How Technology Enables, Rather than Replaces, Commercial Real Estate Professionals

Technology has infiltrated nearly every aspect of the commercial real estate transaction process, from listings to lending. The commercial valuation and appraisal process has not been as quick to catch up, for a variety of reasons, the most important of which is that appraising commercial real estate requires a human touch, with each income producing property unique in its own way. The tools an appraiser has at his or her disposal have not improved at all in recent years, with the largest and most advanced appraisal firms in the world still using Excel linked to a Word document, and repeatedly writing over the same old template reports. This can cause immense frustration, result in errors, and create bottlenecks in what are already lengthy and complex transactions.

When I started my career in the appraisal industry, I was shocked at how little technology was being used by appraisers. Excel spreadsheets were seen as cutting edge. Important inspection information was (and still is) gathered with a pen and paper. Information was manually aggregated from the same 10-15 websites every time, for each different property. Reports were created in Excel and linked to a Word document that was often pre-populated with data from a previous report, making it extremely easy to make errors and typos. Experienced, talented appraisers were spending 40 to 50 percent of their time on busy work and reports took three weeks to be delivered to clients.

My co-worker (and now co-founder) and I couldn’t help but think there was a clear need for technology to improve this antiquated process. Recently, there’s been a good deal of industry buzz around automated valuation models (AVMs) in residential valuation. Most people are familiar with Zillow, which uses an AVM to generate “Zestimates” for residential properties. AVMs rely on vast amounts of data to create mathematical models to try to identify what a property is worth. However, AVMs are only as good as the data they use. In a residential valuation, with so much data available and properties that are so similar to one another, AVM’s have become somewhat accepted. That being said, when it comes to a commercial property, an income producing property, the need for the thoughtful human art of valuation remains, to fill in the gaps of the broadly incomplete commercial real estate dataset. There are so many more parameters (foot traffic, visibility, investor type, etc.) that affect commercial real estate value as compared to residential properties, and the data surrounding those parameters is often unstructured or captured so rarely, that there’s not sufficient fidelity to draw any meaningful conclusions. In fact, at this time, no FDIC backed lending institutions accept AVMs for commercial appraisal reports.

There are so many more parameters (foot traffic, visibility, investor type, etc.) that affect commercial real estate value as compared to residential properties, and the data surrounding those parameters is often unstructured or captured so rarely, that there’s not sufficient fidelity to draw any meaningful conclusions.

So how to find a happy medium? How do you insert technology and improve a process in which human expertise is a necessity? We think the answer is a modern toolkit for appraisers. The dream software, in our mind, would allow appraisers like ourselves to cut out the busy work and appraise more efficiently, while still applying complex, time-tested and accepted valuation methodology. In the same way that QuickBooks doesn’t replace accountants, it is a tool that makes them more efficient, we want to build a similar tool for appraisers. We see our technology not replacing appraisers, but rather helping them do their job more efficiently and more intelligently to provide higher quality reports across the board.

There are a variety of points within the lending process that can benefit from the combination of technology and human expertise. For example, when seeking out comparable properties to use in a report, traditionally appraisers have to think back to properties they themselves have previously appraised and comps they may have used, or sort through old spreadsheets to find comps that might work. Alternatively, they can use a third-party data provider like CoStar that may or may not be accurate. We designed our tech so that when a new comp is used by an appraiser, that comp is stored in our software for each of our appraisers to choose from, anytime. Therefore, each one of the comps in our database is extensively researched – appraisers are picking up the phone to actually confirm details. This gives appraisers access to a huge number of confirmed comp data at their fingertips to select appropriately for any job they’re working on. That confirmed comp set grows every time a new comp is added.

At my previous job, I was tired of having to spend multiple hours every day manually transcribing property data from city-run websites into my Excel model. Not only was it tedious work, but it was extremely easy to fat finger a number, which I personally saw happen a number of times. It’s pretty scary when a 10,000 square foot building accidentally becomes 20,000 square feet because someone was rushing to enter information and entered in a 1 instead of a 2. At Bowery, we spent the better part of two years working on data validation and integration with public records (Zoning and Land Use, FEMA, the Department of Finance, and more), so that we could not just save time for our appraisers, but more importantly, ensure that every report our clients receive has accurate data and calculations throughout.

For property inspections, traditional methods include an appraiser taking notes with paper and pen, taking photos on a camera/iPhone, and then manually entering all that information into a Word or Excel document back at the office. The Bowery Valuation toolkit gives our appraisers a mobile app to store notes, photos, and property information found on an inspection. The mobile app seamlessly imports that information into the web application – no more need to sort through or format property photos.

We all tend to get excited about the latest technological advancement. We understand the excitement. Our approach is to use technology to supercharge our appraisers – not to replace them. And our clients take note that we are producing higher quality reports with more consistency and a faster turnaround time, than anyone in the industry.  

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