Strategic Development Worldwide

The Future of Residential Appraisal – The AVM Dilemma

Appraisal Today ConferenceSan FranciscoAugust 6, 2004

Vicky Cassens ZilliouxManaging Director

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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

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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

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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

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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

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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

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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

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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?

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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

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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?