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The Future of Residential Appraisal – The AVM Dilemma

Appraisal Today Conference San Francisco August 6, 2004 Vicky Cassens Zillioux Managing Director. The Future of Residential Appraisal – The AVM Dilemma. In the Beginning…. Automated Valuations – They have been around longer than we think

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The Future of Residential Appraisal – The AVM Dilemma

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  1. Appraisal Today Conference San Francisco August 6, 2004 Vicky Cassens Zillioux Managing Director The Future of Residential Appraisal – The AVM Dilemma

  2. In the Beginning… Automated Valuations – They have been around longer than we think • County Assessors have been using these products for many years • First developed to accurately value homes for tax purposes • Accuracy was important to eliminate time and money spent on reassessments due to homeowner appeals • Models were developed on a county basis with much of the necessary information readily available as model inputs • Neighborhood idiosyncrasies were identifiable due to limited geographical coverage • This is not really an appraiser issue

  3. Price Index Models Make the Scene University research brings the development and use of price index models • CSW – the Wall Street Model • MRAC – also targeted wall street • Price Index modeling addresses the issues of limited data available to the commercial enterprises • Primary focus was for portfolio valuations in the investor community • Not yet introduced into lending • This is still not an appraiser issue

  4. Automated Valuations Move into Lending The first models are developed for the residential lending market in California – early to mid 1990’s • Initial models are “hedonic” • Initial take on price index models is that they are not accurate enough for individual valuations • First American develops Value Point • More like appraiser emulation with regard to comparable choices and radial searches • HNC develops AREAS • Neural network model that attempts to identify neighborhoods and improve comparable search methods • Much of the time was spent selling the concept rather than the products • Now its becoming an appraiser issue

  5. Not Always an Appraisal Replacement Models are being used in all parts of the lending process… • Prequalification • First Mortgage (portfolio lending) • Home Equity • Wholesale review • Quality control • Default and foreclosure • Portfolio valuation tracking • Internet marketing

  6. The Reality Check AVM’s are here – Like it or not • Only the monopolies get to win the fight • AT&T and the Gopher search engine • So what happens now? • What are the choices? • Forget about it and go on with the way you are doing business • Complain about it and go on with the way you are doing business • Find out what your clients are doing • Figure out what the appraiser related tools are

  7. How Many AVM’s are Out There today? Sizing up the competitive market • There are 15+ AVM models out there today • ValuePoint 4 – First American • Basis 100 – Now First American • ValueSure – Fidelity • CSW – Fiserv • Value Wizard– Trans Union/Banton • HVE – Freddie Mac • MRAC – Basis 100/First American • ValueFinder – Landsafe/Countrywide • Do you see the trend here….. • Q-Value – Real Info • VeroValue – Veros • Net-Value – C&S Marketing

  8. Understanding Your Client Do you know who your client is? • Do you know what they need in today’s market? • Do you understand their competitive environment? • Mortgage broker? What does he need? • Lender? What does he need? • Borrower? What does he need?

  9. Understanding Your Market Do you know… • What the Fitch press release said about AVM’s • What everyone else said about the Fitch press release • What the leading mortgage publications are that will give you information about the lending industry • Which appraisal chat websites are worth the time and which are not • Who the current appraisal management companies are and what they can offer • What appraiser assisted AVM products are out there • What is going on out there in the lending community

  10. Who Gets to Win? There doesn’t have to be only one winner… • How have you handled competition in the past? • Customer service – quality work, fast turnaround • Client relationships • Understanding customer needs • Is this really so different? • Professionalism – understand the big picture in the industry • Everyone needs to move with their market – As a client, how do you expect your doctor/dentist/accountant/attorney to react to technology in their market?

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