Appraisal Forum goes nationwide with goal of doing one thing well -- appraisal

Memphis, TN-based Appraisal Forum was established in January 1999 with the goal of attacking appraisal turn times on the technology end -- full EDI ordering, statusing and fulfillment. It expects to grow from a regional shop in the southeast to a national presence by next year. EVP and co-founder Bethany Kaaz recently sat for Appraisal Intelligence's Industry Spotlight interview.  (May 26, 2003)

Your business model is unique in the industry. How is Appraisal Forum different from a traditional AMC? 

When we began, we saw the problems of a traditional AMC because we dealt with them on a local level. So we tried to approach it differently. First of all, we solely focus on appraising, by working with contractor and employee appraisers -- we don't provide any flood, or title, or other services. We're striving to be the pinnacle of the appraisal industry, not a one-stop shop for every type of product. 

For a lender, a traditional AMC was expensive and inefficient. Our system and process allows us to be very competitive in price, and our efficiency is illustrated by an average turnaround of less than five days in all markets, for all appraisal products. Our Web-based system allows our clients and appraisers to track appraisals, and retrieve them, from any computer that has Internet access.

We also have $5 million E&O insurance, which covers all of our appraisals, and we review every appraisal before it goes to the client, which catches 98 percent of all errors. That saves the client a lot of time, which allows them to close more loans, which allows them to order more appraisals.

Talk about the origins of the company and your strategy for nationwide expansion.

We began in 1998 as a local appraisal company, and we were first in the area to use EDI exclusively to transmit our appraisals our appraisers and our clients. Our goal was to be completely EDI and Web-based -- and paperless -- from day one, which we accomplished. In 2001, we brought in additional investors who liked our business model to help us fund our nationwide expansion. Our goal is to be nationwide in 2004.

As you enter a new market, what challenges are you seeing?

The biggest challenge is to differentiate our company from a traditional AMC. What we try and do is stress that we have a somewhat different business model and provide clients with value-added services. When we enter an area that's really busy, sometimes appraisers aren't interested in talking to us right away. We just stretch out our growth in that area a little bit.

Your initial investment when you founded the company was largely dedicated to building an EDI network. How has your company differentiated itself in terms of technology generally, and online ordering/processing/fulfillment/ storage specifically?

We were going to go the EDI route, and then we discovered that a lot of lenders and appraisers just didn't have the technology. So we shifted to an ASP model, where our clients, appraisers and staff are like a community in the system. Information is exchanged and permanently stored, which has created a close synergy for all three parties. We store all appraisals for the appraiser and the client indefinitely in our system, which can be retrieved via our secure, encrypted access from anywhere.

You have made some management additions recently -- who are they and what do they bring to your business plan?

Our latest addition is Calvin Shook, our new chief appraisal officer, formerly of GAC and SunTrust. He's a certified general appraiser and an SAR with the Appraisal Institute, and he's on the Industry Advisory Council of the Appraisal Foundation. We put high emphasis on ourselves as an appraisal company, so we feel that someone of Calvin's caliber can be a tremendous aid to our appraisal network on appraisal-specific issues.

What do you look for in an appraiser partner? More broadly, what sets one appraiser apart from another?

We hold our appraisers to high ethical standards, which is first and foremost what we're looking for. Additionally, we look for appraisers who understand that the clients in today's market are demanding a more accurate and timely appraisal. We feel that the days of the basic appraisal taking two weeks or more are numbered if not already gone, so we're looking for appraisers who understand that.

We're looking for appraisers who are somewhat technologically advanced, just with basics like Internet and the capability of creating PDFs. Nothing more than the average that is out there.

Are there any specific areas of the country where you're ramping up and especially need appraisers? 

We're headed up to the northeast -- we'd been concentrating on the southeast. Virginia, Pennsylvania, New York and farther northeast, as well as central areas such as Iowa and Missouri. However, since some of our clients order nationally, we'll look at any appraiser who's interested n working with us.

How can an appraiser interested in working with you be considered?

Appraisers can sign up on our Web site, www.appraisalfrum.com, or call our toll-free number (866-367-8611) to speak to a recruiter, at which time an application and fee schedule is sent to them. We will get copies of their license, resume, E&O if applicable, and a W-9. After we receive all the documents, we perform a Web site test to make sure they're PDF-capable. As soon as we're done with that, which is a pretty short process, they're immediately eligible to receive orders.

LSI and Atlantic Assurance have been bought this year; Forsythe Appraisals, a Great Lakes-area branch network out of Minnesota, got bought into by equity investors this month... do these developments affect your business strategy at all? Do you see your company as a likely acquisition target, or is it something you foresee keeping independent for the foreseeable future?

I think that for the foreseeable future, we don't see any changes in the ownership of our company. We want to focus our efforts on selling our services right now, not our company.

What's the future of the residential appraisal profession?

I think that after reading this, some appraisers might still be left with the idea that we're just another AMC. We would like to get the message out that we're not the enemy; we are trying to provide value-added for our clients as well as our appraisers.

The lending industry has changed dramatically over the past few years, primarily in two ways. There is a tremendous amount of consolidation that has taken place and will continue to take place, resulting in fewer and larger banks which will dominate the industry. Second, in order to achieve economies of scale, these large lenders are forced by competition to streamline and centralize their processes. In order to achieve their corporate objectives, there will be increasing demand on regional and national appraisal management companies. It's becoming very ineffective for these large lenders in a centralized processing setup to deal with 40,000 or so appraisers. It's easier for them to deal with 10 or 15 management companies. Appraisers are starting to realize this, and the ones who are welcoming this change, we feel will be more successful than ever, because they'll be able to do what they do best -- appraise. Our processing system eliminates unproductive time for the appraiser such as marketing and bill collecting.

AVMs have also been a big concern. First, we have to ask the question, why have AVMs gained in popularity? I think one of the reasons is some of the inefficiencies inherent in a traditional appraisal company. We're positioned through our processing technology to bridge the gap between the lenders and appraisers by creating efficiencies. Therefore, we feel that we're actually advocates for the appraisal industry as a whole -- helping to ensure its long-term survival.

We see ourselves as the advocate to keep changing and molding with the industry as it happens so we can keep our appraisers up-to-date and connected with lenders.


Contact:
Bethany Kaaz
Appraisal Forum
901-754-6640
bkaaz@appraisalforum.com

Don Mundie
Delta Capital Management LLC
901-755-0949