Viewing the appraisal process from a 3D perspective

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Leading AMC’s 3D technology provides a floorplan and virtual inspections for appraisers

THERE IS an interesting paradox playing out in the mortgage appraisal industry currently. While the sheer number of appraisals has risen dramatically over the last several years, the number of appraisers taking on the lion’s share of the appraisal demand remains flat, with a diminishing pool of appraisers – many of whom are nearing retirement. Coupled with this appraiser capacity constraint are the often-lengthy turnaround times that are crippling the appraisal sector and have had a dramatic impact on loan origination and real estate sales. Routine property appraisal backlogs are taxing already overworked appraisal experts and are cutting into the overall efficiency of the appraisal space in getting the job done. For Class Valuation, a leading appraisal management company, the industry is at a crossroads, and addressing some of the industry’s pressing concerns forms the cornerstone of just how adaptable the appraisal sector will prove to be. “Over the last couple of years, Fannie Mae and Freddie Mac have been seeing in the neighborhood of 650 to 700 thousand appraisals per month coming through the uniform collateral data portal [UCDP],” says Tim Staudenmaier, chief digital officer with Class Valuation, "and this doesn’t include waivers, where an appraisal is not required.”

As chief digital officer, Tim Staudenmaier focuses on technology and processes that support the modernization of valuation and collateral risk assessment. Prior to joining Class, Tim served as Fannie Mae’s manager of collateral strategy and innovation, where he helped design and roll out Collateral Underwriter, Fannie Mae Connect collateral reporting, and Appraisal Process Modernization. He has ten years of experience as a residential and commercial fee appraiser and worked six years in appraisal review and collateral underwriting. Class Valuation is a top nationwide Appraisal Management Company (AMC), delivering outstanding quality and service to every client. The company is committed to combining the best people, products, processes, and technology available to help lenders make more homeownership dreams come true. Class has consistently been ranked highly in client service by several of the nation’s top ten mortgage lenders and has been recognized as a top place to work, along with receiving many other industry awards. Founded in 2009, Class Valuation is headquartered in Troy, Michigan.

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Class Valuation: ahead of the appraisal curve

Appraisal turnaround times reduced by two days on average

0.5%

“Over the last couple of years, Fannie Mae and Freddie Mac have been seeing in the neighborhood of 650 to 700 thousand appraisals per month coming through the uniform collateral data portal [UCDP]”

Tim Staudenmaier, Class Valuation

However, he adds, nonprofits have been resilient. “Most of our insureds are not only recovering back to their pre-pandemic state, but are in fact expanding,” he says. Parvathy Sree, vice president of nonprofit underwriting for AmTrust Financial Services, agrees. She says some nonprofits, such as homeless shelters and schools, adapted particularly well to the challenges. “Nonprofits with good management and decent financials were able to survive the last year and are seeing the fruits of their hard work and diligence,” Sree says, but she cautions growing organizations to be diligent with loss control and risk mitigation, emphasizing that while claim counts are down and court cases are in limbo, things could change.

With appraisal volume so high, Staudenmaier points out that the number of trained appraisers does not nearly hit the target. “The number of appraisers completing these orders has plateaued and remained unchanged at roughly 40,000 since as far back as 2013, so the volume peaks and spikes have been difficult for the industry to absorb,” Staudenmaier says. Class Valuation believes that one of the ways to help close the appraisal gap and streamline the labor-intensive process for appraisers working within the current system lies directly in the appraisal technology and platform being used. Putting their observations into action, the company is the only

AMC in the US to develop and champion a new, cutting-edge technology platform using 3D imaging and machine learning. Class Valuation’s technology, Property Fingerprint, has revolutionized the way appraisers can carry out their jobs, reducing the more cumbersome aspects and speeding up the overall process to address turnaround times. “The current process is super outdated. It’s super messy and super manual and there is minimal technology involved,” Staudenmaier says. “With Property Fingerprint we leverage 3D imaging to capture the necessary data for the appraiser to use when performing the appraisal.”

A “fingerprint” of the industry Staudenmaier began exploring avenues to modernize the whole appraisal apparatus eight years ago while collaborating with colleagues at Fannie Mae. “Back in 2013 and through 2018, I was in the collateral policy space, running a modernization pilot [program], and we started thinking about inefficiencies in the system. We worked with big-data providers and technology providers to figure out what could be done to improve the process,” Staudenmaier says. “One of the things that the industry has been doing over the last decade to improve the state of things is to support or build support around automated underwriting of collateral,”

Tim Staudenmaier, Class Valuation

There was little room to account for property variation and therefore more room for error. “The first approach [to solving the problem] was separating property data collection from appraisal analysis,” Staudenmaier explains. “We wanted to keep appraisers at the desk doing what they do best – analyzing and understanding the market. Sending someone else out to capture property data and communicate that back to the appraiser was the first step,” he adds. “We wanted to move to a space where we’re standardizing property data at the time of collection using technology, such as mobile applications.” A “fingerprint” of improvement The mobile technology that Staudenmaier advocated represented a necessary starting point. However, the actual image capture at the property was still limited by the 2D imagery being used by data collectors. What Staudenmaier and the team at Class Valuation discovered was that the same 3D technology being used by real estate counterparts in the form of virtual tours could close the gap on the appraisal end of things by providing a holistic and completely accurate picture of a given property and could also allow the appraiser to review those images carefully to avoid appraisal errors at the back end. “If appraisers had a virtual tour to review and they could virtually walk through the house, including an exterior, and that information was captured in a standardized way, that would really start to solve the problem,” Staudenmaier outlines. “Our Property Fingerprint [represents] that use of virtual tour technology.” Property Fingerprint marries the virtual tour with appraisal software and deep analytics to form the full digital appraisal solution. Staudenmaier emphasizes that what makes Class Valuation’s model different from competitors’ solutions is that it combines the 3D tour with an automatically generated floor plan and standardized data collection into a virtual inspection platform; it’s not just a floorplan and PDF.

“What’s different about this [appraisal technology] compared to other solutions is that while others can capture floor plans with full mobile data collection, in all those cases the appraiser is still trapped using 2D images to try to understand the quality and condition of a property,” Staudenmaier says. “We believe that having 360-degree visibility into the property is a key requirement for appraisers to be able to perform a reliable appraisal on a property that they have never set foot in. “Another way Property Fingerprint is different from those other technologies is we’ve built the virtual tour and the floorplan around the various data specs required by Fannie Mae and Freddie Mac,” Staudenmaier explains. Instead of trying to train property data collectors to understand the data specifications, Class Valuation invested considerably in advanced technologies to capture the data in a standard and repeatable fashion. This mitigates the errors and dependence on a human-trained labor force and instead uses 3D imagery specifically for the appraisal use case. Future “fingerprint” directions Class Valuation is very confident that Property Fingerprint’s technology base is reflective of the future permanent direction of the industry. “We’ve seen a gigantic reduction in revisions going back to the appraisers and appraisers are excited about that,” Staudenmaier notes. “Appraisers who are using our technology are often excited about the new direction and the freedom it provides.” “We have partnered with a few major lenders who are piloting with us, and we now have more than 15,000 orders under our belt,” Staudenmaier says. Class Valuation has stood out from the appraisal pack by pinpointing weaknesses in the long-used traditional appraisal model and thinking about property data in a new way. As Staudenmaier describes, its competitors are now also “scanning” for potential. “There is now a complete visual record of the entire house, inside and out, and that is something that appraisers have never had,” he concludes.

Leveraging Class Valuation’s 3D scanning technology:

Staudenmaier notes. “However, we found that the automation was limited due to data inconsistencies.” “What we learned is that even with a standardized data requirement, the appraisers are still interpreting that standard when entering the data instead of using prescribed definitions,” he says. “This creates a lot of problems for the models.” “We looked at a lot of different technologies, including mobile data collection, to resolve the inconsistencies at the source, and this is the main path we ended up taking.” Although this research into more efficient tech platforms was a precursor to the 3D imaging platform Class Valuation offers appraisers today, mobile data collection did have its limitations. The big hurdle to overcome was how to standardize all of the information about properties required for automated collateral underwriting models to be effective.

More than 15,000 digital appraisal orders completed

Underwriter revision rates reduced to under two percent

Class Valuation: ahead of the appraisal curve

Standardized, repeatable process providing the exact same output every time – regardless of who performs the scan

Automated ANSI floorplans and complete virtual tour with every scan

Data fully fungible across any type of appraisal order or requirements

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