AppraisAnalysis

I have heard it said, “A good appraiser is hard to find”. It really depends on what definition you use. I have been around long enough to know there are a few definitions of a “good appraiser”.

The real estate appraiser’s definition of “a good appraiser“: A good appraiser is one who has been well trained through education, experience and mentoring. Understands if the value is off, someone relying on his report might get burned. The appraiser has good and extensive data sources and knows his service area well. He has a good idea of the ebb and flow of buyers and sellers in the market place, both from his data and from his experience with the market area. When including comparing sales in his report, he strives to use the most recent sales which are most comparable to the subject property. Physical and locational differences are adjusted based on what the market indicates. The good appraiser also considers comparable listings and/or pendings as (after market based adjustments) they tend to set the upper limits of value. The good appraiser reconciles all of his research, analysis and reasonings into a final value estimate that is not influenced by biased individuals connected with the transaction.

From over 20 years of appraising, the following is what I have come to understand the definition of a good appraiser is, from the view point of…

A few Divorcing spouses: A good appraiser is one who brings the value in LOW because I want to buy my EX out of the house.

A few Divorcing spouses: A good appraiser is one who brings the value in HIGH because I want my EX to buy me out of the house.

A few Commissioned loan agents: A good appraiser is one who will, look at comps and tell me what the value will be before doing the appraisal; use whatever comparable sales will indicate a high value (even if they are not the most comparable); withhold information about the property or location (which might put off the underwriter/lender); will change the report when the truth about the property does not match up with the underwriter/lenders guidelines or requirements; will bring the value in for what ever will make the loan work. (Disclaimer: the majority of commissioned loan agents I work with are very professional and do not use the above tactics)

All Lenders (the one with the money): A good appraiser will be unbiased in his appraisal and communicate true market value.

It is kind of funny that the definition of “a good appraiser” can be so varied. In the face of being labeled “a bad appraiser” by those who use another definition, the good appraiser will always stick to his definition, no matter the cost.

P.S. for a funny look at this topic, check out Real Estate, in the eye of the beholder

Since I am a Zaio zone owner, I am following the Zaio Corp. very closely.  John Ross was the CEO of the Appraisal Institute, of which I am a member.  Since I appreciate and admire the work of the Appraisal Institute, it was very satisfying when I heard that John was coming over to Zaio.  His “first impressions” will give you more understanding of what Zaio and the zone owners are up to. 

“First impressions – two weeks into working for Zaio
By John Ross
The Zaio concept is even more powerful than I expected! In my first two weeks on the job, I visited with many appraisers, clients who use appraisal services, and investors in growing small-cap companies. The ideas and market opportunities afforded Zaio Zone Appraisers are phenomenal.

Zaio does require a mind shift – it is a different approach, starting from street level photographs, then rating and ranking every home against all similar homes in the context of the market, and completing the analysis with field inspections to confirm or update the ratings and rankings. This process results in a value estimate from an exterior inspection for virtually every property in the zone. Of course, there will be unique properties, and some under construction, etc., so “every” is a bit of an overstatement, but even identifying those provides useful information. Having the unique (for whatever reason) properties identified helps to define the scope of work and the level of analysis required for that home.

As they come to understand the concept, appraisers, clients for appraisal services and investors all begin thinking about the possibilities. With organized data on virtually every property, an appraiser not only is a better appraiser, but can also open up new lines of business: consulting to sellers and brokers, to the insurance industry, to governmental agencies, etc. Clients appreciate an internally consistent, current, and responsive way to serve their needs…and investors see a company with tremendous growth potential as we open up new markets to appraisers ranging from insurance to portfolio analysis and consulting. An investor at a conference in New York last week said to me, “If Zaio and the Zone appraisers can prove this concept across the country, it is the next big thing – real estate will be as efficient as other investments!”

I don’t mean for this to be a sales pitch, but I have become passionate – everything that I have seen and learned in my first two weeks with Zaio confirms the conclusion from my initial analysis: Zaio is for real. It offers appraisers significantly increased efficiency and productivity, as well as a new business development and growth model. It also helps to address key industry issues – it becomes much more difficult to pressure and/or influence an appraiser who can prove and support where a home fits in the context of the other 157 (or 83 or 419) similar to it in its market. Non-traditional clients, like portfolio traders in the secondary markets, and the property & casualty insurance market, can also be served more effectively.

After years of working to improve the profession, to develop high standards for appraisals and for appraisal data, and to provide quality professional education, it is really exciting to be part of a company that can deliver an innovative quality driven business model for appraisers!

As with any growth company, there are challenges to be met. In order to attract business from national clients, Zaio needs to establish sufficient market coverage. Our goal is to reach about 65% of the lending footprint over the next year, and the entire market in the U.S. by 2011. That means matching (selling) zones to appraisers, and then getting the zones photographed (which Zaio pays for), delivering the photos and property data to appraisers…and train and support the appraisers to rate and rank the properties within their zone. From an appraiser standpoint, there is the zone investment, and the time to organize the property data, score the properties according to our proprietary rating system and conduct their required field inspections. The time from zone purchase to an operational zone may take up to nine to twelve months. It is possible to significantly reduce this time frame, which is based on several variables, such as the time the appraiser can commit to this initiative (most concurrently operate their existing business), the weather (snow delays in some markets), and meeting the minimum number of appraiser owned zones in the area to trigger the photography phase.

Zaio is making great progress. Mesa, Arizona and Spokane, Washington are already operational. Photography is underway in Orange County, San Diego County, St. Louis and Orlando with another 8-12 cities starting within the next 4-6 six weeks, including Houston, Denver/Colorado Springs and Los Angeles. In fact, we are beginning to “photograph ahead” working on that step before zones are sold in some strategically selected markets.

Appraisers in the markets that are set up – Mesa and Spokane – are starting to enjoy significant benefits. Revenue from local market clients (lenders, realtors, consumers, etc.), as well as gaining real efficiencies in all the appraisals they do, not just the Zaio-driven appraisals. We are beginning some tests with national clients, and are seeing a positive response (one test I am involved with brought an almost immediate “How soon can you provide this information for the Southeast? How soon for California?”).

There are many positive aspects to Zaio – including developing an “appreciating investment” where the zone is expected to have increasing value as the revenue stream builds– and one that is particularly exciting is the training program for new appraisers. The Zaio model answers a question I dealt with at the Appraisal Institute: How can appraisal trainees gain experience toward their license?

By starting as a Zaio photographer, the trainee will, in a systematic and organized way, look at around 10,000 properties per zone. Those who show promise may also become further involved under the supervision of an appraiser with rating those properties, and then may ultimately accompany the appraiser during the field inspection process, leading to appraisal work under their supervisory appraiser. What other training program would provide opportunity for in-depth review of 10,000 properties in the first year – let alone four months – of an appraisal trainee’s experience? Combine this experience with a solid educational program and the trainee will be well-grounded for entry into the profession!

Zaio is developing strategically selected key markets today. However, appraisers in other markets can also get their market going by getting together and acquiring “multiple” zones (20 plus), in which case we will begin developing those markets as well. I really encourage appraisers to talk amongst their peers in the markets in which they work. More information is available on our website (zaio.com), and can also check out the information reported to the Toronto Stock Exchange, as Zaio is a public company (symbol: ZAO at tsx.com). Interested appraisers can also take part in an online webinar, and are welcome to attend one of our regional meetings. I will be in four cities in Ohio next week and am looking forward to talking with appraisers about this investment in their business future! Buzz readers can also contact company founder Brad Stinson at (Brad@zaio.com) or John Ross at (johnr@zaio.com). ”

Thanks go out to appraisalbuzz.com for this article.

Thanks to First American Real Estate Solutions for the data.

CALGARY, Feb. 13 /CNW/ - Zaio Corporation (TSX-V:) announced today that lenders, appraisers and consumers in Spokane, Washington, are now using Zaio’s industry-changing, innovative valuation solutions. Spokane is the first market in the country where high-quality, industry-compliant appraisals completed by a locally licensed or certified appraiser can be obtained instantly resulting in obvious “speed of delivery” and “peace of mind” benefits. 

Gary Cantrell, consumer risk manager for F&M Bank, reports, “Before Zaio, we were using a drive-by product that took about 10 days to receive, or a full interior appraisal that would cost over $300. The Zaio product has given us the ability to immediately document the property value, thus allowing an almost immediate turnaround for equity lending. Also, we really appreciate the more robust detail of the Zaio report compared to an Automated Valuation Model (AVM). Our regulatory burden to evaluate and document property values is ever increasing. Zaio helps us to exceed regulatory requirements by providing us the ability to use an appraisal when most lenders are using an AVM. And getting the evaluation almost immediately is hard to beat. We are sold on the Zaio solution.” Todd Powell, President and CEO of Spokane Firefighters Credit Union, said, “When a borrower is unsure of his property value, the Zaio system allows us to confirm a value range prior to ordering a full interior appraisal. We have used this on many occasions and found it a valuable tool that can save our members money.” 

“Zaio is an amazing system that will revolutionize the mortgage industry just like automated underwriting did. The ability to get an accurate value on a property instantly from my computer with the customer sitting in front of me and then later turn it into a completed URAR interior appraisal within a day is extraordinary. The system also reduces the risk of fraud. This takes a layer of risk out of the mortgage process when alternative lending products are at their highest,” emphasized DeeDee Williams, AVP/HLC operations manager, Panhandle State Bank. The property valuation reports in Spokane are being generated by several local appraisal firms that joined Zaio’s premiere appraiser network including Certified Appraisal Inc., Zone Assessment Professionals LLC, AAA Appraisal Service Inc. and Berg Appraisal Services PC. These Spokane area appraisal firms are the only appraisers in Spokane who have inspected and appraised virtually every home in the city and are enjoying an increase in their business volumes as a result. 

Tony Higley, president of Certified Appraisal, stated, “Spokane appraisers from five offices, using handheld computers, conducted an exterior inspection of virtually every home, authored appraisal reports and stored that information in Zaio’s secure network. The local appraisers constantly monitor and evaluate sales and listings in the local market as they occur and regularly update their value estimates. The result is an exterior appraisal that can be retrieved by the customer instantly, complete with pictures, produced on official industry-accepted appraisal forms, prepared and signed by a licensed appraiser who has inspected the property. “  Homeowners also benefit from Zaio’s solutions. Receiving an appraisal completed by an appraiser who is an exclusive member within the Zaio network can expedite home sales. Zaio also announced that the city of Mesa, Arizona, population 500,000, is completed and customers can now receive instant appraisals for virtually every home. In late 2006, Zaio completely sold out its software to local appraiser experts in 170 US cities in just 6 months. Zaio is now aggressively launching appraisal operations in those 170 cities and is expected to provide coverage in those and other US cities by the end of 2007. It is just a matter of time until an official appraisal for virtually every home in the United States will be completed by Zaio-affiliated appraisers and available to a variety of customers instantly.