Appraisal Scoop

Shameless Self-Promotion: Grand Opening! ScoopGear.com!

Some of you have already noticed the ScoopGear.com display ad on this blog and were curious enough to click on it.  For those of you that haven't . . .this post is for YOU!

Over the years, I've noticed that a lot of appraisers come up with some pretty neat ideas but they never seem to gain any traction because there was no place to advertise them economically or they weren't able to demonstrate or explain their value.   That's all about to change!

AppraisalScoop has been phenomenally successful thanks to all of you!  Along with that success comes an opportunity to create a sister-site, that's geared towards marketing a variety of niche-market appraisal tools, that would otherwise not of had exposure to a large targeted market.

ScoopGear.com has been open for a few days now but today is its official GRAND OPENING! 

One of the key features of ScoopGear.com is its blog interface.   This is NOT just another storefront site.  For the first time ever, ScoopGear.com's blog style allows merchants and appraisers to interact real-time on a variety of levels.  Sure, you can buy stuff from the individual merchants, but that's not the great part of this site. 

Each merchant essentially becomes a blog author!  Just like on AppraisalScoop.com, each author can post articles, videos, and photos about their product or service.  In turn, appraisers can comment and interact with the merchant. 

Many will recognize Anthony Young's fantastic Nuts & Bolts of Spreadsheets and Graphs DVD as one of our premier merchant offerings.  "Soup to Nuts" might be a better description for Anthony's DVD.  Beginner or seasoned Excel grapher, there's plenty in this video training DVD for everyone.

Anthony Young is already working on a series of training videos to illustrate some of the things that you'll learn with his product.  Your questions and comments to Anthony will also be featured there.

The LaserReel is also being featured on ScoopGear.com!

LaserReel is a heavy-duty retractable "Quick Draw" reel designed to replace the bulky holster that comes with laser measuring devices.  The LaserReel works with any laser measuring device, camera, or light that has a standard 1/4-20" mounting thread, up to 1 lb.

I had tried another brand and really, really liked the concept but the design was not durable enough for the way appraisers would use it.   I went looking for an alternative.  The LaserReel's superior 0.04" (O.D.) steel wire with a protective vinyl plastic outer layer has a 34" long reach which is ample for when you want to use the telescopic viewer on Disto measuring devices.

In the coming weeks I hope to finalize some talks with additional merchants and see if together we can build a community sharing tips, tricks, gadgets, and software.   I hope you'll visit and support the merchants.  Watch for upcoming videos!!!

Declining Market Issues: Analyzing Future Values for Clients

AUTHOR: Steven R. Smith, MSREA, MAI, SRA, Smith Realty Advisors, 936 San Jacinto St., Redlands, CA 92373, Real Estate Appraisals, Consulting, Expert Testimony, Forensic Reviews, Fraud Research and Analysis, Litigation Support, Fraud Training.

In most of the formerly hot market areas, housing prices have been declining for well over a year. Many appraisers have struggled with how best to provide their clients with an in-depth market analysis, as well as which reference sources should be consulted to provide that analysis.

In the spring of 2006, my office began to measure market declines by Zip Codes or Market Segments and started illustrating the declining trends with graphs in our reports.  By the winter of 2006, in some local markets, my office measured double digit price declines.

Now, in the spring of 2008, some areas have declined over 50% in value from the peak.  Now we have begun to measure the bottom of the market and to project future value trends, such as when values may begin to stabilize.

The following is an example of how we estimated future values for the city of Corona, which is on the western edge of the Inland Empire, our primary region.  Corona borders the city of Orange, where home prices are higher, and the cities of Riverside and Lake Elsinore, where the prices are lower.

From http://www.realtor.com/ - Corona is a city in Riverside County, California, United States. As of the 2000 census, the city had a total population of 124,966; a 2004 special census put the fast-growing city's population at 144,274. The city of Norco lies to the northeast, Chino Hills and Yorba Linda to the west, and the Cleveland National Forest to the southwest; unincorporated areas of Riverside County line all of its . . .

As shown on the map, there is a wide range in pricing in the City with some neighborhoods in the $300,000 range and some over $1,000,000. Not all that different from many cities in terms of the breadth of the range. Higher prices than some, lower than others.

How can appraisers use this type of information to analyze and estimate where the bottom of the market might be?

Zilpy - Demographic Rental Data

Inman News reports - "Zilpy is like Zillow for rental properties, with rental price estimates, demographic data and heat maps based on median rental rates."  Click here for the complete article.

The new Web site, which launched last week and lists Zillow as a partner company, offers competition to Rentometer.com, another site that allows users to gauge rental prices in a selected area.

Zilpy.com is not a rental listings site. It is a rental research site that allows users to grab automated rental price estimates by address, city or ZIP code, and to refine searches based on type of rental property, a desired rental range, number of bedrooms and a range of square feet. One of the founders referred to the site as "the Trulia for the rental market."

Click here for the complete Inman News article.

Zaio Releases New Technology - "Access appraisals from a secure database in seconds"

Press Release: CALGARY, Feb. 6 /CNW/ - Zaio Corporation (TSX-V: ZAO) and its Scottsdale, AZ based subsidiary, Zaio Inc., announced the release of Version 2.0 of its exclusive patent-pending database and technology.

The company also reported that the appraisal revenues sent to affiliated Zone Appraisers in Q4 2007 increased by 32% over Q3 2007, and increased by 107% from March 2007 to December 2007, demonstrating its commitment to attract more revenues for its elite network of local appraisers. Overall, Zaio sent revenues to 2,302 appraisal firms during 2007, with many firms having multiple appraisers.

One such appraiser is Zone owner Ken Verrett of Houston Texas (Runt Rants - Appraisal Scoop) who said: "Our appraisal business received $39,345 in increased revenues as a result of our Zaio affiliation during 2007, generating a handsome return on our investment in Zaio technology."

Zaio's latest technology includes several enhancements that greatly benefit lenders and appraisers. Lenders will no longer be required to wait 4 to 7 days to obtain the results of appraisals, and they can access appraisals from a secure database in seconds, much the same way they obtain credit reports.

Instead of instantly populating only the 2055 exterior appraisal form, with Version 2.0, appraisers are now able to produce a complete line of valuation services ranging from:

• AVMs, to
• Desk top appraisals, to
• Exterior drive-by's,
• Professional price opinions, and
• Full URAR interior appraisals

to diversify their appraisal business and help grow revenues.    

Traditionally, lenders have been required to obtain appraisal reports from licensed appraisers. Previous industry attempts to increase the speed of the appraisal process have resulted in lower appraisal quality and led to the introduction of valuations performed by computer models and real estate agents.

However, Zaio's proprietary database and technology allows appraisers to speed their delivery of appraisals without reducing quality. This is significant because loans originated with appraisals have significantly lower loss rates than loans originated with broker price opinions.    

Click here to continue reading . . .

 

"Real World" Appraisal Series Returns to a la mode's Las Vegas Convention - April 12-14 2008!

Appraisal Scoop authors will be presenters at a la mode's 2008 Las Vegas convention!

This year, a la mode is offering more targeted, up to date training in three cities across the country. Appraisers want to stick to business right now, so their Regional Conventions will skip the dinners and cocktail receptions and focus more on the hard core training we want and need.

They're offering three all-new, solid tracks (marketing, management, formfilling), plus real-world courses taught by appraisers and industry experts who’ve developed effective strategies used in their own offices for things like going paperless or doing more in-depth market analysis.

Patrick Egger (Outside The Boxes series) and Brian Davis (Appraisal Scoop - Paperless Office) will be presenters at the first of three regional conventions, to be held April 12-14 in Las Vegas.  Their seminars will be part of what a la mode calls the “Real World” series.  This series of courses are taught by a la mode customers and are designed to show real life examples of how technology can make a difference in your office.

Real World: Going Paperless  (Brian Davis)  I'll be covering lots of free tools and services, available from the Internet, to assist you in creating a paperless environment.   The seminar shows how tools like FolderShare, MS OneNote, PaperPort and even DiVinci, XSites, and Tablet PCs can come into play with a paperless office. I'll be working LIVE to demonstrate a paperless workflow from receiving an assignment through creating an electronic workfile.

Real World: Networking and Security (Jeff Jones) This course teaches safe practices as it relates to computer, network and wireless security. Topics discussed include secure Internet access, spy/adware and virus protection as well as data backup solutions. And It’s all in laymen’s terms.

Real World: Housing Market Analysis (Patrick Egger) Learn how to gather data from the Internet and build a true housing market analysis addendum that demonstrates your expertise and further defines you as a leader in your market.

Real World:  Regression Analysis (David Braun)  If you’ve heard regression analysis isn’t appropriate for real estate, think again.  Learn to use all the great data you’ve been collecting for years to enhance your own reports, compete with AVM’s, and have a tool you can use daily in your business.

To learn more . . . click here!

Outside the Boxes: Part 3 "Down Cycling" - Trends at the neighborhood and subject property level

In part two, we looked at cycles and trends in the collective housing market. In part three, we'll down shift to the neighborhood and subject property to answer questions in the "one unit housing trends." 

"Down-cycling" – trends at the neighborhood and subject property level.

While providing a "snapshot" of the market and economy at the community or regional level is important for the reader to gain perspective of the housing market and factors influencing it, FNMA is asking for neighborhood trends and therefore it's important to understand the difference between a neighborhood and a market area

Simply stated, a neighborhood is a group of complimentary land uses that are influenced by the four forces (social, economic, governmental and environmental) in the same way. The neighborhood can be comprised of a single subdivision or a grouping of subdivisions that are similar in price range, physical character, profiles of residents, etc.

In contrast to the neighborhood, the market area is a collection of neighborhoods that may have similar governmental influences, but often have varying economic and social characteristics. Since the URAR is "neighborhood specific" it is important that the neighborhood is clearly defined and that the characteristics, one unit housing trends, land uses, price ranges, etc., are based on the neighborhood and not the "market area".

In a fluctuating market you can get mixed signals at the market area and neighborhood levels. There can be a shortage of entry-level housing (with increasing prices) while higher-priced properties are experiencing declining price points?  Clarifying the trends is critical to advising the client of the risks inherent in the neighborhood and the subject property.   

Making your points – plotting data

Analyzing sales data over the "short real estate cycle" (SREC - 3 to 6 years) for the neighborhood will give you a good read on neighborhood trends, that can be compared to market area and regional trends. The key is to clean the data (remove concessions, non-market sales, etc.) and observe shifts in values within the neighborhood.

Click here to continue reading . . .

AVMs in Declining Markets

As house prices continue to stabilize in many of the nation’s housing markets, industry observers have expressed concerns about the predictive accuracy of automated valuation models (AVMs), particularly in areas where house prices are falling.

• Critics have expressed concerns that some AVMs may overvalue properties in cooling markets because of ‘data lag,’ or the interval between when a sales transaction occurs and the model receives this information in its backend database. According to these detractors, outdated sales prices will result in higher value estimates that do not reflect current market realities.
• Further complicating matters, there is a common misconception that AVMs struggle to ‘see over the hill’ and are restricted to making linear adjustments to update prices and counteract data lag.
• Finally, critics argue that sales concessions occur more frequently in declining markets, compromising sales data used by AVMs and increasing the probability of overvaluation. 

This article will examine the validity of these claims as well as whether traditional appraisals are necessarily a better option in areas afflicted by depreciation.

AVMs calculate a property’s market value based partially on market information contained in public records. Several larger counties deliver this data through online distribution channels as soon as the transaction is recorded. However, this timeliness comes with a price; online data is usually more expensive than alternative sources and delivery methods. In other areas, AVMs receive this information monthly on a CD Rom. In counties where sales transactions occur less frequently, an AVM developer might receive data on a quarterly basis.

In general, AVMs have online access to current market intelligence in high frequency sale transaction areas. AVM vendors receive thousands of valuation requests every month; hence the extra cost of online data per order is negligible. On the other hand, appraisers do not have the scale to invest relatively significant amounts of money to acquire the most current data. In counties where vendors receive sales information on a monthly basis, appraisers and AVMs are on par in terms of access to current data.

Appraisers do have an advantage in those counties where data is reported quarterly; however, in these areas there are not many sale transactions in the first place.

Click here to continue reading . . .

The Zaio Chronicles - Part 2 - The Summit

My name is Greg Wood.  I am a Certified General appraiser with over 18 years experience.  This post is the 2nd in a series of articles on my journey as a Zaio zone owner.  This is not intended to be a series cheer-leading for Zaio, but rather an honest portrayal of why I bought my single zone in Torrance, CA, and an ongoing diary of the ups and downs of bringing my investment operational.  See Part 1: One Man's Journey.

I'm back from the Zaio Summit in Vegas. Wow!  Last Wednesday night was the reception. We were introduced to the Zaio management team, saw a couple of examples of the high quality video ads we will have available for our local marketing soon, and then spent the rest of the evening quaffing adult beverages, munching on tasty hors d’oeuvres and talking to our fellow Zaiotistas.

Additionally, there were numerous guest appraisers, invited during the Valuation 2007 conference, who came to explore the Zaio world.I was able to speak to zone owners from Colorado, Florida, Washington, my own neck of the woods here in California, and of course to the Houston contingent led by Ken Verrett, the other “Zaio poster child” as Brian Davis calls us. (Brian should insert the photo he has of Ken and me after a hard day of geoscoring, so everyone knows what we look like—Ken’s the one with the tattoos. - click to enlarge) I was also able to speak briefly with Tom Inserra, Zaio’s CEO, as well as several others of the Zaio team.

We spent all day Thursday in a series of presentations. There is absolutely no way I can report on all the info we received, but I will try to touch on the high points. Most importantly, out of the 7564 zones in the United States, over 1400 have been sold. Those 1400 though, represent 50-65% of the prime mortgage lending areas in the country. Of the 500+ zone owners in the country, more than 200 were in attendance in Vegas.

We were introduced to Zaio’s new scoring software, Valytics 2.0. Zaio responded to many of the suggestions of the zone appraisers with this new tool, allowing the use of more than 3 comparables, and the inclusion of listings.

Click here to continue reading . . .

Mean, Median, Mode … Misleading … Misdirection?

They say, "A picture is worth a thousand words" and since we live in a world that is visually oriented, we tend to assume that those that may be statistically challenged will easily grasp our concepts if we present the same data in graphs vs. the numbers and words alone.

Analysts use the terms mean, median and mode to define measures of central tendency and regression techniques (linear, polynomial, etc.) as methods to model and display the trends the data may indicate over time.   

While appraisers know what these terms define and how regression analysis can be used to display the trends and findings of data in a graphical format, I think we take for granted that others outside the profession (and those inside as well) have the same comprehension of statistical analysis tools that we do.

The real question is "do they"?

What I've discovered is that despite my best efforts to keep them simple and straight forward, many if not most, cannot quickly grasp the concepts or easily (without lengthy explanation) get on the same wavelength as the graph's creator.

Moreover, I found that those creating the graphs can easily (by choice or accident) "misdirect" or "alter" the representation of the data (and therefore the client's comprehension of the same information) by using different methods to present conclusions (in the form of linear vs. polynomial trend lines), inflation adjusted prices (Case-Shiller indexes) vs. nominal prices, etc.

This brings me to an interesting point. If we create the graphs to assist the client in understanding the trends, data, adjustments etc. and the client is confused (as a result of the presentation without sufficient explanation of the methodologies, etc.), in creating the graph have we assisted the client or have we further contributed to the problem of a confused and misinformed marketplace?

Click here to continue reading . . .

Video: Runt Rants - Sub Prime and Alt-A, The Market Revealed

I spend time trying to understand the nuances of  the now Global currents that affect my business and yours, so that we may both guide our companies to prosperity. Hopefully you follow my efforts and hopefully we both will profit. 

Occasionally I come across an analysis so concise, so on target, that I have nothing to add.  This is one example.  Don't click on the link below until you have nine minutes to spend learning, and at least five minutes to recover.

This video takes a humorous look (from a British point of view) of our economy from basic sub-prime borrowers, to brokers, to how the hedge fund market works. 

Have a wonderful day!

The author is the owner of Acorn Appraisal Associates, a 22 year old firm offering a wide range of quality appraisal services to the Financial and Business Communities. [email protected]

I have the right to remain silent. Anything I say will be misquoted and used against me