For the RICS Insight Series second panel, thought leaders convened to discuss the outlook for the appraisal industry during the current health and economic crisis. It was moderated by John Busi who asked panelists what are the business opportunities and challenges for valuation professionals during this current crisis? Panelists included Anne Jablonski of SitusAMC, Nils Kok of GeoPhy and Maastricht University, Paul Massey of B6 Real Estate Advisors and Wayne Miller of Bank of America.
New loan volume is down due to market uncertainty as the appraisal community pauses for an onslaught of activity, but the work will start flowing again in about four months, according to Wayne Miller. He recommends appraisers take the current down time to focus on professional development because they will be very busy once the market starts moving again.
Rents were paid on March first since the crisis had only just begun and while market watchers will be checking if May payments were made, it’s not until the first of June that we’ll see an indication of the number of defaults due to the economic crisis.
“We’re going to start to see more and more coming from retail,” warns Anne Jablonski. She stresses the importance of data points as special servicers evaluate and perform deep dives into each new asset when borrowers require monetary modifications to shift reserves to cover operating expenses.
Miller encourages appraisers on the front line to access current research rather than to rely on research that was done a month ago. “Pay attention to the presentations of chief economists from the leading firms,” he said but encouraged front-line appraisers to seek opinions from various informed sources. “The most airtight type of analysis would include names and phone numbers of people you’ve spoken to.”
The current crisis has radically shifted how people think about retail and hospitality, said Paul Massey. Over the next 12 months there will be a lot of learning required but he predicts the world will be back.
“It’s a massive crisis and I’m deeply sensitive to the suffering it has caused but if you believe in our human ingenuity, there will be a vaccine and a treatment and in a year from now there will be a positive outlook,” said Massey.
An expert in AVMs, Nils Kok raised them as part of the problem in the last crisis. Much has changed in 10 years and now AVMs can be part of the solution. AVMs have a broad base and a long history that can provide more reliable comparable information that factors in location data and macroeconomic data. “AI learning and algorithms understand how local and macro economic changes in the economy effect prices,” he said.
AVMs, however powerful, are only another tool in the toolkit to be harnessed by an experienced appraiser. They allow the appraiser to consider more data than can be processed by the human brain – allowing the appraiser to seek out new sources of data. “Credit bureau data contains a wealth of forward-looking indicators that we can use to see what’s happening in a building as people’s credit cards start to deteriorate.”
Panelists agree the crisis has forced short-term change and more reliance on technology but will not change the role of the appraiser. If anything, rapid change has made the role of the appraiser more valuable.