What would happen if there were no referees in [insert any competitive sport]? How would the game be different? What would happen if one team saw something afoul but the other disagreed? What if one team was taking cheap shots and ignoring the rules, yet there were no flags on the play or appropriate penalties dealt? Would you still want to watch the game? Or maybe a better question is, would you or anyone want to play the game?
My guess is probably not.
A referee serves as a disinterested third party who reviews the transactions between two opposing teams to make sure the rules of the game are followed. We place our trust in the referee to make the right call (though many of us are understandably upset when we feel like they have made a bad call). However, a qualified referee understands the game, its rules, and makes their best judgement call based on their observations. A referee doesn’t get paid more or less if a particular team wins or losses by any number of points, so there is no incentive for him or her to make bad calls, in fact, to consistently do so would risk their reputation and they’d find themselves quickly out of a job.
[I’m sure you see where I’m going with this.]
It’s not a perfect analogy, but qualified appraisers are asked to perform a similar task. We observe and review the transactions of two opposing teams (buyer and seller) and are making sure the rules of the game are being followed. We make judgement calls (our opinion of value) based on our observations and understanding of the game (the market). We don’t get paid whether a team wins or loses by any number of points (being at, above, or below the contract price or target value). And to consistently make shotty calls (value opinions with no evidentiary support) would lead to a loss in reputation, clients, or ultimately the loss of our license.
So, why do so many people loathe the appraiser and think it’s a good idea to do away with them altogether?
I suppose some would cite the advent and proliferation of algorithmic type valuation services like that big company that starts with the last letter of the alphabet. But, let’s go back to our sports analysis: Could I program a robot with certain parameters so that it is able to determine a basket was made or a touchdown was had? Well.. not me personally, but yes, I’m confident smart people can make it happen! However, would those parameters be able to discern all of the plays prior to getting to that touchdown? In other words, could it determine whether that touchdown was actually valid? We’ve all seen it. Someone throws a pass and scores a touchdown only to discover one of their teammates did something amiss. A flag (or several) is thrown and the penalty leads to a reversion of that touchdown play. In my opinion, you need eyes on the field to make that determination.
Likewise, you need appraisers to verify data through observations to accurately assess a home’s value. Purely algorithmic valuations can’t discern whether one house has a better view, or has been fully remodeled, or been completely trashed, or stigmatized, or smells really bad, or has un-permitted additions that skew the gross living area, etc. Theses are all the “plays” that we need to take into account to determine whether that “touchdown” (value) is valid.
[Sorry I guess I’m sticking to the football analogy here.]
So, I do not believe getting rid of appraisers is a good idea for buyers, sellers, banks, or the economy as a whole. If you wouldn’t play football without referees, why play in a game where there is no referee analyzing what is arguable the biggest play most people will ever make? Buying a home.