A view from the clouds: The appraisal industry and drones

Costs and regulations are two factors impacting drone usage in the real estate industry.

Costs and regulations are two factors impacting drone usage in the real estate industry.

Small unmanned aerial vehicles, or drones, are slowly becoming a more common sight, and many professionals in the real estate industry are using these devices to revolutionize the sector. Appraisers are no exception.

The valuation profession is not afraid to innovate with new technology, so it only makes sense that drones would come to be in the hands of appraisers. Drones provide unique perspectives on properties, giving appraisers more information to use for a credible appraisal report.

Initially, the concept of using drones outside of military applications was met with skepticism. For instance, when online marketplace Amazon pledged to deliver packages to customers faster using drones, some consumers were excited, but others didn't have faith the project would get off ground. 

While the use of drones for commerce purposes may still have an ambiguous future, real estate industry stakeholders and the U.S. government have taken steps to facilitate drone usage for appraisals.

Opening the airways for real estate
One of the key obstacles for drone users is the U.S. Federal Aviation Administration. Several consumers have received warnings from the FAA to discontinue unauthorized drone usage. Although these letters didn't include fines, they did have many businesses wondering if the same strict regulations would prevent them from using drones.

In certain instances, the FAA grants businesses the right to fly drones commercially. This allowance occurs on a case-by-case basis and with adherence to specific terms, such as remaining below a specified altitude and a certain distance from airports.

In January, the agency granted the first exemption for real estate purposes. The FAA permitted Tucson, Arizona-based Tierra Antigua Realty to fly a drone. The firm plans to use the footage to improve its listing videos.

"Drones provide a more comprehensive view of properties."

Current drone use across the real estate industry
Despite the strict regulations and need to apply for permission from the FAA to use commercial drones, some real estate agents and valuation professionals have already flown the devices. While no business wants to be behind on innovation, users must remember that operating a drone in violation of FAA rules is against the law. Plus, the possible fines are not worth the risk.

It will take some time, but the FAA is working with real estate sector stakeholders to develop rules to permit expanded use of commercial drones for real estate photography. When the regulations arrive, the market will be wide open for drones. Until then, appraisers should not use the technology without expressed permission from the FAA - as well as any relevant state regulatory agencies. Some real estate agents are already under investigation for violating the current rules.

The potential for drones in the appraisal sector
Despite the FAA's close eye on drone activity, valuation professionals have a positive view of the technology's benefits for creating appraisal reports. One appraiser told Valuation magazine drones provide a more comprehensive view of properties, and clients are happy to have the additional perspective.

"It allows us to get up higher, get a better view of the roof and rotate 360 degrees above the property to provide a view of the surrounding properties," the appraiser said. "We could not provide that footage without using a drone."

With the ability to see hard-to-reach areas of a home, appraisers can provide their clients with more expansive appraisal reports, which is particularly useful in regard to potential litigation. If legal issues arise, more photographic evidence is available.

Further, valuation professionals who surveyed their clients about costs received positive feedback when they asked about charging extra for drone photography. However, that additional revenue may not be enough to offset the cost of operating a drone.

Appraisers are excited about the prospect of using drones to photograph properties from a new angle. Appraisers are excited about the prospect of using drones to photograph properties from a new angle.

Costs likely to slow drone adoption for valuation professionals
Drones aren't inexpensive. In fact, one appraiser told Valuation magazine a suitable model would cost at least $1,000 - not to mention, the cost for additional parts in case repairs are necessary down the road. If appraisers crash or otherwise damage their drones, they will need to make repairs, so that expense is a large consideration.

This may be less of an issue for appraisal firms, which can foot the bill for the drones. However, independent appraisers may be less capable of affording the devices.

Some appraisers may turn to third-party services. Given the widespread popularity of drones, certain photography agencies specialize in aerial photography. These services address the issue of cost but may fall short when it comes to FAA regulations. The rules may permit the company to take aerial photos, but they prohibit the use of these photos for marketing purposes.

What does the future look like for drones?
Federal regulators and real estate industry stakeholders may drone on for some time before reaching a final agreement on rules to govern the use of unmanned aerial vehicles for the purpose of inspecting homes. Yet the industry is excited about the potential benefits and taking steps to make the possibility become reality. For now, appraisers should keep an eye on and adhere to regulatory changes.