June 29, 2000

AIRD will mean big changes for appraisers

By TOM KELLY
The Real Estate Advisor

Mortgage lenders are responding to the consumer demand for rapidity, and the suppliers of critical peripheral components are jumping on board as well.

While new wrinkles to allow speedier credit reports, title policies and escrow services recently have been announced, the appraisal industry got its biggest online boost with the launching of the Appraisal Institute Residential Database (AIRD) a huge bank of residential information expected to be the most reliable and accurate capsules ever accumulated.

The database, which will be available to appraisers and consumers, is a joint venture between the Appraisal Institute, the largest association of professional real estate appraisers in the United States, and FNC, Inc., an Internet solutions and technology company serving the banking industry.

An appraisal is an estimate, or opinion, of value the market would bring if the property were exposed for sale. The appraisal usually includes comparable sales from other homes in the immediate area. A typical, custom appraisal on a single-family home costs about $350-$400, more for huge homes with specific amenities such as swimming pools or waterfront.

However, computer shortcuts and the willingness of some lenders to accept assessed values have significantly cut costs in some cases. An assessed value is the estimated amount assigned to a property by a county representative. Typically, the assessment is compiled via “drive by” evaluations and past sale figures.

Sue Potteiger, Washington Mutual Bank's chief appraiser and national manager for real estate appraisals, said the new process would benefit lenders, appraisers and consumers.

“Our bank’s use of, and contributions to, the AIRD will enable us to manage our own data and draw conclusions that are specific to our needs,’’ Potteiger said. “It’s also a verifiable source of information that gives appraisers the ability to be both providers and users of the information gathered. That will enable them to further take control of the data that they generate and insure its usefulness and accuracy.’’

Potteiger, a member of AIRD’s board of directors, added that the new venture will save lenders time in generating appraisal reports, making the lending process and cost of loan origination more affordable for consumers.

And, consumers will also have a chance -- for a $5-$10 fee -- to check out appraisal data online. An interface enabling consumers to view property records in the AIRD is expected to be operational by the end of the year. Consumers with Internet access then will be able to check out homes and entire neighborhoods anywhere in the country. Users will enter search criteria – price range, number of bedrooms, neighborhood – and subsequently receive “comparable” residential home estimates to assist them when considering values of other homes in the area.

How will this information differ from some of the “home price checks” that are currently available online? AIRD officials say the appraisal database will contain actual reports done by professionals who are in the home appraisal business. What is now available are “automated valuations,” or estimates based on property sales records.

The AIRD process allows appraisers to contribute physical information that is factual, yet not confidential. The database of four million records is expected to grow to 12 million by early August. As more appraisers participate, the database will continue to grow.

Bill King, veteran Puget Sound real estate appraiser who also now sells the FNC appraisal software program to lenders in 10 Western states, said while AIRD may not immediately drive fees down, it absolutely would make for more reliable data.

“Appraisers – big and small – have no reason to fear this thing,’’ King said. “AIRD will help them do a better job faster with more reliable comps.

“Appraisers now have two choices – much like Realtors faced just a little while ago. They can adopt the technology and go with the incredible changes that it brings to help do their job in a more efficient manner. Or, they can get run over by the appraisers who will be using the new tools.’’

Does an appraiser in a small community have a constant need for a national database? Probably not. However, if appraisers do choose to participate, they will be compensated each time their data is purchased. And, their time usually spent researching comparables could be significantly reduced.

Computer files of appraisal information are definitely the future of the industry, yet fresh appraisals done by real people still will have to be completed – especially when seemingly common properties greatly differ. For example, the computer may spit out a price on a 2,000-square-foot home on an acre, but how do you compare that with the one a few feet away that also has a sweeping view of the mountains?

The AIRD concept is a huge piece of the new big picture – an enormous library of professionally gathered comparable sales – yet it cannot be attained without the input of thousands of individual appraisers. Lenders will demand that appraisals be current, especially if your property value recently has plunged because your neighbor just blocked your sweeping sound and mountain view with a very tall, bulky garage.

Previous columns:

• Rules vary on renting your cabin, 06-22-2000
• Credit: You really are just a number, 06-15-2000
• Reverse mortgages have come full circle, 06-08-2000
• Virtual home tours are a big hit, 06-01-2000
• HUD forced to police its own programs, 05-25-2000
• New factors in local housing market, 05-18-2000
• HomeSeekers building a name for itself, 05-11-2000
• Auctions can offer speed, efficiency, 05-05-2000