Secondary Marketing Executive, October 2003.
Remember all those sayings that constantly echo through your head after hearing them for most of your life?
Who was it that said, "Change is one of the only constants in this world?" This insightful piece of diction is one that has followed me through a 20-plus year career path as a professional valuator and Realtor. I remember every little thing as if it was only yesterday as I nervously inspected my first property on Fitzhugh Avenue in the sleepy suburbs of Richmond, Va., in 1982.
At 21, under the watchful eye of my father and supervisor, Lester, who is still working at age 79, I wondered if my methodology and training would meet with his and the bank's approval. And what a methodology it was. After a thorough walk through of the property, observing every nook and cranny, I meticulously taped the outside of the structure and photographed every pertinent item in detail.
The two pages of notes I took quickly turned into 10 as I left the property, bound for the assessor' s office to spend some three hours or more pouring over deed receipts that would eventually lead me to comparable sales.
Then it was back to the subject neighborhood again to photograph the sales I found, hoping all would adequately match my subject's market profile. God forbid if a couple fell out, as then the entire road trip to the assessor had to be repeated.
After all that, it was off to the office to type up forms on my new word processor that would actually store up to an eight-word phrase, enabling lightning speed, unless you made a mistake that required the typing process to also start over again.
I recall feeling I was one of the more efficient and speedy appraisers. I had worked out a "deal" with the local photo place to priority process my film in three days.
That gave me an edge as I could turn out a residential report in around two weeks, well ahead of my competition. Perhaps I could shave another day if I paid my loan officer's processor to do a bit of typing for me? And yes, even then it was all about speed.
Fast forward to 2003. Everything has changed, but has also stayed the same. Technology has made all of us more efficient and comfortable in every facet of our lives.
The two-week turn-time I was so proud to advertise back in 1982 would be laughed at today. And the industry has gotten smarter about the process. In 1982, every home-related loan required a full appraisal to ensure the value of the collateral would be there if something unfortunate happened because "real property always increased in value."
During the decade that followed, we found that old financial rule had to be amended to include words like "bubble" and "oversupply."
So we shifted our focus, still leveraging strides in technology to consider a more evenly spread mix of borrower worth and collateral value. We also looked at what I like to think of as good old customer service. The age of better, cheaper, faster was upon us.
Data modeling appeared on the scene and enabled the lending community to profile borrowers into risk categories. Laws changed to allow financially responsible individuals profiled as low-risk to benefit from streamlined processes that enabled cheaper and faster closings.
Unfortunately, the valuation community was slow to respond to the new needs of its customers and wasted a lot of time in a futile attempt to hold on to past. Many doomsayers said the end of the valuation business was at hand when tech-driven automated valuation models caught on. But just like every other advancement in life where we have applied technology, these models would share a playing field in an industry where an adjustment was necessary.
The food analogy
Remember when McDonald's only sold hamburgers and cheeseburgers? Now with some 15-plus sandwich varieties, McDonald's has adjusted in order to better serve its consumer. Remember when it took all day to purchase an automobile? I just bought one in an hour.
Some in the fast food industry have even teamed up to supply a wide variety of products to varying tastes, e.g. "…yes, I' ll have a burrito and an original recipe drumstick please."
In the same measure, successful valuation firms have made similar adjustments. Savvy firms took advantage of strides in data-gathering capability, developing products that leveraged technology to satisfy the changing needs of their consumers.
Having worked in this business on a national level for the past 12 years, I have often heard my customers use the phrase "one-stop shopping." This means a firm that can supply all the ancillary services necessary to support the entire loan process, from origination to closing to back-room risk analysis.
With the technology currently available, smart firms have adjusted into settlement service providers and risk analysts, rather than limiting themselves to a single product line.
For instance, let' s look at the many different facets of the valuation industry today. Yes, traditional appraisal products still and, in my opinion, will always exist. The complex or unusual property or the "scratch and dent" borrower will be the mainstay of these high-definition reports.
However, why should a borrower with a reasonably high FICO score, a great prior credit history, and a low LTV be subjected to the same standard? In today' s data-rich real estate industry environment, that is ridiculous.
Settlement service firms can now offer a variety of valuation products based on borrower profile. Models that calculate up-to-the-minute residential transfer data are available for the "model" borrower. No field inspection is needed or required if the borrower fits the mold.
Additionally, real estate professionals can leverage their businesses by participating in products that offer model-based valuation with the additional security of a field inspection or review by a licensed professional. This segmentation also improves borrower experience by reducing my former two-week turn-time to seconds from the cyber standpoint, or just a few days from the field standpoint, to provide that "instant satisfaction" that today' s consumer wants.
For the lender, settlement service providers are developing valuation products fed by field data and modeling that look at particular property types, geographical areas and time periods. These products are capable of producing risk scores that enable the investor to rate the quality of a potential purchase or ensure solvency of a portfolio – large or small – in a timely fashion. Forecasting models that operate on similar platforms are also available.
So where is the valuation industry headed? I see the survivors in this industry honing the marriage between technology and field skills. I see multi-faceted companies that offer one-stop shopping prevailing in the future. I see the appraisers who are willing to adjust to today' s demanding marketplace remaining a valuable asset to the lending process, utilizing their skills as information providers and trend analysts.
And I see the need for speed being met by industry participants who work as a team, rather than what I now see as peaceful adversaries. Change will always be with us, and willing adjustment to that change will keep us going forward into the next decade.
Mark Chapin, a veteran real property valuator and trend analyst, works in business development at FNIS Hansen Quality, a provider of collateral assessment solutions. Beginning his career in Richmond, Va., Chapin moved into the national appraisal scene in 1988, serving three settlement service firms over the next 15 years as chief appraiser. He is also a former chaiman of Appraisal Foundation's Industry Advisory Council. Located in San Diego, FNIS Hansen Quality is a division of Fidelity National Information Solutions.