The current mortgage market problems are not new news…and many professionals in real estate saw this coming quite some time ago. When home prices started exceeding the cost to construct a home by one and a half or more times, and when the market price to rent ratio stayed above 1.15, there were surely issues to follow. Unfortunately, the cost approach is no longer required in most cases, and the data to evaluate prices relative to rents is often not readily available. There are other benchmarks as well but all are challenged by the availability of timely data.

Twentyfive years ago, the mortgage process took 30 days, and the appraisal, ordered on the first day and completed by the tenth day, served as the basis for the loan. Now the mortgage process takes five to seven days and, while appraisers have used technology to respond more quickly – usually two to four days – the parties have often already decided how much they are going to borrow or lend. The role of the appraiser has changed. Instead of being a guide, the appraiser is the person who “makes or breaks the deal.” And, the only feedback an appraiser usually gets today is negative feedback (you screwed up my deal!!!).

I came to Zaio Inc. because I see in Zaio a way for appraisers – armed with better and more current information than ever before – to return to the role they once had as guide for the real estate transaction. Data is more available, and technology exists, so that an appraiser can both have a better overview of the whole market AND develop defensible value estimates for a significant proportion of homes in a market…all before the order comes in. Appraisers can serve clients immediately with quality analysis and value estimates.

We have talked a lot in this profession about “thinking outside the box”. Perhaps the real issue is that appraisers are too often constrained by any kind of box at all. It is time for a new approach – one that builds upon the theory and practice of appraising, but focused on the whole market as well as on specific properties.

When I was at the Appraisal Institute, we talked of a concept called “Whole Market Analysis”. Essentially, the idea was to look at where a property fit into the whole market considering all the sales, listings and properties in the market, rather than building up to a value by finding three comparable sales. In other words, if one already had a “map” of values in the market, then any subject could be appropriately placed into the map. However, the data demands were pretty overwhelming, and we could not figure out how to do that massive project (although some appraisers, given tenure and good historical files, were able to approximate the whole market concept).

Zaio is, working with Zone Owners across the country, beginning to achieve the concept of whole market analysis. Not only will this tremendous project put appraisers back at the front of the mortgage transaction, it also can open up significant new lines of business.

And, coming back to the opening for this column, the dataset and analytical tools will give Zaio Zone Owners the ability to look at markets much differently. Determining price-rent ratios, analyzing variability of competing markets, potentially benchmarking price to cost, and even developing new metrics will all be possible for Zaio Zone appraisers.

To learn more about how Zaio can help you build your appraisal business for the long term, please call 1-800-241-4757, or visit the Zaio website at www.zaio.com – and while there, sign up for an online webinar, held every Monday evening and Friday afternoon.  

By John Ross - Zaio
jross@Zaio.com