ai – Real LexEcon

AI in Real Estate Appraisal:Does AI Change the Rule?

Artificial intelligence is moving into the real estate appraisal profession fast. At seminars, conferences, and professional discussions, appraisers are increasingly being encouraged to bring ChatGPT and other AI tools into their work.

There’s nothing wrong with that on its own. Used well, AI can be a genuinely useful tool for appraisers.

The trouble starts when AI is pitched as something you can simply ask to determine a property’s value — sometimes without even inspecting the property. That proposition deserves closer scrutiny.

AI Does Not “Know” Property Value

Ask an AI system for a property’s value and it will often produce an estimate readily — one that can look remarkably precise.

But where did that number come from?

Market value isn’t information AI inherently possesses. A credible opinion of value has to be supported by relevant market evidence, and AI is only as useful as the information it has to draw on.

This matters most in markets where reliable transaction data is thin. Where actual selling prices, property characteristics, transaction dates, and similar information are publicly available and systematically recorded, automated valuation systems have a lot to work with. Where that information is fragmented, privately held, hard to verify, or simply unavailable, the picture changes completely.

Online listings may be abundant, but an asking price is not a transaction price. A property listed at ₱20 million may eventually sell for ₱16 million. Another may never sell at all. A transaction may involve unusual financing, related parties, package deals, distress, or other conditions that never make it into the listing.

An AI system that doesn’t know any of this can still produce a confident-sounding estimate. That’s exactly where the danger lies.

Precision Is Not the Same as Reliability

Suppose an AI system concludes that a parcel of land is worth ₱18,437 per square meter. The figure looks scientific because it’s precise.

But suppose the data behind it consists mostly of asking prices, duplicated listings, outdated postings, mislocated properties, and transactions whose actual consideration was never verified.

No amount of sophistication in the calculation can make up for weak evidence underneath it. Worth remembering:

Precision of output is not reliability of value.

A sophisticated algorithm run on unreliable information just produces a sophisticated-looking but unreliable conclusion. Garbage in, garbage out didn’t go away because AI showed up.

ChatGPT Is Not an Automated Valuation Model

This distinction gets missed constantly.

ChatGPT and similar generative AI tools are general-purpose systems, built to understand, organize, analyze, and generate information. An Automated Valuation Model (AVM), by contrast, is purpose-built to estimate property values using defined property databases, transaction data, statistical techniques, and valuation models.

They are not the same thing.

Even a well-designed AVM has limits — its reliability depends heavily on the quantity, quality, recency, and representativeness of its underlying data. If a specialized valuation model struggles when market information is inadequate, there’s even more reason for caution when a general-purpose AI system is asked to value a specific property without being handed sufficient, reliable evidence to work from.

AI can process information. It cannot manufacture reliable market evidence where none exists.

Can AI Replace Property Inspection?

An equally concerning idea is that AI has made physical inspection unnecessary.

There may be legitimate cases for desktop or limited-scope valuation, depending on the applicable standards, the purpose of the assignment, the evidence available, and the agreed scope of work. But that’s a very different claim from saying AI removes the need for inspection altogether.

Consider what an appraiser actually finds on-site that no database captures reliably:

actual road access and road width
topography and elevation
physical condition of improvements
neighborhood influences
encroachments, easements, and rights-of-way
flooding or drainage conditions
transmission lines and other infrastructure
actual frontage
surrounding land uses
quality of views
occupancy
inconsistencies between documents and actual conditions
other physical characteristics affecting utility and marketability

A database may show a property fronting a road. Inspection may reveal the “access” is a narrow passage shared with several other lots. A map may show a regular, developable parcel. Inspection may reveal severe topographical limitations. Records may describe a residential improvement in good condition. Inspection may reveal serious deterioration.

AI cannot analyze a property characteristic it was never given. Technology doesn’t eliminate the need to actually understand the property being valued.

AI Cannot Cure Inadequate Appraisal Evidence

This may be the single most important idea in the whole discussion: AI cannot cure inadequate appraisal evidence.

Technology can process evidence faster. It can surface relationships within that evidence. It can organize thousands of data points at once. What it cannot do is turn unreliable information into reliable market evidence just by running it through a model.

The difference plays out like this:

AI + poor data + no verification + no appropriate inspection → a potentially misleading estimate
AI + reliable data + professional verification → genuinely useful analytical assistance
AI + reliable data + appropriate inspection + sound methodology + professional judgment → powerful appraisal support

The difference isn’t the sophistication of the AI. It’s the quality of the appraisal process around it.

Can AI Apply the Correct Valuation Method?

Even with sufficient data, another question remains: can AI determine the appropriate method for valuing a given property?

AI can certainly run the calculations. Given verified comparable sales, transaction dates, property characteristics, and defensible adjustments, it can assist with the Sales Comparison Approach — computing unit values, applying adjustments, analyzing ranges, testing alternative assumptions. Given reliable rents, vacancy rates, operating expenses, capitalization rates, and growth assumptions, it can run the Income Approach, including capitalization and discounted cash-flow analysis. Given reliable land values, construction costs, depreciation, and obsolescence data, it can assist with the Cost Approach.

But performing a method correctly is not the same as selecting the right method. That distinction is fundamental.

A Correct Calculation Can Still Produce the Wrong Appraisal

Take a beachfront resort property. An AI system might pull nearby land listings, calculate price per square meter, apply mathematical adjustments, and produce an indicated value — flawlessly.

But what if buyers of comparable resort properties actually base their decisions on income-generating capacity, development potential, tourism demand, or redevelopment opportunity, not raw land comparables? The math can be correct while the underlying methodology is entirely wrong for the asset.

The same trap applies to hotels, industrial properties, special-purpose properties, leasehold interests, partial takings, landlocked parcels, properties burdened by transmission-line easements, environmentally constrained sites, and properties with significant redevelopment potential.

AI can calculate almost anything. The professional question is whether that’s what should have been calculated in the first place. A correct calculation using the wrong valuation method is still a wrong appraisal.

Highest and Best Use Comes Before the Method

There’s a deeper layer still. Before an appraiser even selects a valuation approach, they must determine the property’s highest and best use.

A vacant parcel might physically resemble the residential lots around it. But its zoning, accessibility, location, development trends, physical characteristics, and market demand may point to an entirely different use. Get the highest and best use wrong, and everything downstream can be technically sophisticated and still conceptually wrong.

The proper sequence looks like this:

Identify the property and property rights
Define the appraisal assignment and valuation date
Inspect and investigate as appropriate
Analyze physical, legal, economic, and market characteristics
Determine highest and best use
Select the appropriate valuation approach and method
Apply relevant, verified market evidence
Reconcile the value indications
Form the opinion of value

AI can assist at nearly every one of these stages. But if the whole process starts and ends with a single prompt — “What is the value of this property?” — most of the essential valuation questions never actually get answered.

AI May Spot Similarity — The Appraiser Determines Comparability

Comparable-property analysis is a good illustration of where AI genuinely helps and where it can’t take over.

Given enough reliable data, AI can screen hundreds or thousands of properties and flag those that look statistically similar to the subject. That’s valuable. But statistical similarity is not the same as appraisal comparability.

Two properties can have nearly identical lot areas and sit a short distance apart, yet differ substantially because one has better road access, wider frontage, superior topography, a better view, flood exposure, a transmission-line easement, development restrictions, stronger commercial exposure, or a different highest and best use altogether.

AI may identify statistical similarity; the appraiser determines comparability. Selecting comparables isn’t a search for similar numbers — it requires understanding which characteristics actually drive buyer and seller behavior in that specific market.

Where AI Can Truly Help

None of this means appraisers should reject AI. Quite the opposite — they should learn to use it well.

AI can help organize large datasets, screen potential comparables, analyze market trends, review documents, summarize regulations, flag inconsistencies, run statistical analyses, prepare sensitivity tests, work through income and expense figures, check calculations, and sharpen the clarity and consistency of appraisal reports. It can cut the time spent on repetitive work dramatically.

It’s also an effective quality-control tool — spotting inconsistencies between sections of a report, stress-testing assumptions, checking math, comparing scenarios, and flagging items that need further investigation.

Used well, AI frees the appraiser to spend more time where professional expertise actually matters most: verification, interpretation, highest and best use, methodology, comparability, reconciliation, and judgment. The right relationship looks like this:

AI assists → the appraiser verifies → the appraiser analyzes → the appraiser judges → the appraiser takes responsibility.

The Appraiser Still Signs the Report

This point shouldn’t get lost in the enthusiasm.

If an appraisal contains an unsupported adjustment, an inappropriate comparable, a wrong assumption, the wrong valuation method, or a flawed conclusion, the appraiser cannot fall back on “the AI generated it.” The professional who adopts the analysis and signs the report remains accountable for the opinion of value.

Artificial intelligence does not assume professional accountability. The appraiser does.

The Wrong Question About AI and Appraisal

The debate shouldn’t really be whether AI can produce a property value. Of course it can — a calculator can produce a number, a spreadsheet can produce a number, a regression model can produce a number, an AVM can produce a number, and so can ChatGPT.

The question that actually matters is: can the appraiser demonstrate that the resulting opinion of value is supported by sufficient, relevant, verified market evidence, appropriate methodology, and sound professional judgment?

That’s what separates a numerical estimate from a defensible professional appraisal.

AI Will Change Appraisal — Not Its Foundations

AI is going to reshape this profession. Data gathering will get faster. Market databases will get more sophisticated. Comparable searches will become increasingly automated. Statistical analysis will become accessible to far more practitioners. Report preparation and quality control will get dramatically more efficient. All of that is worth welcoming.

But the fundamentals of valuation don’t move. The appraiser still has to understand the property. Still has to understand the market. The evidence still has to be relevant, and the data still has to be verified. Highest and best use still has to be analyzed. The methodology still has to be appropriate. The conclusion still has to make economic sense. And someone still has to exercise professional judgment and take responsibility for the resulting opinion.

So the better message to appraisers isn’t “use AI to determine property value.” It’s this: use AI to strengthen the appraisal process, but never let it substitute for the evidence, verification, appropriate inspection, methodology, market analysis, and professional judgment an opinion of value actually depends on.

The future of appraisal isn’t AI versus the appraiser. It belongs to the appraiser who knows how to use AI effectively — and just as importantly, knows its limits and when its output shouldn’t be trusted.

Because the challenge in appraisal has never really been producing a number. It’s being able to explain and defend why that number represents value.

Beyond the Hotel: Complex Hospitality Valuation in Rehabilitation Proceedings

Open hotel appraisal report showing property overview and financial metrics

One of the privileges of professional practice is the opportunity to work on assignments that challenge not only technical competence but also one’s understanding of economics, law, and property rights.

Our team had the opportunity to undertake two major hospitality valuation assignments in support of corporate rehabilitation proceedings. While confidentiality prevents disclosure of the parties, the engagements involved substantial hospitality assets in Zambales and Tagaytay. They required the application of appraisal principles beyond conventional real estate valuation.

One assignment involved a hospitality development consisting of two five-storey hotel buildings, together with a clubhouse, basement parking, swimming pool, landscaped amenities, function facilities, and more than one hundred individually titled accommodation and commercial units. The complexity of the property required careful analysis of both the physical assets and the legal interests represented by numerous condominium titles.

The second assignment involved another large-scale hospitality village developed on approximately four hectares of land. The property consisted of three multi-storey villa buildings with a combined gross floor area approaching 16,000 square meters, complemented by recreational facilities including a clubhouse, swimming pool, tennis court, landscaped parking areas, and other resort amenities. Unlike the first assignment, however, the underlying land was held under a long-term government lease, requiring the valuation to distinguish between the leasehold interest over the land and the ownership of the buildings and improvements.

These engagements reinforced an important realization.

In complex litigation and rehabilitation proceedings, valuation is no longer about estimating what a property could sell for. It is about understanding what legal rights exist, what economic opportunities those rights create, and how those rights influence value.

Two hotels may appear similar in terms of buildings, rooms, and operations. Yet they may have materially different market values because the underlying property rights differ.

This is precisely why our consulting practice has continued to develop what we refer to as the Evidence-Based Valuation Framework.

Rather than beginning solely with comparable sales, the framework first identifies the property rights involved before systematically examining physical, legal, planning, economic, and market evidence. The final opinion of value is therefore not simply an estimate—it is the conclusion supported by a comprehensive body of evidence.

Assignments such as these demonstrate the expanding role of modern valuation practice. Today’s appraiser is expected not only to measure value but also to explain the legal and economic foundations upon which that value rests. This is particularly important in rehabilitation proceedings, where valuation evidence assists the court, creditors, rehabilitation receivers, and other stakeholders in making informed decisions regarding financially distressed assets.

For us, every engagement is an opportunity to demonstrate that valuation is more than determining a number.

It is the disciplined application of economics, property law, planning, and market evidence to arrive at an opinion that is credible, transparent, and capable of withstanding professional and judicial scrutiny.

The future of valuation lies not merely in producing credible numbers, but in presenting credible evidence.

Monterrazas and the Tragedy of the Commons

Why System Thinking Requires Stricter Development Standards

Recent public discussions have reflected different perspectives on the Monterrazas development in Cebu City, including system-level explanations, precautionary considerations, and calls for regulatory review. These illustrate the complexity of decision-making in such contexts.

At first glance, the issue may appear as a familiar tension between development and environmental protection. However, it may be more accurately understood through a different lens.

From an economic perspective, what this situation reflects is a form of the Tragedy of the Commons.

The concern lies in understanding how multiple developments interact within a shared system, and how each contributes to cumulative impacts over time.

Cebu’s upland areas perform essential ecological functions. They absorb rainfall, regulate runoff, and contribute to the stability of downstream communities. These functions do not operate within the boundaries of individual properties. They extend across space, linking different parts of the city through continuous hydrological processes.

In this context, the question of whether a particular development lies within or outside a defined watershed boundary, while relevant in technical terms, does not fully resolve the issue. Environmental systems do not operate as isolated compartments. Their behavior reflects interaction rather than separation.

The scale of that interaction is often difficult to grasp in abstract terms.

Evidence from watersheds within Metro Cebu further clarifies how this system operates—and how development must be understood within it.

Studies of the Mananga watershed show that land-use and land-cover changes—particularly in upstream areas—affect infiltration, surface runoff, and the movement of water across the system. As vegetation is reduced or land is altered, less water is absorbed and more becomes surface flow.

A similar pattern is observed in the Butuanon River watershed. The river originates in upland areas of Cebu City and flows through increasingly urbanized zones before reaching the coast. Upstream areas are already characterized by agricultural and altered land uses, while downstream sections are densely developed. This configuration illustrates how water accumulates as it moves across elevations, shaped by both upstream conditions and downstream constraints.

Altogether, these cases point to a consistent principle:

The watershed is the system within which individual projects must be considered, as runoff is generated across the entire catchment while its behavior is shaped by land-use conditions across different elevations.

This framing is critical. It does not assign causation to any single location. Rather, it defines the proper unit of analysis.

A project is not evaluated in isolation, but in relation to the system it enters—where each intervention contributes to cumulative pressures and must therefore be assessed with reference to the system’s capacity.

It is often observed that flooding in Cebu is multi-causal. Infrastructure limitations, watershed conditions, land-use changes, and rainfall patterns all contribute. This observation is correct.

However, its implication must be properly understood.

If multi-causality is interpreted to mean that no single development can be meaningfully evaluated, then responsibility becomes diffused. Multiple factors contribute, yet accountability becomes less clearly defined.

But the correct implication is the opposite.

If risk is systemic, then evaluation must also be systemic—and correspondingly more rigorous.

The system is not an excuse—it is the basis for stricter evaluation.

This requires a shift in how development decisions are made.

The relevant question is not whether a particular project can be shown to cause a specific flooding event. Rather, it is whether the addition of that project contributes, in combination with others, to increasing pressure on a system that may already be approaching its limits.

The concern lies in the combined effects within a shared system, and in how each individual project contributes to those cumulative impacts.

This leads to a central question:

What is the capacity of the system?

How many developments are already present within a given environmental zone?
To what extent has land use already been altered?
At what point does additional development begin to significantly affect the system’s ability to absorb rainfall and regulate runoff?

Without a clear understanding of these limits, development decisions are made incrementally, without reference to cumulative thresholds.

The Monterrazas issue, therefore, should be viewed in terms of how development decisions are made when each additional project contributes to a system with finite capacity.

In such a context, compliance at the project level is no longer sufficient. Each additional intervention must be evaluated in relation to the condition of the system as a whole.

This has significant implications for urban development.

First, evaluation must move beyond individual projects toward system-level analysis.

Second, development must be aligned with capacity. Growth is no longer simply a matter of feasibility or compliance, but of whether the system can sustain additional pressure.

Third, planning must shift from reactive to anticipatory. Addressing impacts only after they occur is both inefficient and costly.

Fourth, institutional coordination must ensure that decisions reflect a consistent understanding of cumulative risk.

The Monterrazas issue is not resolved by determining whether it falls within a particular boundary, nor by isolating it from broader conditions.

It must be understood as part of a system where effects accumulate, capacity is finite, and each development contributes to increasing pressure on that system.

It shows that outcomes in shared systems are shaped not only by individual decisions, but by how those decisions accumulate—and whether they are governed by a clear understanding of limits.

Ultimately, the question is not whether a particular project should proceed or not.

It is whether each project is evaluated in light of the system it enters—and whether that system can sustain the additional burden it brings.

Because in such systems, urban development is no longer simply about what can be built.

It is about how each development contributes to a shared environment—and whether the whole remains within its capacity to endure.

A Journey of Trust and Transformation

Blake Feken’s 20-year journey in the legal profession is a testament to the power of trust, dedication, and integrity. Formerly a senior associate lawyer at a leading firm, he founded his own real estate services company in 2014, specializing in breakthrough negotiations and innovative dispute resolution. Blake’s career has taken him through various fields—from mining and natural resources to corporate law and telecommunications—but his ultimate focus has always been on creating impactful, transformative solutions for his clients. In a recent interview, he shared his insights on the legal profession, balancing work with personal growth, and the importance of trust in client relationships.

Early Beginnings

Atty. Blake credits his mother as his inspiration for becoming a lawyer, albeit in an unexpected way. As a child, he had a natural inclination for debate, often defending his stance with explanations, alibis, and well-reasoned arguments—qualities his mother noticed and encouraged. She saw in him the potential for a legal career, urging him to channel his natural skills into law. This early push laid the foundation for a profession that would later become his passion.

Reflecting on this influence, Blake said, “My mother observed me as a smart-aleck kid who is always quick to argue, defend a position, and explain away certain behaviors. She told me to become a lawyer because I was always acting like one, (in short, mahusay magpalusot)”. It’s a reminder that sometimes, career paths are set in motion long before we realize it.

Blake’s journey in law began with an impressive range of specialties at a top law firm, where he worked on cases involving real estate, mining, government contracts, corporate law, and public utilities, among other areas. Despite his successful tenure, he ultimately felt drawn to a more specialized and impactful role in real estate, founding his company in 2014. Today, he focuses on breakthrough negotiations—finding transformative solutions to complex client issues through tailored remedies and innovative problem-solving.

This shift allowed him to not only bring his legal expertise to bear on real estate issues but also to pursue a purpose-driven approach. For Blake, it isn’t just about resolving disputes or drafting contracts; it’s about providing clients and stakeholders with meaningful, often life-changing, outcomes.

A Day in the Life

Atty. Blake describes his workday as one of deep contemplation and strategic planning. “A typical day would consist of a lot of thinking, reading, contemplating, writing, planning, and strategizing,” he shared. In his current role, he’s as much a strategist as he is a lawyer, using his time to carefully assess his clients’ needs, anticipate issues, and devise effective solutions.

This thoughtful approach aligns with Blake’s dedication to providing clients with not only legal guidance but also a roadmap for successful negotiations and outcomes. His work requires constant reflection, reminding him of the importance of clarity and foresight in making sound legal decisions.

A Defining Moment

One of the most impactful moments in Blake’s career was a situation that demonstrated the immense power of trust. A client once entrusted his firm with a P110 million deposit, without any formal contract. “This effectively demonstrates the power and speed of trust,” he remarked. This moment left a lasting impact on Atty. Blake, underscoring the responsibility and privilege that comes with being a trusted advisor. For him, trust is more than a professional standard—it’s the foundation of his entire practice, built through years of integrity and commitment to clients’ best interests.

Balancing Law with Life

The demands of the legal profession can be intense, and Blake has found balance by focusing on personal growth and renewal. Inspired by Stephen Covey’s concept of “sharpening the saw” from The 7 Habits of Highly Effective People, he prioritizes self-renewal. This practice has allowed him to maintain clarity, resilience, and a positive outlook on both his work and his personal life.

“By developing the habit of sharpening the saw or self-renewal, I’m able to sustain a balanced life and well-being,” he explained. Blake’s emphasis on self-care serves as a reminder to other professionals that maintaining mental and physical health is crucial to long-term success.

Grateful for the Journey

Looking back on his career, Blake has no regrets. “I am extremely grateful for all the things I had experienced, learned, unlearned, and relearned from life’s everyday teachings,” he reflected. He approaches each experience, challenge, and success as a building block, helping him grow personally and professionally. For Blake, life’s journey is continuous learning, with each lesson contributing to his development and capacity to serve others.

Advice for Aspiring Lawyers

When asked for advice to young lawyers, Blake’s message was clear: “Since lawyering is a noble profession, one succeeds with oneself, with others, and with life, if one consistently extends, cultivates, restores, strengthens, and inspires trust.” For him, the heart of legal practice lies in building trust and maintaining integrity. He urges aspiring lawyers to be principle-centered, consistently embodying honesty, accountability, and ethical responsibility.

Atty. Blake’s advice is both timeless and essential: trust, once established, can unlock new levels of success and fulfillment in a lawyer’s career. He sees law not merely as a profession but as a vocation, a path to serving others and creating positive change.

A Career Rooted in Purpose, Transformation, and Trust

Blake Feken’s story is one of dedication, resilience, and unwavering integrity. From his early days as an associate lawyer to his current role in real estate services, he has built a career centered on trust, innovation, and transformative solutions. His journey serves as an inspiring example for those entering the legal field, reminding them that success in law is not just about technical expertise but also about the values one brings to the practice.

In Atty. Blake’s view, the true essence of being a lawyer lies in cultivating trust and using one’s skills to bring about meaningful, positive outcomes. His commitment to his clients and personal growth exemplify what it means to succeed in law with integrity and purpose.

Atty. Blake Feken with Gus Agosto