Real estate appraisers, if not on the verge of extinction, face a very different future as automation eliminates several of the functions they traditionally have performed.

Indeed, the prospects of the residential appraisal business look so bleak to Silver Spring appraiser Thomas Miller that he is planning to shut down his small operation that he and his office-manager wife have run for nearly 20 years.

"Appraisers are really becoming marginalized," Miller said. "I am 49 years old and that is pretty old to be looking for a new job, but I don't see that I have very much choice."

Miller is one of the droves of appraisers that many housing officials expect will leave an industry that is considered too large, with an estimated 75,000 licensed appraisers, for the demand expected for their services in the coming years.

Where once appraisers used their own storehouse of knowledge and judgment to pinpoint the value of a home, as well as to select the comparable home sales to support that opinion, technology is proving a competitive threat.

In one of the clearest signals that the world of appraising has changed, two weeks from now the first lenders will begin using a computer system developed by the McLean-based Federal Home Loan Mortgage Corp. (Freddie Mac) that is known as "Loan Prospector."

Within two months, several more lenders, including the nationwide firms of Citicorp Mortgage of St. Louis and PHH US Mortgage Corp. of Mt. Laurel, N.J., which write mortgages in the Washington area, said they will start making loans with the Loan Prospector system.

The Freddie Mac technology relieves the lender of the decision of whether to approve a loan application or not, said Peter Maselli, vice president of automated underwriting for the firm.

As part of the process, Loan Prospector will determine whether something less than a traditional appraisal of the property in question is acceptable. The borrower, however, must otherwise present little risk by virtue of making a large down payment and possessing a sterling credit history.

Freddie Mac's foray into the appraisal decision-making process has appraisers worried, industry officials said, given the company's potential influence on the market as a major supplier of the capital that mortgage companies lend to borrowers.

When the Loan Prospector service indicates a limited-scope appraisal is in order, the appraiser may dispense with the interior inspection of a home, usually done to verify its features, assess its condition and measure the rooms.

"We want someone to at least drive by, to see that the home does exist and fit with the neighborhood," Maselli said.

Without the need to arrange an appointment to get inside the house and complete the extensive paperwork normally required with a traditional appraisal, the limited-scope appraisal can be completed in 72 hours or less, compared with the one to two weeks a traditional appraisal now takes, Maselli said.

The Loan Prospector system decides which homes qualify for an abbreviated appraisal and produces a set of comparable properties for the appraiser's consideration based on historical experience with 4.6 million repeat property transactions, Maselli said.

"We did a lot of testing of the alternative approaches and found that a full appraisal just does not add enough value to justify the costs," Maselli said.

Chicago appraiser Richard C. Sorenson, president of the Appraisal Institute, the industry's principal professional trade organization, is wary of the Freddie Mac development.

"We have a concern about the quality of these collateral assessments and whether the public and consumers are well served by these cursory drive-by and computer-generated values," Sorenson said.

Chris Nard, vice president of marketing for Strategic Mortgage Services, a nationwide appraisal firm based in Costa Mesa, Calif., said he envisions a day when even driving by a property will become unnecessary as the automation improves.

"But we will still need appraisers trained to review the data for accuracy and to pick the final point of value," Nard said.

Appraisers, Maselli said, will continue to perform the abbreviated evaluation work and to do the full-blown appraisals needed for homes that are unique, extensively remodeled or located in inner-city neighborhoods.

The question, though, is how many appraisers will be needed to carry out Freddie Mac's vision of the future. Diane Ringler, president of Valuation Information Technology Inc., a nationwide appraising firm based in Des Moines, guessed the number is far less than it is now.

"There will be fewer appraisers, no doubt about it," she said. "The remainder will do twice as many appraisals in half the time" with the help of Freddie Mac's automation.

Small appraisal firms may find themselves forced to affiliate with one of the large national appraisal management firms to survive. The only way an independent appraiser can tap into Loan Prospector business is by subcontracting with one of the three national appraisal companies working with Freddie Mac.

The appraisal is one of 20 areas under study by another major mortgage capital supplier, District-based Fannie Mae (formerly the Federal National Mortgage Association), as a means of achieving savings to reach the firm's announced goal of reducing the cost of making a mortgage by $1,000, a company official said.

The willingness of appraisers to change with the times is unknown, said James F. Taylor, president of Midland Financial Mortgages Inc. of Des Moines, one of the first lenders to use the service. "This is a fairly dramatic paradigm shift for the appraisal industry," he said.

Added Joseph J. Murin, executive vice president of Lender's Service Inc., a national appraisal firm based in Pittsburgh: "The appraisal industry to date has been a little bit obstinate and afraid of change."

Other technological innovations are forcing traditional appraisers to rethink their business practices, said Michael J. Lange, an Atlantic City appraiser and an official with the National Association of Independent Fee Appraisers.

As the industry moves toward a paperless transaction involving instant transmission of the appraisal, appraisers will have to buy electronic cameras that create digitized photos, electronic signature devices, automated sketching programs, computerized mapping services and special software, Lange said.

"I am going to do whatever I have to {do to} stay in business. I am matching my equipment and time delivery" to that of the most electronically advanced firms, he said.