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MortgagePoint » Your Trusted Source for Mortgage Banking and Servicing News 46 August 2023 E X P E R T I N S I G H T S Matt Stepanovich, VP, Hybrid Valuations, at SingleSource Property Solutions, discusses appraisal modernization and big data's role. M att Stepanovich serves as VP of Appraisal Modernization and Quality Control for SingleSource Property Solutions, where he oversees the company's appraisal modernization initiatives. As a certified Residential Real Estate Appraiser with more than two decades of experience in the valuation and financial services industries, he has owned a successful real estate appraisal firm for over 15 years and has extensive knowledge and expertise in hybrid and alternative valuation products. He has also served as SVP of sales and operations for a regional real estate company and VP of sales for a national real estate inspection and hybrid valuation firm. He can be reached at mstepanovich@singlesourceproperty.com. Q: When did Fannie Mae and Freddie Mac begin collecting data for property valuations? The GSEs implemented the Uniform Appraisal Dataset and began collecting various appraisal data points back in 2010. At that time, appraisal data was somewhat fragmented and inconsistent. In fact, that was part of the goal, to standardize appraisal data points across the board. The initiative was instrumental as it marked the inception of a more data-driven, systematic approach to property valuations. Q: What was the benefit of implementing UAD? The most significant advantage was that it gave both GSEs the ability to start systemati- cally tracking data on individual properties. All of the data was housed in one centralized hub. For the past five years, Fannie and Freddie have been able to monitor valuations and other data on specific properties. With that historical data in hand, requirements for the type of valuation that would be needed on specific transactions can be more easily determined. The UAD also made the access, analysis, and utilization of property data significantly more efficient and reliable. This ultimately led to more precise, data-driven approaches to property valuations that reduced margins of error and provided a more nuanced under- standing of the property's value. Q: How is historical data utilized? The use of historical data in the property valuation process has always been a critical part of determining current market value. If you think of each property as having its own unique story to tell, the historical data serves as the chapters of that story. When an appraiser is tasked with determining a proper- ty's value, the historical record of that property is crucial information for the appraiser. As they sift to analyze the data, they could be looking for clues in the form of data points that could be relevant to their current assessment. That might include details about past renovations, changes to the property's layout, value fluctua- tions, or other data. Collectively, each of these elements contributes to a broader understand- ing of the property's current value. The same historical data can also help shed light on what the valuation require- ments for the current report should be. For example, if the data points have a compre- hensive and consistent history and the type of transaction qualifies, perhaps an inspection isn't needed. Conversely, if there are data gaps or inconsistencies, perhaps an inspection or full appraisal is needed. Basically, historical data can be both a guide and a foundation that ultimately enables a more accurate and efficient determination of value. Q: Are there any other benefits to using data? Absolutely. For instance, some of the ap- praisal bias issues that have been raised are being investigated through UAD data. The Federal Housing Finance Agency recently examined over 47 million appraisals from 2013 to 2021 to investigate potential appraisal bias. The agency developed a metric that identi- fies when properties appraise for less than a buyer's offer and found undervaluation to be more prevalent in certain metro areas in which expected appreciation, property condition, housing availability, and buyer demand were factors. In such cases, the appraiser will have no idea about the ethnicity of the homeowner. UAD data is also a valuable resource for other academic and industry researchers studying housing markets, lending practices, and appraisal practices and methodologies. Expert Insights APPRAISAL MODERNIZATION AND DATA "If you think of each property as having its own unique story to tell, the historical data serves as the chapters of that story."