allows you to specialize, train new appraisers, and accept larger volume from direct clients.