Appraisal BUZZ
Interview with Darius Bozorgi of Veros Software
Author: STAFF
March 31, 2003
( APPRAISAL BUZZ )--March 31, 2003--Our
interview this week is with Darius Bozorgi, President and CEO of Veros Software,
Inc.
Veros Software is a company best
known for predictive technology solutions for the financial services industry and
is the host of the annual Predictive Methods Conference held each June. Veros Software
offers decision support applications including its VeroVALUE AVM used to obtain
property values on an individual or portfolio basis.
Q: It has been almost eight months
since we last spoke. Can you give us an update on what Veros Software has been doing
during that time?
A: Our clients have increased their
focus on integrating technology, including AVMs, into their systems. Veros has been
focused on creating the tools and features necessary to help our clients succeed
in this effort. True integration will be measured by our client's ability to connect
quickly and seamlessly, access a variety of product offerings suited to each client's
particular needs, and most importantly be able to use our services in a production
environment with a high rate of success. To this end we provide multiple accessibility
options, meaningful confidence scores and very high - usable - hit rates. At the
same time, we have been involved with new and exciting uses of AVMs and related
analytics that include prequalification and marketing tools, user-submitted value
scoring and analysis, forecasting tools to estimate future values and market stability,
portfolio analysis, collateral score development, and most recently appraiser-assisted
tools. Finally, since we last spoke Veros has expanded its coverage to 40 states
and over 600 counties nationwide.
Q: What do you mean by "meaningful"
confidence scores?
A: Just like the underlying value
itself, confidence scores must be highly accurate, reliable and very consistent.
Veros was the first to achieve this benchmark, what some in the industry may call
a "correlated" confidence score. Unfortunately, in the past, the industry was led
to believe that confidence scores were a true indication of the accuracy of values
generated by AVMs. However, expectations never met reality in either testing or
actual usage, leaving what should have been an extremely valuable and integral tool
relatively useless. This failure to meet expectations understandably created many
skeptics. Veros has gradually changed that with the introduction of our confidence
score that is highly correlated to the accuracy of our values in a meaningful and
proven way.
"Meaningful" refers not only to a
high level of correlation in a consistent manner, but also to a distinct and proven
distribution of variance between major confidence score ranges or buckets and also
within each bucket itself so as to make the score useful. Our clients can and do
make very effective decisions based upon our valuation estimates and the corresponding
confidence scores. Our capabilities have been proven time and time again and are
working today for our clients.
Q: And hit rates figure the same
way?
A: Almost. The hit rate issue is
a bit more complex and all too often either ignored or analyzed incorrectly. For
example, if a client submits 100 properties for valuation and an AVM delivers a
value for each one then, by one measure, the AVM may be said to have achieved a
100% hit rate. However, let's say more than half of those values could not be used
by the client due to low confidence scores or other client criteria. That client
has been left with less than half of the valuations that could be used in production.
The AVM actually delivered a "useful" hit rate of less than 50%. This is an unfortunate
and all too frequent occurrence for some AVM providers. To make matters worse, the
client has usually paid for those valuations that were never used and must now pursue
one of many collateral assessment alternatives. At Veros, our focus has never been
absolute or gross hit rates at any cost (usually to the client's detriment); rather,
we have successfully focused on delivering the highest usable hit rates to our clients.
Q: You mentioned that you have
seen expanded use of AVMs with appraisers. How can they benefit from this evolving
technology? Are there any AVM tools or features that can benefit our readers?
A: Yes. Since the beginning of the
year, we have seen a surprising increase in orders directly from appraisers. In
my opinion, this is due to the large market that exists between AVMs and related
products on the one hand and the full interior appraisal and closely related products
on the other. This market has been largely untapped and is experiencing increasing
demand. Veros has never taken the position that AVMs can or should be used in every
situation. There are many scenarios in which an AVM is ill-suited, regardless of
the AVM provider. To that end, we have attempted to create useful tools for the
appraisal industry - with an eye towards creating new product offerings and sources
of revenue, as with an appraiser-assisted AVM, and in providing value-added tools
for traditional products.
Regarding the latter, one of the
most powerful and useful tools is our indexing product, VeroINDEX Plus (VIP). Generated
by extensive data analysis and predictive technology, VIP tracks changes in market
conditions over time and can be used as support for "time adjustments" in appraisal
reports. This will be a positive and time saving change for appraisers. With VeroINDEX
Plus, appraisers can generate an area specific report, import the results into the
appraiser's software (e.g. a generic map page), and then reference the graph addendum
in the comments. When you compare the time invested between this process and the
traditional method of providing support for time adjustments using "paired sales",
VIP is clearly a productivity tool benefiting busy appraisers. We have received
tremendous feedback from appraisers who have successfully used this tool in their
business.
Q: How do AVMs fit into modern
appraisal practice?
A: We receive emails every day, from
entry level to experienced appraisers, asking this same question. One answer was
just provided. Another answer can be seen in the growth in demand for "appraiser
assisted" AVMs. Lenders are requiring new ways to merge the speed and cost savings
of an AVM valuation with the expertise of local area experts (appraisers). This
is not intended to replace either one, but simply fill an existing gap. Many appraisers
have seen this demand first-hand and have already incorporated these tools into
their business. In fact, we received a large amount of positive feedback, success
stories and requests for use based on the recent survey issued by the Buzz regarding
appraiser assisted AVMs.
With appraiser assisted AVMs, an
appraiser will be provided with a completed valuation report and asked to comment
on its accuracy and relevance with respect to current market conditions. Appraisers
can view this as an additional service to add to their business. Of course, many
appraisers and appraisal management companies use this tool, when appropriate, as
a means to introduce other products within their business. Most appraiser-assisted
AVMs allow the appraiser to indicate that the valuation report cannot be validated
either "as-is" or with additional support and must be upgraded to any number of
more formal and detailed reviews. In my opinion, as the appraiser-assisted AVM market
evolves, advances in technology will allow the appraiser to more effectively interact
with the AVM and related products.
Darius Bozorgi can be reached for questions or comments at
dbozorgi@veros.com.
About Veros Software
Veros Software (www.veros.com), located
in Irvine, California, is a leader in predictive technology development and implementation.
Veros is focused on building practical and effective decision-support applications
that assist clients in making accurate and informed business decisions that directly
impact their bottom line. More information on Veros' AVM can be found at
www.verovalue.com.
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