Collaboration and data sharing: Let's talk about why and how
Woody Fincham, Research Fellow
See also:
The Comps and Data Share Debate: Does Size Really Matter? by the same author and
As a profession, we must advance along with our technology by Jim Simmons.
As we begin our tenure as Research Fellows with a la mode labs, I envision a new type of technology that really could be just as life changing, if not more so, than anything we have ever seen. And now thanks to the labs we have a chance to think it through and eventually try it out.
This new technology would allow participating appraisers in a market to share non–private work file data, making data collection faster, more reliable and more useful. Such a system would be superior to what we use now, a way to leverage our intellectual property to compete with lower cost alternatives, and would save a lot of time per assignment.
Appraisers collaborating and sharing work file data would boost both our value to and our perception in the mortgage industry. We will be the ones in control of the best valuation information in the market. By aggregating it and making it available to each other, we can decide if and how we discount our work individually, and provide an unprecedented service.
Many appraisers welcome technology, and many show up at continuing education classes, seminars and conventions with the latest widget. On the other hand there are the holdouts that exalt the old ways. I have observed some of these people in our field go from "I will never buy that, use that or accept that..." to seeing them a year later using it more than anyone I know.
My first theory instructor held off buying a cell phone for many years – he just didn't see the need. I wish he still felt that way, as he is one of my biggest competitors now. We all know it is true; that we both keep an open mind and keep up, or we get left behind in the dust.
So the subject of this article requires you to be open to a new suggestion prior to passing judgment, because something as market sensitive as this idea could be destroyed before anyone ever really thinks it through. For those of you who like the idea of working smarter, follow me down the rabbit hole, take the blue pill and allow me to ponder some of this with you:
Typical day for us: you are doing a property that has old and outdated MLS and tax records. You have measured the property, only to find that there is 300 square feet of extra gross living area, with a full bathroom. We see this everyday, and a situation like this can blow your preliminary data out of the water. To boot, it is a rush and the client sending you the work is one of your big ones (it always happens that way). Unless you have a previous file on the property, you are stuck with the data you pulled, and now have to re–pull and replace it.
Now imagine this: same property, same situation, except you have a verified data source set up and managed by other professional appraisers that shows all instances and updates to the property as seen every time it was appraised. You look into the database and see that it was appraised three times in the last five years, all for refinance purposes, by three different appraisers. Of course the data may vary a little depending on measurement technique and site data collection, but it all correlates into essentially the same information.
I think I would take that over an agent's sales–oriented comments, or a lacking tax system any day. This type of regional information and the technology to share it is here and employable, but the biggest hurdle, in my opinion, knowing my peers, is a lack of participation or a misconception that it would not be compliant.
We, as appraisers, own the intellectual property we develop. We cannot disclose certain types of private information, but beyond that, work file information is ours to use and do with as we please. And guess what? AVMs and mortgage companies are already stealing this very same data and information, and using against us. And they admit it.
Then there are situations that exist in–between the two (appraisers using their work and AVM vendors using it against them). Some of you may be aware that there is at least one company that is hiring appraisers to do drive bys on every residential property in the country, in order to provide low cost computer based "appraisal alternatives." This company is making a successful run at it, as their available territories are selling out. And all the people buying the territories are appraisers, who are willingly helping drive us into prohibitive pricing structures.
We have control over our work file, and how it can be used, and a system like I propose does not just provide a professional convenience. It empowers the profession to decide together how long we stay in the fight. You know, the one where large mortgage companies sell us out to computer modeling.
Now that I have soap boxed a little, how does an appraiser–controlled data sharing arrangement compare to what we use now?
A Real Estate MLS is great for getting basic profiles about a property. But don't forget that it's a selling tool. Many times the information is polished to make a property seem more attractive than what it may be. Nothing wrong with that, but as appraisers, comments like "cream puff" or "cozy" are just a bit vague. I cannot count how many times I have followed up with a listing agent, only to learn that the very same comments really meant "hasn't been updated in 20 years" and "the property is really small."
In my market area, our MLS does not allow appraisers to actually contribute to the system at all. It is owned and operated by a coalition of the brokers in town. Essentially, appraisers are no more than data subscribers. I think those who run the MLS here fail to realize that when I measure a property larger or smaller than either tax records indicate, or the home owner is guessing at, they would have a much better source to use for their listings and their market analysis. I am not sure how many other markets are in this situation, but I would sure love to know how they are run.
Tax /assessor data is no better. In my area we cover seven cities, seems like a lot, but they are all relatively small areas that constitute a larger metro area, similar to the size of most counties. This means I have a good sample showing what is available for data, as each city seems to collect and publish the data in varying ways and formats.
I have one city that has a large private network that you have to travel to the assessor's office to use, that includes field photos, actual assessment notes, footprints, the whole enchilada. Then I have one city that seems to have a very difficult time just getting accurate square footage data across, in that they segregate the information in such a way you never really know if they included everything, or just part of it. Every other city falls somewhere in between. All of them do now have good GIS data, and keep recent sales relatively up to date.
I am not knocking what they do, as I am sure they get beat on like we do for just doing their job, but most of the data is really only a guide, and not really hard fact. The systems and theory used for compiling the data, and reporting it, is not up to modern technique. The new construction information is usually on point. It's funny that depending on what era the property was built in, you can see that whoever was running that assessor's office at that time did things differently than his/her predecessors and it changes as the person in charge changes.
I like what I've seen of national subscription services, but they are so limited in where they cover and provide services, that I may be retired by the time they get around to doing my area. From what I do know about them, they are still not allowing a solid base of appraisers to contribute to data. That we are not consulted for our research is odd to me, in that we are in the field everyday, and that is in regards to all the services I have mentioned.
Let's take this one step further. If a usable system like this were available, and were integrated with formfilling software, I believe the importing and management of that data could result in some truly huge time saving features. It would include information about homes that have sold, refinanced (I already know that you can't use refinances as comps before I get emailed about this, but it will eventually sell and having basic info can be of assistance), and private FSBO sales (I do a bunch of FSBO transactions, as the buyer usually needs a mortgage, and I would gladly share this info to a peer). This would bring forward information that we never had available to us before.
I also believe that a structured format in regards to property condition could be used to allow specific condition related items to be graded, to show true market comparison. At this point it is a pie in the sky concept, but I think it may have some legs to it, and I think that will mainly be up to you, the reader to let us know what you think.
I know I have opened a Pandora's Box here, as there will be comments about the validity of other appraisers' work, breaching USPAP disclosure rules, and probably 12 other things I can't imagine. That's the beauty of working as an appraiser, and with appraisers: we aren't typically shy when we have an opinion. So let me and the labs know your feedback as we think through these issues and work on how to deliver this kind of service.
