The author is the owner of Acorn Appraisal Associates, a 20 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities in the greater Houston SMSA
The current year has witnessed a number of new business ventures that offer opportunities to appraisers to expand their markets. Zaio, Zillow, IRR come to mind. I haven't attended any of the introduction seminars put on by these ventures, so I'm not privy to any insider information, not bound by any non disclosure agreements. I've only visited the various web sites, and free from any facts, I'm able to speculate wildly. Perfect!
I thought the Zaio business model the weakest of all I've yet seen. Especially if the appraiser is not the one taking the photos...I originally thought territories were purchased, the purchaser was responsible for the territory, taking the photos, labeling and uploading them, then loading all the sales in the market into the data base also...That's one huge undertaking. Also, I felt there might be limited use of such data.
But when something thought through by wise guys doesn't make sense to me, it doesn't mean it isn't a good idea...it just means that I need to consider it a little more. I might agree, I might disagree, but I need to learn more... Click Below For More!
So I took the time to go to the Zaio web site. http://www.zaio.com/ Pretty slick. Pretty informative.
A pretty impressive and well rounded key management, including the CEO, and SRA with background as Chief Appraiser for the FDIC and the RTC. That should certainly take care of the Regulatory and USPAP compliant issues some have raised.
The business development guy actually started the company. He began by taking pictures of 1.7 million homes in cities in Canada and building a data base. Developed several applications of technology to the appraisal process. So the basic stuff is really field tested. Well. Interesting concept, good background of leadership, basic systems field tested. Sure seems to be fundamently grounded as a viable business plan.
Using appraiser trainees as the photo team is a novel approach and shows some creativity. We read all the time about trainees having difficulty getting supervisors and making a reasonable income while learning. This might be an alternative for them. Plus, Zaio provides a path to take the trainee from the photo phase into the appraiser phase, introducing them to the Zone Appraisal owners. The whole photographer/trainee package is innovative.
My biggest stumbling block in initially thinking of this model was the mass of data that would have to be input daily on market transactions within each zone. However, the size of the zones...roughly 10,000 houses according to their web site, makes that task at least doable. But Zaio makes that function even more efficient. Each sector within the zone will have a few sales within that sector that the system and the appraiser agree are representative of that sector. The appraiser is charged with reviewing the current sales...maybe monthly....and determining if any of those sales represent a change in value trends within it's sector. If not, the sale is discarded. If so, it is loaded into the comp data base....think of a set of key comps in each sector.
It is unclear to me how the appraiser comes upon the sales data...maybe from his MLS, maybe from a central Zaio data base...I'm guessing at this point that it's from his MLS data base which the zone owner currently has access to....But I can envision that a quick scan through those sales to 'score' each as to it's predictive properties could be efficient, especially if some software has been developed to assist the process.
So, when the phone rings...sorry...when the e-notification comes in to 'value' a property, it's then a matter of pushing a few buttons to load the subject, populate the report with certain sector specific and property specific data, bring in the key comps, with pictures and probably an automatically populated grid analysis, push another button or two, and send the result on it's way. Yep, I can envision how that might be done, produce a pretty detailed, impressive looking report, and in just a few minutes.
HOLY COW! This model might cut into my market share!
Or will it? The Zaio product seems to be essentially a very creative drive by report. If all the software works as it could and as they infer it does, the result is likely more accurate than an AVM, more accurate than a Desk Top appraisal, but less reliable than any product we produce with an interior inspection.
If I've got this right, Zaio's main threat is to AVM analyses which we lost as orders over the last few years: Desk Tops, which we in Acorn would like to do but currently don't do; and 2055Es, which we do currently provide. A quick visit to my QuickBooks shows me that drivebys account for 10 percent of our total volume this year to date, and was a little less than that last year. I'm surprised by that percentage...I thought it would be much higher...maybe 25 percent...but as I look back over the years it's never been more than 10 percent of our volume....interesting.
On the other hand, it seems to me that the niche it offers is business I don't get, can't get. To wit, the AVM sector of the market, which already captured that no boots on the ground stuff for otherwise credit worthy borrowers. I really, really, would like that business!
"It leverages all the local knowledge I have of my market and the technology that is available to render opinions within appropriate SOWs, all while I'm sitting at my work station, as I am now. That is the ultimate in efficiency and productivity!! That's cream puff stuff! I WANT IT! "
But I can't get it. My local knowledge and hard technology are in place, but my available software and accessible data bases are not. AVMs offer relatively quick answers I imagine (I imagine, but I don't really know); maybe instant response. Zaio offers that instant response coupled with pretty pictures and a pre prepared neighborhood analysis. Were I still a banker, I'd like that product for a very lucrative sector of my banking customers. Instant loan approvals!
As it stands, I don't think we in Acorn are threatened in the next few years by Zaio. It doesn't appear to threaten our current product line.
Furthermore, the numbers at the zone level don't appear to be a very attractive investment from my view. Investment of $9,000 (rounded) for the purchase of a zone. They estimate 240 appraisals from that zone a year. Fees for the product somewhere between $100 and $200 each. Zaio takes a haircut of 56 percent, appraiser gets 44 percent. That's an annual gross between $10,560 and $21,120. Even at the higher number, that's not particularly appealing to me.
It might be if I considered it an add on to our existing business, with the rest of our business covering all of the fixed costs necessary....a marginal revenue, marginal cost approach...however, why the heck would I consider it in that narrow context? But I must be missing something here...or everyone would turn the deal down, and clearly they haven't.
While I don't think Zaio is a threat to me, I do think they have developed a very impressive business model from their perspective. If they pull it off, that data base they will have is currently unique, and would be a terrific base to spin off products of many types that would be in demand in the market.
A visit to their web sites suggests that it exactly what they plan to do. But I'm afraid all of that upside is retained by Zaio, not the worker bees who will build the data base for them......
Interesting times! For Zaio's Response - Click here!
www.acornappraisal.net is a 20 year old firm offering a wide range of quality appraisal services. Our market includes the greater Houston SMSA, including Harris, Montgomery, Fort Bend, Brazoria and Waller Counties
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