Web-Based Multifamily Valuation Enhances Speed, Builds Better Predictions

Meghan Czechowski quote Apprise Multifamily Valuation

The future of multifamily valuation requires flexibility and the use of technology to process data faster and more reliably. Meghan Czechowski, managing director and valuation lead for Apprise by Walker & Dunlop, spoke to Finance Insight about why multifamily valuations in particular are well suited to a web-based machine learning approach, resulting in faster appraisals with increased reliability.

Finance Insight: How does the Walker & Dunlop Apprise program differ from traditional residential valuation programs?

Czechowski: We’re focused on multifamily with our tech-enabled process. Most appraisal reports on the commercial side (multifamily included, that is, five units and up) are completed using a web-based database, and those databases are typically blank slates. When you’re entering sale comparables, rent comparables or other data, most people are starting from scratch and usually using an analyst to record that comparable information that then feeds into a database.

The Apprise team of appraisal experts uses our Apprise application, which is a proprietary web-based system. It uses the property record database; therefore, it is not a blank slate. It has over 2.5 million multifamily records flowing into it from a public record aggregator and various industry resources like REIS, RCA and Yardi, using direct integration and application programming interfaces (APIs).

Because of these multiple sources of information, our staff (whether it’s an analyst or a senior appraiser), will see all the available multifamily inventory in their market through the Apprise system. They can use this as a starting place to spot check the data and reconcile any conflicting information. It’s a time-saving situation when we go through that enhanced process using our technology

Finance Insight: What does this mean for workflow?

Czechowski:  The Apprise property records database ties directly to our appraisal workflow, which develops the ultimate output: the appraisal report, which is web based as well. Because data is not trapped in Excel and Word documents (like with legacy platforms), we’re able to control the product and ensure consistency with regard to how we’re analyzing and reporting our comparables, the comments we’re making in terms of the conclusions and the assumptions and support that drive our ultimate opinion of value.

One huge benefit in using a web-based system is saving time. In a legacy system, if you change something in an Excel or Word, it may never get back to the database. This means the next time somebody uses that database, they might be using inconsistent or unconfirmed information, resulting in redundancy in the confirmation process. The fact that we start in the web-based model and stay there means that valuators can really rely on the confirmed comparable data. As you build upon the comparables, you build upon the history of expenses and rent growth, etc.

With the Apprise system, users now have an incredible number of sale comparables and rent comparables from which to select because it’s all been recorded by the team. There’s a positive feedback loop of offering up data and the comparable information so production staff can sail through their analysis much quicker.

We’ve listened to our lender and owner clients to ensure that we’re developing a consistent and quick product for their multifamily valuation needs.

Finance Insight: What makes this platform work well in the multifamily market?

Czechowski: In general, multifamily analysis is more simplistic than for some other commercial product types (for example, shopping malls and shopping centers). For multifamily, the equation is income, expenses and investment parameters. We typically use only a direct cap and sometimes there will be a discounted cash flow analysis, but, overall, it’s very simple growth rates that we’re dealing with and a less volatile income stream than the other product types. Because of that simplistic nature of the multifamily valuation space, it is an obvious starting point for our web-based technology.

Finance Insight: What can this data do for underwriters?

Czechowski: The Apprise system, through the partnership of Walker & Dunlop and GeoPhy, a global data science company, has aggregated thousands of property records with actual operating statements, which we use for annually updated expense comparables. From there, we can take a very granular look at various expense categories in any market across the nation and offer our clients far more support than our competitors.

This all helps the underwriters, because an appraisal is just an opinion of value that is supported by market comparables. The more robust your dataset is, the more trustworthy the appraisal would be considered. The system mitigates any back-end questions that can arise because we can create a clearer picture with a more supported valuation conclusion from the get-go.

Finance Insight: How does this system help appraisers or valuators?

Czechowski: On the appraiser side, transaction volume, specifically in the multifamily space, has increased exponentially in recent years, and the number of appraisers has decreased over that same time period. We’re working with a supply/demand issue for the professionals that can produce these appraisal reports.

Speeding up and enhancing their appraisal process and data aggregation, as well as creating a well-supported opinion of value, means a faster valuation. But it also saves time by mitigating any questions that might occur on the back end.

Finance Insight: How has predicting property income become more complex in the last couple of years?

Czechowski: Income predictions vary property by property and market by market. COVID, plus the resulting lockdowns and the economic impacts, made multifamily income more volatile than it normally is.

Having a solid history, being able to use machine learning in parsing rent rolls and recording various unit mixes (with data from third party resources like Yardi or REIS) all in a single system allows us to see trends over the span of multiple quarters/years, not just what happened during COVID.

This means being able to more meaningfully project various factors impacting value in the market and then making future predictions. Ultimately, you can’t take a single snapshot in time and assume that what you see there is going to continue into perpetuity. We must look at the whole picture, and a web-based interface that’s constantly recording and taking snapshots in time means we can meaningfully understand not just a 12- to 18-month span, but utilize a larger historical snapshot to make more reliable and supported future predictions for an asset or market.

—  This article is posted as part of REBusinessOnline’s Finance Insight seriesClick here to subscribe to the Finance Insight newsletter, a sponsored four-part newsletter series, followed by several video interviews with leading lenders and financial intermediaries, delivered to your inbox in February 2022.

Walker & Dunlop is a content partner of REBusinessOnline. For more articles from the company, click here

Content Partners
‣ Arbor Realty Trust
‣ Bohler
‣ Lee & Associates
‣ Lument
‣ NAI Global
‣ Northmarq
‣ Walker & Dunlop

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