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Appraisals and Valuations

Reggora’s Brian Zitin on changes in residential valuations

This week, HousingWire’s Editor in Chief Sarah Wheeler interviews Brian Zitin, CEO of Reggora. In this episode, Zitin talks about innovation within his company, as well as changes occurring in residential valuations.

Here is a small preview of the interview, which has been lightly edited for length and clarity:

Sarah Wheeler: Do you think the FHFA is going to be more accepting of hybrid appraisals going forward and is this the tipping point we’ve kind of been waiting for?

Brian Zitin: You know, no one knows. They have lots of data in terms of prior history. These appraisal waivers that happened over the last year, make us wonder what does that look like in terms of loan effects and costs of losses? It seems like it’s inevitable because any of the changes that have been rolling out have not addressed the problem in the industry, which is the lack of appraisers joining the market. So, unless there is something introduced, whether it’s some of the things that are mentioned in this RFI or more embracing of trainee appraisers, there is going to continue to be more and more of a capacity problem, which affects the liquidity of the market and accessibility of financing for folks. So, it seems like it’s kind of hit a head. And, you know, hopefully, they’re using this opportunity to accelerate that. I’m bullish that it will signal the new and coming but you know, you never know how the government is going to react, so while I have my fingers crossed, we’ll have to see.

The Housing News podcast explores the most important topics happening in mortgage, real estate, and fintech. Each week a new mortgage or real estate executive joins the show to add perspective to the top stories crossing HousingWire’s news desk. Hosted by Sarah Wheeler and produced by Alcynna Lloyd.

Below is the transcription of the interview. These transcriptions, powered by Speechpad, have been lightly edited and may contain small errors from reproduction:

Sarah Wheeler: Hi, this is Sarah Wheeler, editor-in-chief of HousingWire. I’m the host of “Housing News.” And today, we’re interviewing Brian Zitin, the founder and CEO of Reggora, about the changes we’re seeing in valuations this year. I’m so glad you’re joining us. This is gonna be a great discussion. 

Alcynna Lloyd: Hey, “Housing News” listeners. This is Alcynna Lloyd, and I’m the producer of this weekly podcast, which is a proud member of the Industry Syndicate. You just heard from our host, Sarah Wheeler. But before we dive into this episode, here’s a quick word from our sponsor. 

Victoria Wickham: For over 60 years, the private mortgage insurance industry has helped more than 33 million low to moderate income borrowers’ access affordable, low downpayment home financing. This year, the private MI industry will continue to bridge the downpayment gap for millions of more Americans and serve as the best option for low downpayment borrowers. Learn more at www.usmi.org. 

Alcynna Lloyd: Well, thank you for listening. And here’s Episode 10 of season 5 of the “Housing News” podcast. 

Sarah Wheeler: Welcome, everyone. This is Sarah Wheeler, editor-in-chief at HousingWire with the latest episode of our “Housing News” podcast. I’m excited to introduce our guest today, Brian Zitin, founder and CEO of Reggora, which is a venture-backed startup that provides software to speed up the appraisal process for mortgage lenders and real estate appraisers. Prior to Reggora, Brian co-founded a real estate brokerage called Sonder Partners, which was based on a proprietary algorithm that helped to efficiently target and sell investment properties in the Greater Boston area. Brian also has spent time at both a boutique private equity company and a large commercial real estate investment firm. Brian, welcome to “Housing News.” 

Brian Zitin: Hey, Sarah, thank you so much for having me. I’m excited. 

Sarah Wheeler: We are too. And, the first question we always want to start out with is how did you get started in this industry? It sounds like you have some really interesting things in your background there. 

Brian Zitin: Yeah, well, I always make the joke because appraisal is, like, always one of those funny things. And I’m one of the younger folks in appraisal. People are like, what, did you wake up when you were an 8-year-old boy wanting to automate appraisals and that sort of thing? The answer is definitely not. I think like most, kind of I stumbled into mortgage and went from there. So as you read there, I had intern at, like, a private equity company where I was reaching out to lots of different companies to try to get, you know, to acquire them. And then I ended up interning at JLL, a big commercial real estate brokerage. And so me and my college roommate at the time I went to Boston University for undergrad… He’s technical so he’s been coding since he was like 10 years old. We tried to basically combine his skill set with my two internships. And we made this algorithm in the beginning of the senior year, that could programmatically reach out to thousands of property owners. 

So instead of like the normal brokers who were kind of knocking on doors and cold calling, we used that and could basically just chill in class and send thousands of emails, saying, “Hey, do you want to sell your property? Do you want to sell property?” So we found some distressed sellers, people that were moving to Florida, people whose, you know, father just died, that sort of thing, that for some reason chose two 22-year-olds to sell their properties. We sold about $5 million worth of buildings doing that. We’re focusing on kind of multifamily properties in Boston. And then didn’t really want to go down the brokerage route. But as we were giving these property tours, obviously, part of that is like the financing, and kind of appraisal contingencies and all of that. So, saw an appraiser walk in, you know, old school kind of clipboard sort of thing, really manual, low tech in terms of how they were doing it. And so, once we graduated, we started focusing on the appraisal industry. I would go out to random appraisers’ houses and shadow them doing the work and all that. And then, zoom forward to now, we’ve been in the appraisal industry about three, four years, kind of trying to transform the space. 

Sarah Wheeler: That is crazy, and also super interesting and impressive that you guys were doing that as college students. 

Brian Zitin: Yeah, I appreciate it. I mean, I think that there’s so much room for optimization and everything in terms of the mortgage world and real estate that…especially kind of recently, in the last five years, you’ve seen just so much tech folks come into the space. So I think there’ll be a lot more examples of that, where people are just kind of stumbling into random problems and trying to come up with tech solutions for it. 

Sarah Wheeler: You know, one of the reasons we wanted to have you on “Housing News” is just, we see the innovation coming. And then finally, I feel like we see some of that, from a regulatory standpoint from some of the other players that aren’t just lenders or appraisers really embracing some of that innovation, which has been a difficult thing to do. And really 2020 was a gift in that way. It was a terrible year in many ways, but it really did highlight that some of these solutions and some tech and automation solutions are doing a great job, right? We went to them. And my first question was really, like, maybe so many things changed for appraisals over the last year so maybe you could outline some of those appraisal changes, including, you know, the fact that drive-by appraisers…appraisals were, you know, allowed desktop valuations in certain circumstances, and kind of give us an overview of what that looked like as the pandemic started. 

Brian Zitin: Yeah. No, that sounds good. And to your point, appraisal is one of those things, even within the mortgage process, that is largely dictated by, yes, there are some federal regulations, but mostly the kind of processes are dictated by the secondary market investors. So primarily the GSEs and others. And so, from a technology vendor standpoint, in terms of really pushing the bounds of innovation, we’re kind of beholden to what they want us to do. And so to your point, although COVID was terrible in a lot of respects, it has accelerated things. 

They recently put out the FHFA, this RFI, in terms of appraisal modernization, and I think that we are probably gonna enter what I hope is like the golden era of appraisals, in the next year or two, but essentially, prior to that, appraisal had always been very manual and analog. There have been some efforts from the various participants in terms of standardizing the data, in terms of the reports, you know, newer processes like uniform collateral data portal from the GSEs who would help underwrite things a little bit more efficiently. And, more recently, there was this concept of appraisal waivers as well. Traditionally, prior to the last year or two, appraisal waivers were kind of low percentage, though. So, the vast, vast majority of transactions were still having that appraiser go to the property, do a full appraisal report, do the inspection themselves, complete the report and all of that. Recently, because of the increase in refinance activity, and I guess, the general levels of comfortability with…from the GSEs, there’s been an increase in the number of appraisal waivers. 

And so as COVID happened, and the literal last thing that people wanted to do, let in a stranger into your home, became a problem. They offered using these risk models, flexibilities to accommodate that so that, on certain types of products, where they felt comfortable with the level of risk, the appraiser did not have to go inside the property. And they could do a desktop analysis or a drive-by sort of thing where the appraiser makes a determination of an estimate of value without physically inspecting the inside of the property. And so there were some limitations to this, right? So on certain things like cash-out refis, and different things like that, they weren’t offering some of these flexibilities as much. And some of the non-GSE secondary market investors didn’t allow for these flexibilities so lenders were still ordering full appraisals anyways. But through a combination of that, and an increased number of appraisal waivers on a percentage basis, this kind of unlocked or provided a little bit of like a pressure valve, so to speak, people felt, in terms of…because turn times were getting crazy bad in terms of really holding things up in terms of the pipeline because of the crazy amount of volume. 

So even with both of those things, in effect, turn times actually still got worse. So you can imagine what it would have been like if those didn’t happen. But now as a kind of reaction to that, the FHFA is like, okay, well, we’re rolling out all these changes, really increasing the number of waivers going on. Do we need to take a deeper look at this, reel this back a little bit, introduce more standardized versions of these newer products? And so I think, you know, I don’t have the inside scoop, but I think that’s kind of what prompted this RFI to happen towards the end of last year. 

Sarah Wheeler: Okay, well, that was my next question, which is, let’s talk about the request for input because, you know, analysts were like, well, is this signaling the FHFA is gonna be more accepting of hybrid appraisals going forward? Is this the tipping point we’ve kind of been waiting for? 

Brian Zitin: You know, no one knows. I mean, I think they have lots of data. Right? And we talked about this the other day on the clubhouse, they have lots of data in terms of prior history. And, from these appraisal waivers that have happened over the last years, what does that look like in terms of loan effects and costs of losses and anything like that? It seems like it’s inevitable, like, because any of the changes that have been rolling out have not addressed the problem in the industry, which is the lack of appraisers joining the market. And so unless there is something introduced, whether it’s some of the things that are mentioned in this RFI, or kind of more embracing of trainee appraisers, like there is going to continue to become more and more of a capacity problem, which affects the liquidity of the market and accessibility of financing for folks. So, it seems like it’s kind of hit ahead and, hopefully they’re using this opportunity to accelerate that. So I’m bullish that it will signal kind of the new incoming. But you never know with government and how they’re gonna react and all that sort of stuff. So I have my fingers crossed, but we’ll see. 

Sarah Wheeler: Yeah, I know that. I think that no one really knows, right? We’re just taking our best guesses based on what’s going on. Well, let’s talk about that exact thing, the lack of new people coming into the appraisal industry. We know that the appraisal industry skews older. So even people wanting to retire, get out of it, and then not enough people coming in. So, can you talk about the creation of the practical application of real estate appraisal? I think it’s PAREA, PAREA, whatever you want to call it, which is really an alternative road for new appraisers to come into the profession. 

Brian Zitin: Yeah, yeah. So to set the stage on this a little bit. So to your point, the average appraiser…the average age of the appraiser is over 60 years old. What happened was there, with the housing crisis, and all this sort of stuff, there became an introduction of additional barriers to entry in terms of the industry. 

So at one point, you had to have a college degree. The appraiser model is one that you have to kind of go through a trainee mentorship type of program, so you have to find a supervisory appraiser, get a certain number of hours under your belt, and then you can become an appraiser. And until then you don’t make any money. And you have to find a supervisory appraiser to do that for you. And what happened, especially with kind of the gaining prominence of appraisal management companies, the margins for these appraiser firms became…it became difficult to take on a trainee, especially because lots of folks on the secondary market pushed back in terms of the acceptance of reports that use trainees to do the inspection or something like that. So you have these appraisal firms where it’s like, we’re not making any money off of bringing on a trainee, we can’t even use them on a decent chunk of loans, why would we be incentivized to take on trainees? And so, that in combination with decreased compensation, more regulation, all this sort of stuff, there’s just not many folks entering the industry. 

I think I read a stat that it was like in Illinois last year, there were like 70 new applications for appraisers or something, in terms of the entire state. So, yeah, PAREA, PAREA, I actually don’t know how to pronounce it either, Practical Application of Real Estate Appraisal, is essentially an effort from The Appraisal Foundation and groups like that, to say, “How can we reduce these barriers to entry, and provide an alternative path for people to become trainees and eventually appraisers that isn’t as stringent and allows for kind of more accessibility, so that we can kind of bring more people into this industry?” So I think that it’s still in the early days. I think, to your point earlier, we had a HousingWire spring summit where Bill Fall, who’s one of these veterans in the industry, and I think he’s part of the Appraisal Qualification Board is saying, people are starting to do things with this and propose programs. And we’ve seen a couple of things where it’s like maybe appraisers can do their training or trainees with, like, virtual inspection simulations instead of on the job work and things. So there’s concern from folks in terms of, is this gonna match up and ensure quality as much as we need? And there’s some folks that are saying, “Look, if we don’t do this, then the appraisal industry that we know is not gonna be the same.” 

So I think you have competing interests in terms of from appraisers and folks like that saying, “Look, let’s just get trainees more on board and going,” and then you have other folks that are like pushing on this RFI front in terms of let’s just introduce a completely new workforce. We need non-appraiser folks, whether it’s real estate agents, or some type of approval process to get an additional workforce going, because the efforts on the other side of the house are just too slow and not working. 

Sarah Wheeler: It’s so interesting. You do think about bringing on those new appraisers, it seems like that’s still potentially more of a quality control issue than if you’re just trusting those third parties that might be a real estate agent, might be an inspector, not that those people aren’t qualified to do what they do, but there is a different skill set for appraising. But those are people who are already out there, are already familiar with the house, potentially, familiar with the neighborhood, because of course, one of the biggest sticking points is rural areas. And we saw a huge exodus to rural areas over the last year as people were like, “Hey, I can work from anywhere. It’s cheaper, and I want more space.” 

And so I do think that, we have to figure out something that’s gonna work for… If you’re waiting on three weeks on an appraisal because there’s not anybody even in your area, they’re already busy in the city, what’s their incentive to drive out and do where you are, right? And at the same time, there’s less comps and less…you know, it’s gonna be harder to appraise something out in an area where there aren’t as many houses. So I really feel like that’s one thing that we really have to look at, too. 

Brian Zitin: Yeah, quality control is the entire point around all of this, right, because whether it’s a trainee appraiser or a third party workforce, how do you enforce accountability and quality so that you can properly manage risk, like while balancing better capacities and things like that? So that was my main point. I did have the privilege of speaking at the RFI with Mark Calabria and the folks from the FHFA. And that was my main point is that how we come up with the standards for that probably is different, to your point, based off whether the complexity of the property and things like that, but there needs to be some sort of standard set that can be, like, data-backed, that shows like, okay, if…whoever it is doing the inspection can ensure some level of quality standard that we can measure, then let’s approve that, whether that has to be a trainee or a real estate agent, or whoever it is. I think coming up with those, like, insurances around making sure that the quality is good enough is gonna be the first step to getting everyone comfortable with using whatever type of workforce is completing these inspections. 

Sarah Wheeler: You know, we just heard last week, the FHFA extended their appraisal, the lowered standards on appraisals, right? For another month, they’ve been doing this since the pandemic, and every month we get another. When do we see… I mean, from your perspective, is that still necessary? And do you feel like, oh, that’s gonna be the norm for the next six months? Or at what point does that become something that is still necessary, I guess? 

Brian Zitin: It’s really a hard question because I think there’s a lot of components to it. There is the capacity question in terms of, like, how long do we need to keep this up? There’s also, like, the health concern, right? Like, I think that there are still some folks that are, until things are really cleared out in terms of vaccines and COVID cases and things like that, that genuinely, still want to maintain safety. So it wasn’t just, like, we want to get faster turn out. It was like, we need to protect people’s health. And so, in instances where the appraiser doesn’t need to go into the property, let’s make sure that we can do that. 

So I think it’s gonna be a combination of kind of like where COVID…you know, it seems like things are getting better with the rollout of the vaccines and all that, so hopefully sometime in the summer, they will both have feedback on the RFI plus have more of a view in terms of, like, where COVID stands, and things…they’ll kind of make a determination one way or the other. I think they’re just keep…you know, until they feel like they really know what’s going on, they’re gonna keep offering that until they feel comfortable with both people feeling good about from a health standpoint, and all that. Even if people are getting those flexibilities, some lenders still just get the full appraisal anyways. They’ll find someone who is…because there are still secondary market investors who want the full thing. 

So I think that… I forget the exact stat, but the GSE has released it that a lot of folks aren’t even capitalizing on it anyways. So they’re just kind of…I think, it’s somewhat of a cushion for some folks. 

Sarah Wheeler: That’s an interesting point that, you know, maybe it’s just greasing the wheels a little bit, but it’s not what most people are relying on anyway. So that’s interesting. Well, you know, so you are the CEO of an appraisal technology company, so I’d love your take on, you know, we’ve talked about how this is an industry, part of our industry that’s just ripe for disruption, and you guys really offer like an automated workflow, what do you see…like, one of the things we’ve seen is that technology is great, as long as it integrates with all the other parts that are going on, so give us your technology integration standpoint. 

Brian Zitin: Yeah, I mean, you’re exactly right. Because there’s a bunch of things to balance in terms of, yes, we want automated processes, we want faster turn times, but we also want that to be a better experience for our users internally, the processors, the loan officers, all those folks, and the actual borrower themselves. So I think what I’ve seen at least is that it seems like the industry in general is moving to kind of 2.0 of integrations. You’re seeing folks like the Ellie Mae…well, ICE Mortgage Technology, and Ellie Mae’s gonna roll out, kind of, next gen APIs. You’re seeing much more vendors play nice in the sandbox in terms of having more open APIs for integrations. I think there used to be this mindset of, like, control and people wanting to sync their hooks and processes. And now it’s, like, look, there’s so many technology vendors out there that you really need to be able to play cohesively with everyone involved. 

And so, luckily, us being kind of more tech savvy, we did build our technology, with a kind of more flexible and open integration structure. So we do…you know, are able to plug in deeply with things like the loan origination system, point of sale system, and all of that and do cool things with it, but no matter how fancy your thing is, if the loan officers or the processors have to leave their system, and go do something differently, that’s gonna get a lot of pushback from from lenders. So what we found is any company that’s trying to innovate in this space, the first two, three years of development are really kind of accommodating the existing processes, and then you can kind of start pulling people forward. So, for the first kind of half of our existence, we were simply working on making appraisal 1.0 better, and now we’re really moving towards appraisal 2.0. So, it’s an interesting dynamic that I think just the general rise of fintech has contributed to, overall, to make things kind of better for everyone. 

Sarah Wheeler: You know, how do you do it? So right now, one of the stories that we’re writing on a weekly basis is just the absolutely insane real estate market, where because there’s low inventory, you have 20, 30, or more offers on the same house, and what’s really become apparent, and this is all over in places that normally wouldn’t be hot, right, but you have people migrating out of some of the big cities, and you have just low inventory right now, for a lot of different reasons. 

So part of the pain point there is that the appraiser is…say it’s a real full on appraiser…appraisal, and the appraiser has to come up with this value in a rapidly changing market. What are some of the challenges there? And from my perspective, they’re really holding the line, because when you have 20 and 30 offers, the winning offer is gonna so inflate that original appraisal, but then now, the comps for that area are inflated in a way that it’s really just, is the house really worth that? Is that what the [inaudible 00:20:59] is worth, and that’s what the bank should really approve the loan for? Or should there be that…you know, right now, there’s that appraisal gap, where it’s like, okay, the appraiser said this, the offers are here, I have to make up the difference, and that really…that means that you’re getting a buyer who has the means to make up the difference, which from a bank standpoint, I would think that that’s the way to go, like the buyer is then taking the risk there, not the institution. But if you get enough of those over…you know, even over the last three months, I would think that your comps are just wacky. 

Brian Zitin: It’s a really tricky scenario because…and this is the problem where people tried to… AVMs, right, Automated Valuation Models are like, oh, it has always been a hot topic and people have been concerned about the Zillow Zestimate, obviously threw chaos into the world when people started trying to understand value on their own. But the appraisal is an estimate of value. It’s an opinion. And it’s really tricky because something is worth what someone is willing to pay for it. Even if it costs from a raw material standpoint a million bucks to build the house and put it all together, there are people who are gonna be willing to pay more than a million dollars, right? So there are technically three approaches to value, the sales comparison approach, to your point, where you’re looking at comparable sales, income approach, where you’re looking at, is this bringing me income? Like, it’s generally more useful for, like, investment and commercial properties. And then the cost approach, which is you’re looking at the actual cost of all the raw materials. 

In the world that we live in, the sales comparable approach pretty much dominates. Like the cost method isn’t even really applied in a lot of things. And so it’s tricky because it’s a little bit of a lagging indicator in terms of the comps that appraisers are looking at are historical, right? There’s nothing to look at, necessarily from a real time. There’s a little bit of that you can see kind of where offers are at, but the majority of data is gonna be looking backwards. 

So I think, intuitively especially when it’s really high velocity, to your point, like when it is today, the real world market value is probably a little bit ahead of where people are appraising, unless you have really savvy appraisers who are kind of on the pulse of that themselves and able to kind of factor that in. But it’s really difficult because it’s not as mathematical. If you can look to, kind of, historical comps, you can, kind of, mathematically engineer, okay, you adjust for this gross living area and that sort of thing. If you’re looking, kind of, future state and, kind of, current state, it’s hard to be like, okay, well, this person got an offer for this, how do you factor that in, if they didn’t end up taking the offer, or they didn’t end up getting [inaudible 00:23:29]? You don’t really know how it all works out. So there have been conversations…because people also have brought up the fact that the sales comparison approach can potentially contribute to racial bias as well. 

So there’s a lot of discussions happening with all of that, in terms of like the general approach around…I think for now, you do the best that you can with the data. And then to your point, if you as the buyer are willing to take on more of the risk, then you get it, right? And eventually that will come through. But it’s a little bit of a lag compared to maybe what the market is exactly at. 

Sarah Wheeler: What kind of lag does that mean? Is that a year lag, a six-month lag, a three-month lag, a five-year lag? Like, how long does it take to really factor that in, do you think? 

Brian Zitin: I don’t know. I think it depends on the, like, velocity of sales in terms of like how many…you know, if you’re in a city where there’s 10, new comps coming available in that area, every…you know, whatever, the appraiser is gonna use the most recent comps, right? So it really depends on… To your point, though, if you’re in a rural area, and there’s less comps happening frequently, then it takes a little more time for that data set to build, right? So it kind of depends on the velocity of sales and how much data becomes available, how quickly, and are they factoring that in? So I would assume it’s…the lag is…this is completely me, just, you know, like intuition, like, I would assume it’s less of a lag in higher velocity areas like cities versus rural areas where it kind of takes a bit longer for that sort of stuff to stack up. 

Sarah Wheeler: No, it makes total sense. And I think that we’re gonna look back at this period and try to figure out exactly what was the best way to do that, where it hit the mark, and maybe where it got a little bit out of control. I’m not sure. And I don’t know how long that will go. We don’t see inventory easing anytime…I don’t see anytime in the next year. You’ve got building costs that are through the roof because of the lumber shortage and just construction costs in general have gone up. I had…just anecdotally, one of my nephews was trying to buy in Pueblo, and he was gonna build and they told him, he’s so far back of the line, it would be the fall of 2022 before his house is done. This is not a big house. It’s a first-time starter home. So I just feel like we are in for at least a whole year of just really tight inventory. So it’s gonna continue to be an interesting time here. 

Brian Zitin: Yeah, my prediction on this is… You see a lot of headlines. I’m sure you guys have been reporting on this. It’s not like the technology doesn’t exist. Like there are new companies cropping up in terms of manufactured homes, 3D-printed homes, like better technology to actually get these things delivered at lower costs and faster times. It’s really like a bureaucratic thing where these local ordinances just aren’t conducive to new housing and things like that. So I think eventually, there will just be so much pressure, hopefully, on these different local groups where people are complaining about inflated prices and whatnot, and general living expenses, that they will hopefully roll out better policies, and then technology and capitalism can do its thing and deliver better solutions. But to your point, that stuff moves really slow so I probably agree with you. 

Sarah Wheeler: No, I do. I mean, and I agree with you because I just do feel like it becomes a local issue on what you’re willing to do. I mean, we’ve seen California make huge strides by having a statewide law about allowing AD use, accessory dwelling units, and how that has just been a boon, right, to their cities, to Los Angeles in particular, and I think we need to see something similar to that when it comes to the materials or what’s considered a constructed home that they’ll allow. So very interesting. We’re definitely watching that. When you look at the appraisal process, and I know that you guys are automating part of it, what part of the process do you think is most gonna be affected by automation? Or where can automation make the most difference in the appraisal process? 

Brian Zitin: Yeah, it’s really interesting. Because when we…so, like I said, we graduated, I knew nothing about anything, right? So we have truly gained the knowledge that we have by simply talking to people, hearing their problems, learning about it, and stuff like that. So I started off talking to appraisers. And so I would go and shadow the actual appraiser completing the report. And we used to think that we could deliver a lot of value in automation to the appraiser actually creating the report, because right now, it is actually pretty manual for an appraiser. They have to go to public record data, MLS data, reconcile different things, pull it back into the report. There’s not amazing tools for appraisers, yet. But if you look at, like, the actual turn times, the creation of the report is not the thing that takes a ton of time. The thing that takes a lot of time is the actual logistics. 

So, one of the problems in the market right now, if I’m a lender, I’m in Boston, so I’ll use Boston as an example, if I’m a lender in Boston, and I’m ordering an appraisal in a particular neighborhood, I don’t know right now that the lender down the street is already sending an appraiser to that neighborhood on Friday. So I have to find my own appraiser, and then they have to accept the order at the given price, then they have to coordinate the inspection with the property contact. And, a lot of times there’s an AMC in the middle of this as well. So there’s just a lot of fragmentation in the industry, from a logistics standpoint. 

And I think, as this potentially third party introduction of this new workforce maybe gets rolled out, or even if it doesn’t, it sticks with appraisers, I think where a lot of the lift is gonna come from, is on the actual improvement of these logistics, kind of like a more Uber…you know, Uber really nailed that, obviously, in terms of like transportation, all of that. But I think that’s where a lot of the lift comes from. A lot of folks talk about automation in terms of, like, the data and things like that, and I think that’s part of it, using like their spectrums of risk and the GSE is doing appraisal waivers, but for the actual appraisal itself, I think a lot of the lift comes from the actual logistics of it because that’s what’s taking so much time. 

Sarah Wheeler: That’s interesting. So, is that part of what Reggora solves or is that part of…you know, who’s solving that problem? 

Brian Zitin: Yeah. No, we’re definitely solving it. There’s lots of folks working on it. Like I said, it’s tricky because you have to get, kind of, all the right people at the table at the right time. Between the AMC, the appraisers, people have different mindsets on whether they use AMCs use or work with the panel directly. We kind of accommodate everything. But lenders, generally whether they’re using something like us or something else, have kind of like allocation models in terms of whether it’s like a round robin between their vendors and things like that. And they use different reporting metrics to optimize for who’s going to what areas and all of that. 

So we definitely work on improving those algorithms for optimizing that. You can see how like…and this is even…this is a solved problem like FedEx and folks like this have done route optimization and all of that sort of stuff. So really, it’s a…you know, you have to kind of bring together all the different participants to kind of come to, you know…because as long as the AMC or the appraiser isn’t on board with it, it’s hard to coordinate. So we’re working on it. People are definitely working on it in general. As I mentioned in the beginning of this, there’s been so many problems with appraisal 1.0, in terms of connecting to the LOS systems and all the other manual processes that often people do that the logistics hasn’t necessarily got its time to shine yet. But I think with the introduction of these new inspection technologies, potentially new workforces and things like that, that it’ll have its time soon. 

Sarah Wheeler: Well, it’s an exciting time to be in appraisal and to look at valuations in general, just because for so long, it was pretty stagnant. And then like I said, I feel like there’s a jumpstart. And now, it’ll be interesting to look back even this time next year to see what happened. So Brian, lending executives have just so many options that they have right now about where they should be putting their tech money and where they should be prioritizing time and attention to really getting to that digital mortgage. From your perspective, how do they evaluate appraisal in that overall, look at what makes sense for their business and what’s gonna affect the bottom line? 

Brian Zitin: Appraisal is one of those tricky things where it’s a little bit of a double edged sword, because it’s one of those low hanging fruit things that when you think about it from, like, a project resource standpoint, it’s not as big of an endeavor as ripping out an entire loan origination system or point of sale system. Because it’s kind of one small component, and generally systems like mine plug into these out-of-the-box LOS systems, it’s generally not too bad of a project to take on. That being said, it is hard to quantify the ROI of kind of improving your appraisal process. I think everyone understands intuitively that appraisal generally sucks and people don’t like it and they’re frustrated by it. But it’s always a hard question. If you go to an executive and say, “What would it mean to you financially if we reduced your average turn times from, let’s say, 15 days to 5? What would that mean for you from a financial standpoint?” 

And there’s so many things that go into that, on a variety of different areas, whether it’s okay, how many loans are…you know, the rate locks are getting screwed up because of delays because of the appraisal? What is the NPS of my consumer because of delayed appraisal times versus a more streamlined experience? Is it easier to recruit loan officers because we deliver a more streamlined internal process for them? How much money are you losing on kind of re-disclosures and things like that? 

So we’ve generally kind of helped lenders build like these big old spreadsheets about different components. But I think it’s kind of very specific to each lender, but those are some of the things that get people thinking about. Because ultimately, for a lender, they want to deliver a better experience to their customers, which are, you know, the borrowers, but also loan officers and folks like that, and they want to improve operational costs. And the appraisal certainly touches a lot of that, although people don’t traditionally think of the appraisals may be affecting the user experience. When you actually look at it, it really does. 

So I think those are generally the frameworks that people think about when kind of evaluating appraisal as a priority overall. 

Sarah Wheeler: And so I guess my last question for you is, as you look over the next 12 months, what’s most exciting for you? 

Brian Zitin: Well, to your point, for me personally, because I’m a little biased, I think that the attention on the appraisal is great. Anyone who’s looking at new appraisal technology, Reggora hopefully is top of mind for a lot of folks. That’s great for me. In terms of the actual changes to the appraisal, I actually do think that this RFI is probably the most exciting thing to happen in appraisal in a long time because if it is positively received and there are some action taken, that’s gonna completely change the game in terms of appraisal. And everyone always uses the same phrase in terms of appraisals, the long pole in the tent of digital mortgage and all of that, you’re seeing, like, things like asset and income verification, instantaneous decision making, appraisal is really the only thing where you physically have to send a human somewhere. 

So, we’re excited because as things get more and more painful, that means people want to provide more and more solutions. And so, you know, hopefully those changes do get rolled out and people are able to be more innovative and really improve this. And appraisal is no longer thought of the…as the long pole in the tent. So, we’re excited to be doing our piece in that while others are working on kind of all the other things to automate in mortgage. 

Sarah Wheeler: Well, that is exciting. Well, thank you so much Brian. Great to talk to you today. Love to get your insights and appreciate you sharing them with us. 

Brian Zitin: Yeah, no problem. I appreciate you for having me. Always fun to talk appraisals. 

Sarah Wheeler: Absolutely. Thanks. 

Alcynna Lloyd: Well, thank you for listening to the “Housing News” podcast. Please don’t forget to give us feedback and rate us on iTunes. Also make sure to check out HousingWire’s daily podcast, “HousingWire Daily” which is a wrap of HousingWire’s hottest stories and now available on iTunes, Spotify, Google Podcasts and more. And we’ll see you next week. 

Housing News

Hosted by HousingWire Editors, the HW Weekly Newscast is a conversational look at the most important stories coming across HousingWire's news desk.

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