Home Inspector Distinguishes Property Valuation Alternative
Interthinx is the latest company to come out with in what seems to be a plethora of products being marketed as alternatives to getting a broker price opinion or using an automated valuation model. But unlike most of those new alternative products, which graft a human element onto the valuation technology, the Interthinx Conditioned Valuation Model uses a home inspector rather than an appraiser.
The company’s chief valuation officer, Mark Chapin, is an appraiser. But what Agoura Hills, Calif.-based Interthinx is looking for from the person sent to view the property are condition, overall up fit and compatibility to neighborhood, as well as the neighborhood itself. “We don’t look at anything that influences value from our on-the-ground personnel,” he said. Many appraisers are “a little bit gun shy about doing visual and home inspection work.” Interthinx did consider using appraisers but got feedback that found the appraisers were uncomfortable doing those tasks.
In addition, Interthinx wanted “much more straightforward” language in its report about property conditions than typically appears in appraisal reports, he said. As for using real estate brokers, the feedback was “why don’t you just do a BPO.” Furthermore, this community is looking for something that establishes a list price.
Home inspectors have the function of saying whether or not a house is in good shape and state what needs to be done to fix it up. So that is what drove Interthinx’s choice, Mr. Chapin said.
The valuation side of the CVM comes from an AVM that uses the Multiple Listing Service and public data.
AVMs are well proven tools for valuations. Still, an AVM is only as good as its data, he declared. The problem is that you can run an AVM on a property that doesn’t physically exist and never know it. As for the BPO, it is also well proven, but there are times when the outcome could be influenced by the business considerations of the real estate broker providing it.
“A CVM is a great supplement to BPOs and the protection element is added to an AVM,” Mr. Chapin said. “The boots-on-the-ground approach to viewing the subject property from the exterior and the feedback from those boots on the ground to talk about what kind of shape is the subject property in.” Interthinx, Mr. Chapin said, is “an investigative service company.” In other words, it made its reputation on the fraud prevention side of the business.
During the boom period, he said it looked at what was happening on the valuation side of the business, figured out what worked and what didn’t. Now this is the company “capitalizing” on that research. What Interthinx is doing on the valuation side ties to “our fraud-busting mantra.” The CVM report gives the user up to 15 comparable sales and up to 15 comparable active listings, plus a series of maps and graphs.
Mr. Chapin emphasized this is “a model tool” and not an appraisal. It does not comply with the Uniform Standards of Professional Appraisal Practice. The “conditioned valuation model” moniker is to be taken literally, he continued, adding Interthinx is not stating the CVM is out to replace an appraisal.
It can be used as a standalone or something to verify what appears in an appraisal report or BPO. He believes it is great to be used as a secondary review product.
The CVM can be used on the servicing/portfolio analysis side. Interthinx thinks that as the real estate market recovers, it could also find its way on the origination side to the “predecision” space, Mr. Chapin said.
Look for more regarding “valuation fraud busting” from Interthinx in 2010. “We are looking at helping out the valuation services area in the coming months, just as we have for years in the fraud services area,” he said.
Kevin Coop, president of Interthinx, said excessive AVM usage was a contributing factor to valuation fraud. Furthermore, the company’s third-quarter report found valuation fraud risk up 46% over 2008.