DEC 26, 2012 4:45pm ET

Market Familiarity Key Factor For a Valuation

DEC 26, 2012 4:45pm ET
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When conducting a broker price opinion, one of the most important aspects to determine the proper value for an asset is being familiar with that local community, said one industry executive whose company performs thousands of valuations every month. 

Brent Taggart, senior vice president of business development for Green River Capital, said GRC’s valuation division Infinity Valuation Services conducts 4,500 to 5,000 broker price opinion valuations on a monthly basis. But what makes IVS stand out from other competing firms is that their BPOs are completed by the same real estate agents who are trying to sell distressed assets for them.

“These agents know the market, how much assets are selling for in that area and what the valuation piece is,” Taggart told this publication in an interview. “We don’t send a mass email out to agents where the first person who sees it gets the valuation. We don’t believe in that concept.”

When IVS was created more than five years ago, the goal was to never become one of the biggest BPO providers throughout the country. Instead, the West Valley, Utah-based firm wanted to offer the “best quality and service for their clients”, Taggart said, which is hard to accomplish with a large company.

“IVS was started as a built-on service to make sure our clients who were private equity groups and investment banks at that time looking to purchase or acquire nonperforming debt had a valuation tool to do that,” Taggart stated. “It seemed like a very natural transition into providing valuation.”

Because the agents IVS uses for their BPOs live in communities where they are doing business every day, Taggart fells that the company really does offer clients a “true value” in the marketplace for how much an asset could be sold for‑whether it’s high or low.

For example, the agents know what a room should look like and whether there has to be granite countertops in a particular house. Also, they are knowledgeable about the cost it would take to make repairs in that community.

Additionally, since the agents are selling GRC real estate assets as well as doing the BPOs for these properties, they know it is important to submit an accurate valuation to maintain their business with the company.

Therefore, Taggart said the agents don’t perform a drive-by where they stop the car, take a picture of the home with the side view mirror in the photo and then move onto the next valuation. However, they get out of their vehicle, survey the property to see what it really looks like, and assess the neighborhood to look at comparable properties.

To confirm the valuations submitted to them, IVS has an extensive quality control process where in-house appraisers review the valuations using industry data that the company subscribes too as well as speaking with other agents in that area.

Taggart said every BPO goes through a 250-point checkup to make sure all of the data provided in the report makes sense.

“We let our agents know that if you don’t spend the time to provide us with the work we expect, you could potentially lose all of your REO listings and any future listings,” Taggart said. “So, we’re getting a better BPO because our agents are holdings in terms of knowing that they need to provide the best product in order to make more money on the REO or short sale part of their business. We feel very confident that we’re getting the best value and are comfortable with what we’ve been able to do.”