New Valuation Types Emerge
A pair of new valuation products seek to layer the use of a licensed appraiser on top of an automated valuation model or broker price opinion to help lenders and servicers get a more accurate valuation of a property.
The first is from AppraisalWorld, San Jose, Calif., and is called the Collateral Valuation Report. Meanwhile, Dallas-based First American Valuation and Property Solutions calls its product the Appraiser-Validated Price Opinion.
AppraisalWorld is teaming up with Forsythe Appraisals LLC, St. Paul, Minn., to train residential real estate appraisers in its use. The primary test market for the CVR is Florida, with the ultimate goal to have over 4,000 appraisers trained nationwide in this valuation product.
John Forsythe, president of Forsythe Appraisals, said that while AVMs and BPOs serve a purpose, real estate valuations are really the job of an appraiser. The CVR is a Uniform Standards of Professional Appraisal Practice-compliant product.
“The CVR is a product that provides all of the information that can be had from an AVM or BPO, and then takes it to the next level with a tremendous amount of additional data and detailed information which is provided by a knowledgeable and trained real estate appraiser,” he explained.
AVMs and BPOs have their place in the market, said Alan Hummel, senior vice president and chief appraiser at Forsythe Appraisals. “An AVM is basically analytics without a person, and we’re putting the appraiser right in the middle of those analytics.” More importantly, an appraiser from the local market area will perform the CVR, he pointed out, so someone from San Antonio will not be doing a CVR in San Diego, for example.
The appraiser is “in the driver’s seat” in the process. The appraiser draws the boundaries from which the comp properties are selected. “It put the appraiser in the center of what type of data is being analyzed,” he said.
Mr. Hummel added that a CVR looks at a broader base of data, including not only taking in public records but also multiple listing services data as well. So the statistical analysis portion, instead of just looking at three sales comps, could be looking at as many as 35 sales. Thus they get a better picture of the neighborhood to value the subject property. It is a more efficient way for an appraiser to analyze data to arrive at a credible value, he said.
Besides the MLS data, Jeff Bradford, president of Bradford Technologies, parent of AppraisalWorld, said CVRs use real estate-owned information, listings, flood, aerial imagery, market statistics and appraiser-driven regression modeling, all of which is driven down to the neighborhood level. Forsythe is talking with mortgage servicers who have properties in foreclosure, or getting ready to be foreclosed upon, trying to get a handle on their values, as well as those looking to value their current holdings. This is a market, Mr. Hummel noted, that traditionally has ordered BPOs for this purpose. He added, in the past, some of these products have had to be ordered multiple times and the lender still wasn’t certain. This product is designed to provide that certainty, in a short timeframe (two, no later than three, day turnaround).
The user gets information about the sustainability of that value, Mr. Hummel said. “It is not just simply another report form. The key here is the analysis that goes behind it.”
Another use, on the origination side, can be home equity lending. Especially if the lender goes and makes the decision against extending a line of credit and the homeowner objects, this give the lender empirical data to show the reasons for its decision.
It is a “game changer” in the way appraisers will be able to do analysis, he declared.
As for the new First American product, the company explained that while it is not an appraisal, a licensed appraiser confirms the specific set of values determined by a local Realtor by looking at comparable sales and verifying accuracy. If discrepancies are found, the appraiser provides a new set of values, complete with an explanation of how they were determined.
“This year servicers and investors will order millions of BPOs as they work through loss mitigation scenarios and attempt to value portfolios and distressed assets. With this level of activity, it is even more important to verify accuracy while increasing throughput and reducing processing costs,” said Joni Pierce, division senior vice president for First American Valuation and Property Solutions.
“Our Appraiser-Validated Price Opinion service provides the safety of a second, objective look at the valuation, without the need for second BPOs, expansion of in-house review staff or a full appraisal,” Mr. Pierce remarked.
Appraiser-Validated Price Opinions are available as exterior-only or exterior and interior reports. Reports can be made available to the customer in as little as seven to 10 days.