Data Analytical Tools for Appraisers

Data Analytical Tools for Appraisers

Image courtesy of adamr at FreeDigitalPhotos.net

As appraisers we look at and analyze data.  We pay for access to comparable sale data.  We can easily look at aerial views of properties and in some areas look at the street views. We can look up public records online. We can pull up flood maps, soil maps and in some places traffic counts.  Not only do appraisers use data but others use data to analyze and offer estimates of value.  Zillow's Zestimate is an algorithmic tool that uses data and computes a value.  There are many other Automated Valuation Models that will also calculate data.  Fannie Mae has its own algorithms that will give value estimates based on the data that has been inputted by appraisers using the Collateral Underwriter.

What to do with all of this data?   Many have feared that appraisers will be replaced by these data analytical tools.  Data without insight and analysis is dangerous.  Data needs to be confirmed and scrubbed.  Inaccuracies can cause great errors in computations.  I cannot tell you how often the public record data is not accurate regarding a property and we will have to comment as to why our findings are different that the public records information.  Even if all of the data was accurate, you still need someone to analyze it and give insight to the data.  Who better for this than a professionally trained, licensed appraiser that knows their market area?

As appraisers, I believe that we should really be trying to incorporate some of the analytical tools available in order to give the insight to all of the data.  There are various ways that appraisers use data analysis and data analytical tools.  I wanted to share some of the tools that are available for appraisers and how they use them.  I have reached out to appraisers and here is what they have to say about the tools:

GandySoft:

From Shannon Slater, Certified Residential Appraiser, DW Slater Company

We currently use GandySoft data analytical tool.  GandySoft is actually a statistical model with 7 different statistical methods appraisers can use to help determine adjustment and market analysis.  It has great graphs and presents the adjustments in a way that can be easily shared within your workfile or report.  The appraiser will upload a csv file from their MLS data into the GandySoft online platform.  The software will then run several different statistical analysis with the data the appraiser has inputted.  The appraiser is able to work with and determine which data makes sense within the market using their knowledge of the market. I have been very impressed with its ability to determine an adjustment for features like waterview or guest house.  The key to making this work is being able to import the correct data in the correct format from the appraisers MLS database.   Gandysoft uses analysis model, megamean, matched pairs, least squares, Theil-Sen, Sensitivity Analysis, Bifurcated Grouping, By Value Grouping,Basic Grouping, Leveled Grouping and Fitted Squares.  It will give a brief explanation of the different analyses that can be included in your workfile or report.  We have been very pleased with the product and its usefulness in our market analysis and adjustment determination.  You can read more  here about their product.

Here is what the adjustment support page looks like: 

Spark:

From Brandon Reich-   Appraiser at Choice Valuation and creator of Spark and Trendsheets:

Spark was originally a data-importing tool helping bring in MLS and public records data to your report but last year it was updated to include a robust and fully customizable market conditions analysis. With Spark you can set it up to analyze your market the way that you prefer, rather than relying on prebuilt templates or methods of analyzing markets. For example, you can compare your competing properties against your entire neighborhood (or any other set of data) and you can look at it based on the past year, 2 years, 10 years, etc. Maybe you prefer to analyze data based on average price or maybe median price per square foot or both. Spark lets you do that. You can also choose to see the data visually in a scatter plot, bar chart, or line chart or you can look at the actual data in tables. Essentially, you set up Spark to analyze your market the way you want with as many or as few analyses and charts as you’d like and then when you’re deciding on your housing supply, marketing times, or price trends Spark will show you the analysis you want to see. Whatever data you want to have flow into your report will do that and all of the charts and analyses will go into your digital workfile. Also, it’s important to note that Spark does not decide for you what your market conditions are; it merely runs the calculations you want it to and presents you with the results so you, the trained professional can form your opinions and draw your conclusions. You can click here for more information on Spark.

As talked about above, data needs to be confirmed and scrubbed and Spark lets you do that at any point. If you’re looking at a chart and something looks strange you can click on the bar in the bar chart or the dot in the scatterplot and Spark will show you that specific data where you can then edit the data or remove the property altogether from the analysis.

Spark now also has a site value tool where it runs the cost approach on any properties you choose, in order to help calculate site value using extraction. It then presents this data in a visual way (as well as with data tables) which you can then include in your report to make it easier for your clients to understand how exactly you arrived at site value

TrendSheet:

TrendSheet is a spreadsheet that integrates into a la mode’s TOTAL to help with adjustment support. TrendSheet analyzes your actual sales grid that you’ve typed up in your report and presents the results of both a paired sales analysis and sensitivity analysis. Since TrendSheet integrates with your report in TOTAL and analyzes your actual sales grid, the results are available immediately and you don’t need to download anything from your MLS. The other benefits to this method of analyzing adjustments is that it’s very fast and easy to use and it uses data you know is accurate because it’s what you’ve vetted, verified, and typed into your sales grid. The down-side is that the analysis is run only on the properties you’ve typed into your grid. TrendSheet is a product you purchase once and never have to pay for again and it’s also a completely unlocked spreadsheet which means you can customize it however you want and add your own calculations to it. You can read more about TrendSheet here.

From Bill Cobb, Appraiser at Accurate Valuations Group

SPARK & TRENDSHEET

My Hats Off To Brandon Reich!  He reminds me so much of Ryan Lundquist, so professional and represents us so very well! Brandon Reich blows my mind with his products and willingness to help Appraisers, whether they’re customers or not, and customer service.  His innovativeness holds great promise and excitement for the future of his brand and Appraisers alike. Yes, SPARK and TRENDSHEEET look very interesting to me, and I look forward to it being in my market.  I do use TRENDSHEET LITE occasionally to see trends via his awesome charts my MLS doesn’t provide.  His addition of “Sales / Pendings / Actives” chart to TRENDSHEET LITE helps illustrate when a market is changing direction, sales begin to slow.

Appraiser Genie:

From Bill Cobb, Appraiser at Accurate Valuations Group

Appraiser Genie to me has meant tremendous time savings and much less typing. Genie has allowed me to complete more reports per week than before I began using it. It fills in some subject data and some neighborhood data, types my comps, performs 1004mc, adds very detailed NARRATOR addendum explaining how adjustments and value were supported, adds up to 10 charts, provides 33 pdfs to my work file for adjustment support, figures site value (if I trust the estimate) and fills out my Cost Approach. It's a huge time saver for me and it’s helped better understand how to work with and filter data. After using it since October 2016, I'd feel handicapped without it. There's no way I'd perform Attorney or Divorce work without it. Plus, there’s hours and hours of Youtube tutorials on how to use Genie, which is huge to me because I’m a visual learner.

Below is my work file setup for each 1004 or 1073 report I complete. The arrow points to my Genie folder.

I’ve been using Appraiser Genie with SFREP Appraise-It software since October 2016, to the point of becoming a beta-tester, offering ideas Appraisers want to see and working with Genie Staff on support issues. I understand Genie works especially well with Total and ACI was recently added.  To understand Genie, one needs to understand the creator’s history as an Appraiser. As I understand it, creator Andy Arledge received a complaint from his state appraisal board on a report, which led him to create a system that would support adjustments based on 4 methods (matched pairs, allocation, extraction and regression), perform 1004mc with multiple charts, export a long detailed “Narrator” addendum into report and build a bullet-proof digital work file of up to 33 pdfs for any future reviewer to review or state board inquiry.

Of Genie, R. Wayne Pugh, MAI, owner of SFREP’s Appraise-It software and past President of the Appraisal Institute says, “I've see all of the apps, and Appraiser Genie does more and the analysis is defensible. There is no requirement to learn or understand regression. It will look up last sales, down load data from your MLS, analyze the sales, post up to fifteen of the best comparable sales to the grid, complete the 1004MC, and document your work file with support for your adjustments. It will also complete a cost approach, then post everything to Appraise-It. I have not seen another app that can do all of this in a couple of minutes. Certainly, the appraiser will have to tweak the results and complete the narration.”

GENIE TIP: Get used to downloading and working with large sets of data and then filtering down, also including active, pending, expired and withdrawn. A larger dataset is needed for data analytics tools to produce credible results. For Genie, If your subject is 2,000sf living area, pulling a dataset between 1500sf to 2500sf is best and then filtering at say 15% if those the 6 to 9, including 1 or 2 competing listings.  I’m talking downloading 100s of sales and listings.

GENIE’S SIDE-BY-SIDE ADJUSTMENT SUPPORT SCREENSHOT

In this large suburban market example, I downloaded 213 sales and listings, filtered them down to 93 for 1004mc, used 4 solds and 2 required competing listings.  The blue box were my selections although all comps used had 2 garage bays and no pools.  In this example, I chose to use extraction for GLA adjustment versus regression for reasons I can explain in another conversation.

ALSO, if your appraisal software hasn’t caught up with Total’s awesome “side-by-side” comps view, Genie provides this experience for you.

GENIE’S NARRATOR ADDENDUM EXPORT

This is only the top portion describing adjustment support and summary of my MLS search parameters.

The Narrator addendum into this report was 3 pages long.

GENIE’S NARRATOR ADDENDUM EXPORT PROVIDES DETAILED SUBJECT AND COMPS HISTORY

GENIE DOES OFFER A VALUE WITHIN NARRATOR EXPORT, SOMETIMES SHOCKINGLY CLOSE TO MY INDEPENDENT VALUE CONCLUSION.  IN FACT, WITH MY LAST 3 GENIE USES, GENIE HAS BEEN WITHIN $4,000 OF MY OWN RECONCILED VALUE.  Until March 2018, I was deleting Genie’s 2 paragraphs you see below, but now offer it as extra support.  In this example, Genie offered a value of $125,000 and my own reconciled value was $124,000.

NOTE: Genie is by no means a replacement of the Appraiser, rather a sounding board of confidence if your method of support deals with more with allocation, extraction and/or regression.If you choose to use Appraiser Genie, contact me and as I have tips to save you time with initial setup and default preferences that may benefit you, such as the 10 factors I need to choose comps faster. Properly lining up these 10 columns can help choosing faster. The key during setup and learning is to set time aside, be totally undistracted and listen to Angelia or Genie staff as they walk you through the process via Teamviewer.

You can find out more about Appraiser Genie here.

ABC - The Companion

From Bobby Crisp,Certified Residential Appraiser, Crisp Appraisal Service

ABC’s Appraiser’s Business Companion is an online tool for real property appraisers that offers guidance and support with the appraisal process.  ABC provides worksheets, recommended certifications and comments, and resources needed to produce the best appraisal reports possible.  We have AQB Certified USPAP Instructors to keeping appraisers up to date with the most recent changes in the appraisal industry.

The Companion features step-by-step, easy-to-use spreadsheets that will assist you in producing a stronger work file and provide an analytical approach to support your adjustments (land values, amenities, etc.).  It will also aid in determining economic life/effective age, highest and best analysis, several weighted value techniques, and much more.

Are you sponsoring a trainee? Let us assist you by being their resource for field-by-field guidance on the 1004, 1004MC, and 2055, as well as providing numerous suggested comments and certifications that can easily be transferred into the appraisal report so that the sponsor and trainee are USPAP compliant.

Have an appraisal-related question? Our AQB Certified USPAP Instructors on staff are available to answer questions, give some direction, and provide advice so that the appraiser can make informed decisions.

When you are in need of support for your appraisals…it really is - Easy as ABC. 

You can find out more about ABC here.

Bradford’s Redstone Regression Tool

From Anthony Blackburn, CEO Apple Appraisal

I've been fortunate to be a Bradford technologies customer since the mid-1990s. I've seen a lot of changes in appraisal software over the past couple of decades and one of the most powerful tools to come through has been Redstone. Redstone has become a fixture in our appraisal processes here at Apple Appraisal, Inc. Not only was I part of the beta testing team for Redstone, but I'm always able to have some input on the ongoing development and improvement of the product. Redstone allows an appraiser to use a scientific methodology to determine quantitative adjustments in an appraisal, like lot size, square footage and bath count. No longer do does an appraiser need to use other time-consuming or unreliable methods to determine adjustment amounts. Regression analysis, used by Redstone, is easy to use through the Redstone platform. It makes me more confident in my adjustments, as an appraiser. It also cuts down on the conditions from a lender, wanting detailed explanations on how adjustments are arrived at. I can include some commentary about the Redstone methodology and know that my appraisal will be acceptable to an underwriter. Redstone also ranks potential comparables and allows me to select the most appropriate sales and listings and have them automatically imported into the report. Redstone has some great analytical tools for neighborhood analysis and will also fill in much of the neighborhood section, based on the data selected by the appraiser.

Redstone is also a very versatile tool, becoming the backbone of a customized product that we worked with Bradford technologies to create, that gives our clients a cost effective desktop valuation and allows the appraiser to be confident in the report and to create the report in a time-saving manner.

Because Redstone has great data importing capability, into appraisal reports, it's a huge timesaver for an appraiser as well, reducing the need for typing. This is a huge timesaver and over the course of the year, makes an appraiser more profitable.

Not using Redstone would be a huge backwards step. With its data importing capabilities, neighborhood analysis, analysis of the comparables themselves and regression analysis, helping to determine adjustments, it is an extremely powerful tool for an appraiser.

You can find out more about Redstone Regression Tool here.

Regression Excel in A La Mode Store

From Bill Cobb, Appraiser at Accurate Valuations Group

Rick Hamilton’s Regression Excel in a la mode store

https://totalstore.alamode.com/product/easy-multiple-regression-with-value-estimate

Rick Hamilton’s is a heavyweight when it comes to the understanding of regression, his application of it within the former Statwing and video tutorials he posted on Youtube;  https://www.youtube.com/channel/UCWr6ALncIqtOzNPrJRVlU8Q

I owe Rick an apology for judging too early his product before I had the appropriate background in regression.  With some personal training and/or tweaking, Rick can show you how to use this Excel sheet, more so than just his few minute video. His regression product does take a lot of data, generally more than I have available, to produce a credible result. With that said though, I really need to spend more time with it as it’s predictive value estimates I’ve been able to see have impressed me tremendously.  

Solomon Calculators

From Scott Cullen, Certified Residential Appraiser

The Solomon Adjustment Calculators are designed to help appraisers develop and support adjustments in the sales grid.  Unbiased, third party cost data is built into the calculators so the appraiser can quickly extract depreciation from the market.  Depreciated Cost is a recognized, USPAP compliant method that works well on any assignment.  Depreciated Cost is especially useful when other methods fail due to sample problems.

Solomon is a secure, web-based application that includes five separate tools.  Solomon Adjustment fits the scope of work typical in Desktop assignments.  Solomon Cost is designed for 1004 and general-purpose assignments.  Solomon Cost New is designed to work with zero depreciation new construction assignments.  Solomon Manufactured is designed for manufactured housing.  Solomon Site is a site value extraction tool.  Solomon Market Time quickly calculates time adjustments by applying an annual rate of appreciation to the interval between contract date and effective date.

Save time and enjoy the peace of mind of a solid workfile. You can find out information about Solomon Adjustment Calculators here.

Market Machine 

From Joshua Walitt,  Certified Residential Appraiser

The Market Machine tool is excel-based and you need Excel 2010 or 2013 or newer for it to run. It is a stand-alone tool – once you buy it, you have it for your use, with no monthly or annual fee.

www.activeappraiser.com/market-machine has more information.

Overview:  you export your own MLS data (typically 24 months of sales, and all the current actives, pendings, under-contracts); then, within Market Machine, you generate charts, graphs, and narrative summary of the data. There is also a regression model page to analyze property characteristics that you see fit to include. You can attach any of the information as PDF pages to your appraisal report, and there is an excel file generated with all the data used (for a good workfile).

A few notable features:

• Included are 1004MC and ERC formats, as well as more robust and informative charts and graphs related to prices, unit prices, ages, concessions, distress sales, new properties, number of sales, supply, and other indicators broken out by month, quarter, and year.

• You can choose to import just a small pool of sales and listings from your MLS, or you can import the entire “universe” of sales and listings from your MLS and run multiple sets of reports.

• You can build a regression model to isolate the statistically-likely values of sq.ft., acreage, garage, being a distress sale, and other characteristics you exported from your MLS, and you can customize the model each time you use the M.M..

• A market summary page provides narrative-type statistics, assisting in completing various parts of the URAR, 1004MC, and other forms.

• It typically takes me 4 to 5 minutes beginning to end. Then, I have useful statistical information, for summarizing and supporting my market and adjustment conclusions in my appraisal.

To get Market Machine:  You’ll export a sample of data from your MLS and fill out a quick Questionnaire, to help us map your data into the Market Machine. The cost is $250; if multiple copies are purchased for an office, there is a discount.  *Note that the Market Machine completes most of the numeric fields on the 1004MC, but does not populate the prior periods’ Active listings.

Take a look at the example of an entire run-through (and other videos on the Market Machine channel)… https://youtu.be/pdhB7VEC7vo?list=PLv_E6Gn2CiW0GKQNotWABEW6Vbe72khuC

Savvi Analytics

Scott Schiller, Certified Real Estate Appraiser, Causeway Residential Appraisals

I've been using Savvi Analytics for about a year and I trust their methodology.  What is interesting is that (in my market at least) their analysis shows many fewer areas of adjustment than expected.  For instance, it is not unusual for it to indicate support only for GLA and condition adjustments but no bedroom, bath, year built, etc.  Their customer service is great, although I haven't needed it much since my initial setup.

For more information about Savvi Analytics click here.

Appraiser Developed Tools with Excel

From Joe Lynch, Appraiser, Instructor, President of REAA Sacramento:

Don Machholz has developed a series of tools in Excel for appraisers to use. Don has made these tools free of charge to other appraisers. He also has extensive guides on downloading data from MLS systems around the country.

https://donsappraisals.com/

I believe strongly that appraisers should have a deep understanding of the analysis they do. I teach classes to appraisers in Excel so appraisers have insight into their own analysis. My classes are in Excel because that is the most widely available tool for appraisers today. However, I am switching my analysis to R, a free data analysis tool. Someday relatively soon I intend to make available packages in R for interested appraisers. In the meanwhile, I’ll write about the process of switching from Excel to R on my blog: https://josephlynchappraisal.com/

I also highly recommend subscribing to George Dell’s weekly blog.  He teaches classes and I hope to attend one when one is near me.  You can sign up for his blog here or register for his classes.  He provides great insight to appraisers and how we can analyze and use the data available to us.  I recommend reading this blog post: Can the Appraisal Profession Be Saved? Here is an excerpt from this post when discussing some of the valuation products available such as AVMs, BPOs, evaluations by non appraisers, etc:

“ What distinguishes the appraiser from competing products?  Appraisers give an opinion.  Our competitors provide analytical results.  Appraisers produce an opinion then provide “support” for that opinion.  Our competitors provide an analysis, and its outcome: a result.  Appraisers provide an opinion, then justify and explain that opinion.  Both appraisers and competitors produce a prediction of value.  As defined in The Appraisal of Real Estate: the “most probable selling price” as of a given date.

This definition of value reveals a service (useful information) not provided by appraisers.  That service is the probability of the predicted value being true.  This service is provided (directly or indirectly) by AVMs and some other competitors.  Strangely, the profession best able to provide a measure of probability (risk/reliability) is the appraisal profession.  Why don’t appraisers do that?!”

A FEW NOTES: from Bill Cobb

In 2018, I’m unsettled and in a deep learning and shifting process.  Even the Real Estate Appraiser Tips cover page image recently changed to this below. https://www.facebook.com/reappraisertips

Richard Hagar’s Supporting Adjustments courses have awakened me, opened my mind to possibilities and lit a fire underneath me to get with the responsibility of properly supporting adjustments the right way. The method of working more with Excel or some software which helps me personally work on, scrub, filter and derive adjustment support myself. David Braun’s AVT Tools, Josh Walitt’s Market Machine, Joseph Lynch’s Appraiser Developed Tools with Excel and George Dell’s “R: Stats, Graphs and Data Science have me heading toward a different path. I’m hoping Joseph Lynch and George Dell get together and create a video series to help us understand their templates, methods and R.

Closing Thoughts:

It is important to understand that all of these are tools that do require some knowledge and understanding of their use and how they work.  I don't believe that appraisers need a degree in statistics to use these but they do require some time to develop proficiency and competency.  None of these are made to just plug in data and it spits out numbers without much thought. This is where the knowledge and expertise of the appraiser and their market add insight to the data analytics.   The appraiser determines the market and can scrub the data to take out the outliers or inaccuracies.  The appraiser will also determine the reasonableness of the data results.  If the data is giving a $100,000 bathroom adjustment for in a market where the homes sell for $125,000 to $150,000, an appraiser would choose not to use this data for bathrooms knowing that buyers and sellers do pay that much more for an additional bathroom!  Appraisers would be advised to read Advisory Opinion 37 in USPAP which advises appraisers that regardless of the tools chosen the appraiser is responsible for the analysis including the input and resulting output. That said, I encourage appraisers to try out some of the data analytical tools available, take a class and watch the training videos.  Appraisers know their market and can provide valuable insight to the data analytics.

Which tools did I leave out?  What has been your experience?  What do you think about data analytical tools?  

My thanks to all of the appraisers who gave of their time to contribute to this post, providing information about data analytical tools they either use or created.

Disclaimer: All information deemed reliable but not guaranteed. The information is meant entirely for educational purposes and casual reading only and is NOT intended for any other use.  This information is NOT intended to support an opinion of value for your appraisal needs or any sort of value conclusion for a loan, litigation, tax appeal or other potential real estate or non real estate purpose.  If you’d like to obtain additional information or order an appraisal for your specific needs, please contact us at www.dwslaterco.com.