Is there a superior method to evaluate homes?

Reader Question: ​Why hasn’t someone invented a superior method to evaluate homes? Appraisals appear to be just one guess after another. I became interested because I had loan approval threatened by an appraiser that lived in another city. Before I negotiated a price on this home, I did my homework. I walked through every comparable sale and every competing house as part of understanding home evaluation. I am confident I knew more than the appraiser. Online estimates are scary; you, and others, have been critical of appraisals. Most people I have asked about appraisals seem not to have an opinion, or hold a negative one. I do not have a solution, I am just a curious person, and the current system is perplexing.

​Monty’s Answer: Appraisals have been around for eons. It is likely appraisals were used even before private property existed. On a website dedicated to appraisal information titled, a couple of comments bear repeating. An appraiser was sharing a story, “An instructor told us that discounting originated in Europe in the middle ages to value the King’s timber. They would estimate the value of the timber at maturity and to value the present value would discount from the present value based on maturity time, or so the story went.” Another appraiser, Terrel Shields, in Arkansas, had a similar anecdote, “Lloyds of London used appraisers to rank the quality of ships for underwriting purposes. A seaworthy craft received a higher grade than a leaky worm-eaten boat. That was back as far as the 16-17th Century.” Here is an article at expressing my opinion as to appraisals today.

The Risk Factor

The common denominator in these stories is risk. It is very likely assayers of precious metals and stones existed thousands of years earlier to evaluate most anything of value. Gunpowder, fabric, animals, and more. Even then, an individual considering a purchase understood the seller had a conflict. The seller’s opinion was likely high because the seller stated a price that anticipated the buyer might offer a lower price. The risk is the same for both. One is afraid to overpay, and one is worried about being underpaid. The result of this engagement was the birth of the appraisal industry. Mortgage lenders also are concerned with risk.

Is there a better method?

There are many companies, teams, and individuals around the world working to improve the task of predicting or authenticating the value of a single-family home. Here is an example of a document that turned up in a search query: A review of this article will give you a sense of the capacity of individuals working to improve the methodology. The United States Patent and Trademark Office (USPTO) is another good source of information. While the present method is not perfect by any means, we have yet to experience a better approach. The human condition is tough to predict when emotions are involved in the decisions.