Comp Cruncher

[Roy Courtney]

I personally have NO problem with someone lending their OWN money. It does not matter if this money is loaned for a business venture, real estate or just backing up someone headed to the dice table. Remember I said THEIR OWN DAMN money. When they take depositors money and risk it that should be criminal. There should never be tax payers money spent to bail them out. When these high rollers have to pay from their own pocket their losses from these foolish schemes then we will see some changes. They will no longer want the DeMinimus, the BPO, the AVM, etc. They will seek the most honest and professional opinion they can find. This lack of responsiblity is shameful and has been the cause of the financial crisis we are in. Is this the world we want to leave for our children and grandchildren?

 

[Lloyd Bonafide]

I want to hear more about the CVR but understand that the information is going to be put to the test of is it credible, worthy of belief.

I also want to hear more about it, but I'm completely against the concept as used for lending purposes, just like I was for Zaio, AVMs, etc. It just seems like another marketing ploy where someone tries to convince appraisers and appraisal users that a new technology will somehow be a substitute for a traditional appraisal for certain uses.

Personally I'm not looking to compete with AVMs and BPOs.

 

[Randolph Kinney]

One can compete on price by doing less. However, when it becomes clear how much less was done, the usefulness of the value determination is also less.

The focus on the use of statistics to generate a value is driven by eliminating the data outliers that gives rise to less confidence, not how comparable a property is to the subject. It may be the subject's value lies within that 5% tail of the data pool but throwing out that 5% tail to make the coefficient of correlation number acceptable gives an erroneous conclusion of value.

What happens when you value a 4000 GLA home? There are few homes that size in the zip code and they differ mainly in quality from average to very good quality. Shall we assume that quality factors are highly correlatable to price, over GLA and choosing adjustment amounts to support that notion? Or do we let the black box take over and make adjustments that produce the best fit even though the adjustment amounts fly in the face of experience?

 

[lmurry]

sample procedure

Good morning Gents:
Randell Kinney:
Realistically, how often does a report wind up in court. Usually it is because somebody tried to pull a fast one and got caught. To answer your question the statistics do not relate to my opinion of value. It seems to me that you think this software is driving me but the truth is I am driving it. My opinion of value is obtained the same way as when I am completing a 1004.
30 or more sample is best for regression purposes. By the way regression simply seeks out the mean (average) neighborhood value.

Hassler:
You stated up front that you have limited understanding of CompCruncher and the CVR and then you say that there is limited appraiser commentary and that it is a quick report. How do you know this?

Bonafide:
If I have a property in Encinitas or Carlsbad or even Oceanside, I am going to want to know exactly where the property is. If there is a beach or any view and I am informed of that by the client, owner or collected data I will take that into account, and since that is subjective I will probably take a drive for a look see. That is because I have geographical competency as you do for this area.

The Process:
Gents and ladies as well is a quick list of my process. it is not complete, but it may good some comparison to the URAR.
1. Fill in pertinent subject information.
2. Get an order number. (this is where you pay)
3. Direct CC to locate subject property. (lat and long)
4. Consult Thomas Guide to determine boundaries for subject property area.
a. entire zip code.
b. maybe some adjacent zip if neighborhood are similar.
5. Go to Realist to check for missing information.(lot size absent a lot)
6. Go to MLS to set comp criteria
- get sales and listings for the past 12 months so software can determine
trends in the subject area, list/sales ratio, quarterly activity, absorption
rate and low/med/high prices.
7. run search
8. convert search results to CC mapping.
9. Import MLS data
10. ensure all data was imported
11. Check sales and listing import sheet in CC
12. Run regression (to determine average neighborhood value)
13. Mine Scatter plot to remove outliers (outliers skew the mean)
14. Run regression again
15. Go to adjustment grid (already populated)
16. Are the populated comps the best ones to used?
17. Determine the best comps by distance, sqft, date of sale, lot size etc.
18. Go to listing page repeat #17
Okay gents I think that is enough. There are little details I didn't mention, like I usually check other data sources to comp that are not on my local MLS.
I hope this will help you all understand CC and the CVR. By the way this is the future of valuation. This may not be the exact model, but change is coming. Remember a long time ago there was the 5" floppy, who knew then that would lead to the memory stick.
The future is here you can choose to go willingly or kicking and screaming but one way or the other you are going.
As always, I respect you all

 

[Lloyd Bonafide]

If I have a property in Encinitas or Carlsbad or even Oceanside, I am going to want to know exactly where the property is. If there is a beach or any view and I am informed of that by the client, owner or collected data I will take that into account, and since that is subjective I will probably take a drive for a look see. That is because I have geographical competency as you do for this area.

In the example I provided yesterday, all of the potential comps are the exact same model as the subject, all are in the same tract and within 6-8 blocks of the subject, and none have an ocean view. So how do you know if the subjects' value is $660,000 or $850,000, without seeing the inside of the subject property?

Will you always read all comments in the MLS listing on every property you use as a comp?

change is coming. Remember a long time ago there was the 5" floppy, who knew then that would lead to the memory stick. The future is here you can choose to go willingly or kicking and screaming but one way or the other you are going.

I don't think so - when I first starting doing appraisals, I hand-wrote 1004 reports and we used no computers. But I still handle the appraisal process and 1004 reports pretty much the same way as I did in the mid 1980's, other than using a computer and digital photos.

 

[Rob Baum]

Mr. lmurry,

Thank you for providing a no BS rundown of exactly what is happening.

I still disagree with your conclusion, but that is a matter of opinion.

I understand that there are limited scope assignments, and I understand that not every assignment carries the same risk; so one standard for valuation is unreasonable. I also read that you acknowledge that this report is not for every assignment.

It still bothers me that an assignment with no verification other than making sure the Realist and MLS information jive together can be called an appraisal of any sort.

Can you imagine what would happen to the values of a 500 unit development if the developer decided to give 25%-30% concessions to the first 50 buyers? With model matches, same development, same builder, same condition, same interior finishes, same everything other than address - this is the exact type of assignment that the CVR would be used for.

I am not against change. I am not against limited scope assignments. I am, however, against any product that purports itself as being above and beyond verification of buyer and seller intentions and motivations.

 

[Randolph Kinney]

Qualifying and scrubbing data to assure accuracy and completeness for comparison and extraction of market influences is what distinguishes an appraiser from an AVM or BPO.

Verifying zoning, HBU, GLA, functional layout, additions, deferred maintenance, concessions, obsolescence, externalities, apparent & recorded easements, etc. is all part of the SOW and does affect value depending on what the research shows.

The problem with AVMs and BPOs is that the above SOW is sacrificed to produce a cheaper valuation service and speed. Is the CVR valuation similar?

 

[John Hassler]

Hassler:
You stated up front that you have limited understanding of CompCruncher and the CVR and then you say that there is limited appraiser commentary and that it is a quick report. How do you know this?

My conclusions about this being a "quick" report comes directly from AppraisalWorld's CVR ad:

How long does it take to complete a CVR report?
The time it takes will vary between appraisers and their local factors. However, after competing the CompCruncher Education and Training program, most appraisers can complete a CVR report within an hour, sometimes much less.

You've outlined an 18 step process and not one of them involves adding commentary. An hour or less doesn't leave much time for writing comments tailored to the assignment.

Look, I don't see anything inherently bad about the CVR process itself. The problems I see are it being used for the wrong application, easy of misuse by the incompetent/unethical appraiser, and the probability that it will be a low margin product if its use becomes even somewhat common.

If you can make it work then good for you. I'd be all over it too if I thought I could earn a better living from it but I just don't see what you see ... and I think we're both OK with that.

 

[Randolph Kinney]

Looking at the CVR report in the sample from John's link, I don't see any discussion of the subject property characteristics or amenities and how that fits with the neighbor characteristics and amenities. I don't see any discussion of zoning and HBU analysis. I see the value called market value, yet I don't see anywhere that it is defined. I don't see any statement on reconciliation of values or arriving at a value based upon the 10 most relavant sales picked by the software. There are canned statements about the statistical analysis and the acceptance of the output.

This CVR report sample does not appear USPAP compliant.

However, I was struct by this comment under General Information:

CVR Uses

You can use it for any valuation service except for re-finance and loan origination. Refinance and loan origination are governed by Fannie Mae and Freddie Mac and you need to use their approved forms for that type of appraisal work.

Some of the uses that appraisers have told us about: HELOC orders; all desktop appraisals; all services where BPOs are used; all AVM Appraiser Assisted valuations; all BPO certified by an appraiser valuations; legal work, forensic appraisal, review appraisal, collateral valuations for bail bondsmen, estate work, divorces, tax assessment challenges for the tax assessor and for the home owner. If you know of other uses, let us know so we can add them to the list.

It sure does appear that the CVR target market segment is the AVM and BPO market.

 

[Lloyd Bonafide]

If I was a lender, and I wanted to establish a value on a property in order to process a short sale or something like, I would prefer, (in order):

- a 1004 report,
- then a 2055 exterior,
- then a BPO with interior inspection,
- then a BPO with exterior inspection,
- then at the bottom would be a CVR, AVM, or Zillow, etc.

The reason I put a CVR below a BPO is that I would rather have someone actually look at the property in person, with an interior inspection if possible. I know that a lot of BPOs are really poorly-done, but I would still like to have a human being actually look at the property in person.