Valuation Research LLC, a provider of valuation solutions for appraisers, lenders and other real estate professionals, has announced the rollout of a new release of The Valuation Research Assistant — a desktop valuation tool that provides appraisers with the ability to select their comps in a defensible manner and generate adjustments to the comparative market analysis (CMA) that are mathematically accurate, transparent and defensible.
With the implementation of Fannie Mae’s Collateral Underwriter looming, compliance issues have taken center stage with appraisers and appraisal management companies.
The Valuation Research Assistant was designed with these changes in mind.
For comparable properties to be defensible, they must conform to a definition of “comparability” established by the appraiser. This process is essential to the development of a set of sold properties that are truly comparable, that accurately reflect current market conditions, and incorporate all properties that meet the definition of comparability.
The Research Assistant accommodates this process by providing appraisers with multiple means of imposing and documenting a definition of comparability.
For adjustments to be reliable and defensible, they must be based in fact: The appraiser has to be able to trace each adjustment back to core information that can be verified. Today’s tool of choice — regression — is subject to inherent limitations that restrict its applicability for this use, according to Valuation Research Managing Partner Mark Stockton.
In order for regression to return reliable results, a large number of comparable sales must be included in the analysis, and the number of property characteristics (variables) considered must be relatively small. Additionally, the appraiser must have a thorough understanding of the process to achieve optimal performance. Not only does the proper use of regression exceed the skill sets of most appraisers, Stockton said, but the ability to adequately explain the process and corresponding results is difficult for all but the best-trained statisticians.
Valuation Research has developed a patent-pending approach that recognizes and utilizes the fundamental fact that a relationship exists between what it costs to build something and the price for which it sells. Replacement cost is not market value, but it serves as a definable reference point to which sales information can be compared. Markets always pay something less than, equal to, or greater than depreciated replacement cost, and that can be identified easily when applied to a set of properties that conforms to a precise definition of comparability. An abundance of sales data is not required, and there is no limit to the number of property components that can be considered. Each adjustment developed using this methodology is mathematically sound. The results are transparent, defensible, easy to use and easy to understand.
“Those who find themselves ill equipped to deal with Collateral Underwriter in January are inviting exposure to increased operating costs and additional time spent trying to defend the indefensible,” Stockton said.
Property valuation technology developed by the principals of Valuation Research has been in use since 1981. The Valuation Research Assistant is their latest offering in a long list of valuation solutions, which include the first commercially marketed AVM and appraiser-assisted AVM.