Named the Nation’s Best Newsletter by NAREE

December 2016 Vol 10 Issue 12


MY TAKE By Clifford A. Lipscomb, Ph.D. Vice Chair, Greenfield Advisors P11 

CLIENT CORNER Featuring Denis Brosnan CEO, DIMONT P14 

Pi Pi



By Octavio Nuiry, managing editor. Concerns about rising sea levels remains a rarity among most South Florida homeowners and investors, but despite the threat of rising sea levels, the drive to develop Florida’s coastline continues, exposing residential and commercial property owners to potential flood risk. P1 SOUTH FLORIDA BEACHFRONT PROPERTIES THREATENED BY RISING SEAS By Clifford A. Lipscomb, Ph.D., Vice Chair and Co-Managing Director, Greenfield Advisors. Property valuation is an integral part of the housing industry that is long overdue for disruption. Although much could be said on the topic of automated valuation (AVM) market, many AVMs models fall short of meeting customers’ expectations. Dr. Lipscomb explores where the AVM industry might go next to meet future customer demands. P11 BUILDING A BETTER HOME VALUE MOUSETRAP



Twenty years ago, DIMONT founded the industry of providing hazard insurance claims adjustment services for mortgage loan investors and servicers. Now DIMONT is leading the way in leveraging data and industry experience to more effectively help banks provide appropriate flood insurance for home in their loan portfolio.










Concerns about rising sea levels remain a rarity among most South Florida homeowners and investors, but despite the threat of rising sea levels, the drive to develop Florida’s coastline continues, exposing residential and commercial property owners to potential flood risk. According climate experts, the inundation of coastal communities has begun. And in places like Miami Beach, the sea has crept up so high that all it takes is a high tide and a brisk wind to send water pouring into streets, businesses and homes.

of sea level rise, experts claim. More than 90 percent of the 20 million residents of the Sunshine State live on the coast, according to the scientific journal Nature . According to the Intergovernmental Panel on Climate Change, sea levels could rise by more than 3 feet by 2100. For hundreds of thousands of Floridian coastal homeowners, a reckoning with Mother Nature is not far off in the future, experts warn. And as sea levels rise, flooding threatens both real estate values and the tourism economy of South Florida. “If a rise of 58 centimeters were realized by 2050, it would cost Florida $92 billion per year owing to losses in tourism and real estate, among other factors, with costs rising exponentially thereafter,” wrote Nature science writer Mark

Schrope. “By 2060, with a rise of 68 centimeters, 9 percent of Florida’s land area would be gone, including virtually the entire Florida Keys.” The rising sea levels could be an existential threat to South Florida real estate, according to Orrin H. Pilkey, professor emeritus of geology at Duke’s Nicholas School of the Environment in Durham, North Carolina, and a proponent of greater constraint on coastal development. Professor Pilkey insists that no amount of engineering infrastructure will stop the onslaught of rising seas. Miami Beach Is ‘Doomed’ “Miami is doomed,” said Pilkey, who questions the wisdom of high-density

Already, South Florida is “ground zero” for the potential adverse economic impact

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rising sea levels in South Florida. “Unless we can come up with a solution, it’s kind of depressing to think about this. The future is dismal for South Florida.”

Pilkey is not the only scientist sounding the alarm.

‘Nuisance’ Tidal Flooding Increases According to William V. Sweet, an oceanographer with the National Oceanic and Atmospheric Administration’s Center for Operational Oceanographic Products and Services (CO-OPS) in Silver Spring, Maryland, so- called “nuisance” tidal flooding or “sunny day” flooding is increasing in many coastal communities, particularly along the Atlantic and Gulf Coasts. “As relative sea level increases, it no longer takes a strong storm or a hurricane to cause flooding,” said Sweet, a leading scientist researching coastal inundation. “Flooding now occurs with high tides in many locations due to climate-related sea level rise, land subsidence and the loss of natural barriers. The effects of rising sea levels along most of the continental U.S. coastline are only going to become more noticeable and much more severe in the coming decades, probably more so than any other climate-change related factor.” Nuisance tidal flooding results in public inconveniences such as frequent road closures, overwhelmed storm drains and compromised infrastructures.

Florida International University researchers and journalism students developed an online tool to visualize what South Florida would look like with different levels of sea level rise. This map, drawn from that tool, shows South Beach with two feet of sea rise. To see FIU’s project, visit www.eyesontherise.org

Miami is doomed . It surprises me to see the amount of development there.” Orrin H. Pilkey | Professor emeritus of geology at Duke University

development in low-lying coastal areas like South Florida. “It surprises me to see the amount of development there.” Pilkey, the author of numerous books on climate change, including ”Retreat from a Rising Sea” , (Columbia University Press, 2016), said the twin threats of an ever- encroaching ocean and the area’s porous limestone foundation makes drastic mitigation efforts nearly impossible. He said for cities like Miami Beach it could

be a slow catastrophe, involving a myriad of difficult decisions: whether to build infrastructure to keep the water out or whether to retreat from the coast to higher ground. The only solution, he said, was a moratorium on development along the coast areas and to compel residents to move inland. “I think that by 2050, the situation will be very clear that the game is lost,” predicted Pilkey, referring to the risk of

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0.15 - 0.3

0.31 - 0.45

0.46 - 0.6

0.61 - 0.75

Source: U.S. National Oceanic and Atmospheric Administration

It has increased on all three U.S. coasts by between 300 and 920 percent since the 1960s, according to a recent NOAA report authored by Sweet. The report — “ Sea Level Rise and Nuisance Flood Frequency Changes around the United States ” — found that eight of the top 10 U.S. cities that have seen an increase in nuisance flooding are on the East Coast, with Annapolis and Baltimore, Maryland, leading the list with an increase in number of flood days of more than 920 percent since 1960. Other cities on the top 10 list of frequent nuisance flooding are Charleston, South Carolina; Washington, D.C.; and Norfolk, Virginia. “As relative sea level increases, it no longer takes a strong storm or a hurricane to cause flooding,” Sweet told the Insurance Journal . “Flooding now occurs with high tides in many locations due to climate-related sea level rise, land subsidence and the loss of natural

barriers. The effects of rising sea levels along most of the continental U.S. coastline are only going to become more noticeable and much more severe in the coming decades.” The problem of tidal flooding has gotten so bad that Miami Beach has put into action an aggressive and expensive plan to combat the effects of sea level rise. To prevent seasonal street flooding, the century-old city, with its iconic Art Deco architecture and vibrant night life, is taking on unprecedented steps to save itself from the mounting problem of rising sea levels. Sunny Day Flooding: King Tides Over the next six years, Miami Beach will spend as much as $500 million to elevate roads, raise seawalls, build new storm sewers and install 80 pumps across the island city, the Miami Herald reported last year. The pumps are being installed to reverse rising sea levels that push water

As relative sea level increases, it no longer takes a strong storm or a hurricane to cause flooding . Flooding now occurs with high tides in many locations due to climate-related sea level rise, land subsidence and the loss of natural barriers.”

William V. Sweet Oceanographer, National Oceanic and Atmospheric Administration

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Miami Beach, Florida during King Tide flooding.

over the city’s floodwalls and into streets more frequently during full-moon high tides called “king tides.”

Studies have found that millions of Floridians are at risk by being displaced by rising seas. Along Alton Road on the west side of Miami Beach, the sea batters the city’s west coast and sweeps into the resort’s storm drains, reversing the flow of water that normally comes down from the streets above. Instead, ocean water pushes up into gutters along Alton Road and pours into the streets and sidewalks. Then, the seawater surges across the rest of the low-lying island. Alton Road is just two feet above sea level, according to elevationmap.net . Miami Beach, a narrow barrier island, just seven miles long by one mile wide, is a resort community of just over 100,000 people surrounded by water, though its population swells with a steady stream of tourists. To the east is the Atlantic Ocean and the Biscayne Bay is on the west.

Such efforts, according to Pilkey, the Duke geologist, are a waste of money.

“Pumps are not going to help Miami Beach,” said Pilkey.

During the fall seasonal high tides, ocean water pushes up through storm drains turning streets and sidewalks into rivers of saltwater in Miami Beach due to high astronomical tides caused by the lunar cycle. Streets in low-lying Miami Beach neighborhoods have begun flooding during the highest tides, usually when the moon is full around the fall equinox. Residents in Miami Beach, Fort Lauderdale and the Florida Keyes have witnessed these higher tides for decades.

But scientists warn that higher tides will rise more frequently due to sea level rise triggered by climate change.

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Rising population and increasing development along scenic coastlinesare putting more people and more valuable property in harm’s way in South Florida, according to Michael D. Berman, owner of Michael Berman Consulting, a private consulting firm to commercial and multi- family interest and policy organizations. “We could see the doubling or quadrupling of flood insurance over a relatively short period of time,” said Berman, who has served not only as chairman of the Mortgage Bankers Association, one of the industry’s most influential lobbying organizations, but also as a senior adviser to Shaun Donovan, who was the secretary of Housing and Urban Development from 2009 to 2014. “With high tides and king tides, we could see more flooding and more serious flooding.” We could see the doubling or quadrupling of flood insurance over a relatively short period of time. With high tides and king tides, we could see more flooding and more serious flooding.”

“I think the single biggest issue is education,” said Berman, former president of CWCapital, a leading commercial real estate lender and management firm specializing in multifamily housing projects that was sold to Fortress Investment Group in 2010. “Whether it is policy folks or private folks, we need to educate them so they can focus on the issues.” Selling the Miami Lifestyle Others take a more moderate view and are unmoved by the more calamitous predictions. Miami Beach luxury brokers Jill Eber and Jill Hertzberg of Coldwell Banker Residential Real Estate, known locally as The Jills, acknowledged that climate change was happening, but the real estate duo remain bearish about the

South Florida real estate market and its future growth. Eber and Hertzberg said the City of Miami Beach, and its Mayor Philip Levine, are aggressively combating the seasonal flooding. “Our city is actively attacking the problem of flooding,” said Eber, who together with Hertzberg has sold more than $2.8 billion in real estate since 2005. “They're not hiding their head in the sand. The city understands it. People see that and they feel comfortable about buying in Miami Beach.” Hertzberg, who along with Eber represents high net worth buyers and sellers, said the strong U.S. dollar was hurting their business more so than the occasional flooding in Miami Beach. Hertzberg said political and financial








$696.40 $703.00


$639.40 $620.40


$430.50 $419.50





2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Michael D. Berman Owner of Michael Berman Consulting

Source: Insurance Information Institute

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We have some of the best restaurants in the world. The beaches, the lifestyle, warm weather, arts, and the culture. All these things are an attraction for people to live here.”

Jill Hertzberg Broker at Coldwell Banker Residential Real Estate

instability abroad has impacted Miami real estate, more so than rising sea levels.

real estate brokers. “We have some of the best restaurants in the world. The beaches, the lifestyle, warm weather, arts, and the culture. All these things are an attraction for people to live here.” Hertzberg and Eber said new building codes and Miami’s culturally vibrant community, beautiful tropical beaches, luxurious architecture and active nightlife still attract buyers worldwide. “Regardless, everybody looks at the United States as a safe harbor,” said Eber. “It’s a great place for capital flight.” Beach Boondoggle Besides nuisance flooding the sea has been eating away at the shore, and the city has spent millions of dollars pumping up sand from the seafloor to replace it, only to have it wash away again after a storm or a hurricane, according to Robert S. Young, a coastal geologist at Western Carolina University in Cullowhee, North Carolina.

Young is a scientist that studies barrier islands like Miami Beach and is an expert on developed shorelines. Professor Young is a critic of beach “nourishment” efforts, where the federal government has been paying to pump sand onto eroding beaches — commonly referred to as beach nourishment. “There are two threats that South Florida faces from sea level rising,” said Young, the director of the Program for the Study of Developed Shorelines . “The first is the king tides or nuisance flooding, and the second is long-term coastal erosion.” Young and other scientists said that beach nourishment can end up encouraging development in areas vulnerable to flooding and hurricanes, costing taxpayers billions.

“The strong dollar has affected international buyers worldwide — from Britain to Latin America to Europe,” said Hertzberg, referring to strength of U.S. dollar compared to foreign currencies. “The people of South America are a large part of our real estate market. We are the gateway to Latin America. But they are going through some difficult changes right now in Argentina, Brazil and Venezuela. And they’re not buying like they did in the past.” Hertzberg added that Florida has no state income tax, which is “major attraction” for high end-buyers, saving them a fortune in taxes. She said the favorable tax environment was a huge draw for both domestic and foreign buyers alike.

“There are now neighborhoods in South Florida that have nuisance flooding

“We have such an incredible lifestyle,” said Eber, one of the country’s top

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several times every year,” said Young. “That didn’t happen 50 years ago. That’s going to hurt properties values in certain areas. It’s definitely a real issue that folks in South Florida need to be concerned about.” Young said high-end coastal communities are being subsidized through federal and state beach restoration and flood insurance programs. “Federal, state and local governments have already spent around $2 billion over the last few decades on artificial beaches, and they are sure to spend much more in the future,” wrote Young recently in The New York Times . “When federal taxpayers assume all of the risk of developing and rebuilding vulnerable coastal communities, it encourages the wrong behavior. At some point, coastal resort communities will need to assume

2016 Insight report, flooding due to climate change poses a new threat to the housing industry. Life’s a Beach “One challenge for housing economists is predicting the time path of house prices in areas likely to be impacted by climate change,” wrote Sean Becketti, chief economist at Freddie Mac in the April 2016 Insight report. “Consider an expensive beachfront house that is highly likely to be submerged eventually, although ‘eventually’ is difficult to pin down and may be a long way off. Will the value of the house decline gradually as the expected life of the house becomes shorter? Or, alternatively, will the value of the house — and all the houses around it — plunge the first time a lender refuses to make a mortgage on a nearby house or an insurer refuses to issue a

the risk of storm damage themselves. I would venture to guess that, when this happens, they will be quite a bit more interested in the hazards to which they are exposed.” “I find this sort of ironic,” said Young. “The country leans to the right (politically) and calls itself a free market society, while the federal and state government subsidize flood insurance and coastal restoration programs. While they’re screaming about Obama Care, they are perfectly OK with subsidizing flood insurance. The federal government plays a major role in supporting beach nourishment and at the same time subsidizes flood insurance programs. It’s incredibly ironic.” Economists are also worried about the effects of rising seas on real estate values. According to Freddie Mac’s April




There are two threats that South Florida faces from sea level rising. The first is the king tides or nuisance flooding, and the second is long-term coastal erosion.”









Robert S. Young Coastal geologist at Western Carolina University


May 2016

April 2016

June 2016

July 2016 August 2016 September 2016

Source: ATTOM Data Solutions

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homeowner’s policy? Or will the trigger be one or two homeowners who decide to sell defensively?” Rethinking Flood Insurance As many Florida homeowners know, flood insurance rates have risen in Florida recently. The sharply higher insurance rates are an attempt to stabilize the federally backed National Flood Insurance Program (NFIP), which was financially decimated by Hurricane Katrina in 2005 and Superstorm Sandy in 2013, leaving the insurer of last resort more than $23 billion in debt to the U.S. Treasury, according to a Government Accountability Office report. “The federal flood insurance is going broke,” said Young, the coastal geologist. “At some point, this bubble of federal subsidies will collapse. Let’s face it, the vast majority of those properties on barrier islands aren’t primary residencies; they’re investment properties. If you’ve got a $4 million beach-front house, flood insurance isn’t going to help you.” To plug the deficit in the federal flood insurance program, Congress passed the Biggert-Waters Flood Insurance Reform Act of 2012, a law that removed the subsidies on about 20 percent of policies nationwide for homes that were built prior to 1975 and had enjoyed grandfathered, low flood insurance rates.

homeowners, sparking premiums to nearly triple in 2013.

“There’s no doubt that premiums are going up,” said Brosman, referring to flood insurance rate hikes. “We do a ton of business in Florida.” Brosman said the insurance market in Florida is extremely challenged by the state’s exposure to risks from flooding, coastal storms and high winds. “There’s no question that people are putting a lot more focus on this issue,” said Brosman, referring to the risk of flood damage to properties and rising flood insurance premiums. “There’s increasing risk for both lenders and borrowers, including legal and regulatory risks.” The Sunshine state has the largest number of policies under the federally- backed flood program; there are some 2 million federal flood insurance policies in Florida, more than any other state, and more than one-third of the overall total

To plug the deluge in premium hikes, Congress passed the Homeowner Flood Insurance Affordability Act of 2014, which repealed and modified certain provisions of Biggert-Waters, reducing rate hikes and removing the provision in Biggert- Waters in which the buyer of a subsidized home would lose the flood insurance subsidy entirely. Flood Insurance Rate Hikes However, the two-year reprieve on steep premium increases for thousands of homeowners has expired, and there is no end in sight for rising bills that could double or triple over the next few years. Now some insurance policies on subsidized second homes are going up more than 20 percent. Meanwhile, premiums for primary residences are going to increase by 10 percent, experts claim.

There’s no question that people are putting a lot more focus on this issue. There’s increasing risk for both lenders and borrowers, including legal and regulatory risks.”

Denis A. Brosnan | President and CEO of DIMONT

Denis A. Brosnan, president and chief operating officer of DIMONT , a provider of insurance-related services to the residential and commercial mortgage industries, said flood insurance premiums are rising rapidly in Florida.

of more than 5.6 million insurance policies nationwide, according to The Federal Emergency Management Agency (FEMA), who administers the NFIP program.

But Biggert-Waters triggered higher insurance rates for many Florida

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Flooding and natural hazards are not new to the United States. During the 1930s, the Dust Bowl sent thousands of Americans from Oklahoma to California, fleeing the drought and sand storms. Folk singer Woody Guthrie popularized the 19th century diaspora in a song titled “DoRe Mi.” Eleven years ago, flooding after Hurricane Katrina displaced over 95,000 New Orleanians, who fled the city after the deluge — never returning and decreasing the city’s population from 484,000 before the flood to 389,617 residents today, according to the Census Bureau . 36 Million Homes At Risk As Florida grapples with king tides, rising seas and periodic hurricanes, coastal communities nationwide will need to prepare for natural hazards posed by flooding. Today, some 35.8 million single family homes and condominiums with a combined estimated market value of $6.6 trillion are in counties with high or very high natural hazard risk nationwide, according the ATTOM Data Solutions . That’s 43 percent of the nation’s 83.4 million single family homes and condominiums. While there is no consensus on climate change; there is one thing all agree: flooding is getting more expensive — and more frequent.

Miami Beach, Florida flood

NFIP was created by Congress in 1968, partly in response to devastating losses after Hurricane Betsy hit Louisiana in 1965. NFIP is now practically the sole provider of flood insurance for home owners and small businesses nationwide. Additionally, Citizens Property Insurance Company , a state-run, not-for-profit, tax exempted insurance company, was created in 2002 to provide affordable insurance for high-risk buyers in Florida who could not find insurance on the open market. After a flurry of hurricanes and tropical storms in the mid-2000s, Citizen exploded in size as major private insurers cut back in writing policies in Florida. Citizen, which was created to be the state’s insurer of last resort, became the state’s largest insurance company with 1.5 million policies by 2011. Now, Citizen is the fourth largest insurer,

trimmed down to fewer than 503,000 policies, according to the Insurance Information Institute .

The number of people living in coastal areas in Florida increased by 4.2 million, or 27 percent, from 15.6 million in 2000 to 19.8 million in 2015, according to the U.S. Census Bureau. About 98 percent of the total population of Florida lives in one of the coastal counties. “There’s no doubt that (flood insurance) premiums are going up,” said Brosman, whose company represent lenders and mortgage services. “It seem like this is inevitable.” According to the Insurance Information Institute , 12 percent of American homeowners had a flood insurance policy in 2016, down from 14 percent in 2015.

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STAR ISLAND DRIVE HOME WHAT: 7-bedrooms HOW MUCH: $37,000,000

Located on exclusive Star Island, this magnificent estate rests upon an impressive 58,332-square-foot corner lot with approximately 240 feet of sparkling waterfront and unobstructed views to Biscayne Bay and Downtown Miami. The estate boasts a beautiful two-story, four-bedroom villa with open verandas that face the bay and a separate three-bedroom guest house. The lushly landscaped grounds feature tropical foliage and palms and a resort-style pool and spa, private dock.

Agents: Jill Eber and Jill Hertzberg, Coldwell Banker Jill Hertzberg (305) 788-5455, Jill Eber (305) 915-2556.

COLLINS AVENUE WHAT: 4-bedrooms HOW MUCH: $25,999,000

Magnificent three-story penthouse located at the EDITION has been expertly designed with furnishings by world-renowned designer Steven Gurowitz of Interiors by Steven G., exquisite teak floors and 5,246 square feet of unmatched luxury. Designed by world-renowned architect John Pawson, the penthouse features a spacious living room and impressive 20-foot floor-to-ceiling windows, separate private dining area, family/media room, guest room with a full bath, and a gourmet kitchen by Bulthaup.

Agents: Jill Eber and Jill Hertzberg, Coldwell Banker Jill Hertzberg (305) 788-5455, Jill Eber (305) 915-2556.


The Jills present 387 Ocean Blvd. This rare beachfront home, one of only a few found exclusively on Golden Beach, is a true Mediterranean masterpiece. It boasts extraordinary direct ocean views as well as 150 feet of water frontage. Featuring six bedrooms and seven full and two half bathrooms, the breathtaking residence is situated on an oversized 41,750-square-foot lot. Agents: Jill Eber and Jill Hertzberg, Coldwell Banker, Jill Hertzberg (305) 788-5455, Jill Eber (305) 915-2556.

Agents: Jill Eber and Jill Hertzberg, Coldwell Banker Jill Hertzberg (305) 788-5455, Jill Eber (305) 915-2556.

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Introduction Property valuation is an integral part of the housing industry that is long overdue for disruption. Although much could be said on the topic of automated valuation models ¹ , in this piece I explore the current state of the commercially available AVM market, discuss how current AVMs fall short of meeting customers’ expectations, and lastly propose where the AVM industry might go next to meet future customer demands. What is the Current State of the AVM Market? The current state of the AVM market is quite competitive. In the lending world, AVM estimates obtained via one of the

approximately 20 commercially available AVMs range from $1.50 per property (for a high volume of properties) to more than $12 per property (for one-at-a-time valuations). In the lead generation world, AVM estimates are run for pennies, literally, depending on the client and the intended use. With such a wide range of per property AVM pricing strategies, the opportunity exists for new competitors to enter the market in a disruptive way by differentiating themselves not only on pricing, but also on the data returned to customers for each property valued using an AVM. Below I discuss ways in which this disruption of the industry can be achieved.

Clifford Lipscomb

Clifford Lipscomb is the Director of Economic Research at Greenfield Advisors, a Chartered Valuation Surveyor, and has more than 18 years of experience in economic analysis, statistical analysis, consulting, and teaching. He serves as an Associate Editor of the Journal of Real Estate Literature.

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Why do Current AVMs Fall Short? Current AVMs fall short in multiple ways. First, some customers request AVM estimates only, whereas other customers request AVM reports. The return of AVM estimates often includes simply the AVM value for the subject property, and potentially an error statistic (the most common being the Forecast Standard Deviation or FSD), and sometimes a range of possible values for the subject property. Obviously, reports contain much more property detail on the subject property as well as data on the “best” comparable properties, the neighborhood where the subject property is located, and (sometimes) the region where the subject property is located. These outputs returned to customers have been fairly standard for the last 20 years – as far as I can tell, no real innovation in the outputs delivered to customers has occurred. Second, current AVMs fall short in the data used to generate the AVM estimates. From others in the industry, I have learned that some attempt at incorporating different data sources has occurred. In an attempt to mirror contemporary sales price trends, some AVMs use listing data from Multiple Listing Services (MLSs) in generating their estimates while others continue to use only historical comparable sales transactions. Some AVMs use tax assessed value (TAV), which are often updated yearly, in their algorithms. Either way, it seems that the time is right for other “big data” and crowdsourced data

... it seems that the time is right for other “big data” and crowdsourced data to be used in AVMs.”

to be used in AVMs. In the academic literature, it is becoming more common to see Twitter data being used to predict stock prices (e.g., see Bollen, Mao, and Zeng, 2010, “Twitter mood predicts the stock market,” Journal of Computational Science) and Google data to predict movements in house price indices (e.g., see Kulkarni et al. 2009, “Forecasting Housing Prices with Google Econometrics,” George Mason University School of Public Policy Research Paper No. 2009-10). What Else Could AVMs Deliver to Customers? Reason codes or “variances” are common in some industries. For example, one might find on her credit report a

reason for a lower credit score (e.g. too recent opening of an account). In AVMs, reason codes can provide reasons for a particular determination or indications for situations where some variable is “out of tolerance” or outside of a predetermined range of acceptable answers. This would give customers additional insight into the confidence that the AVM provider has in their estimates. One easily computable reason code that would provide additional insight is the number of comparable sales transactions used to produce the valuation estimate for a given subject property. Another is a statistically-derived (bootstrapped) confidence interval around the valuation estimate for each subject property.

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AVMs could also deliver estimates that are based on a reconciliation of multiple data sources. An example of this is the ATTOM Data Solutions (parent company of RealtyTrac) “attomized” data. This is a data warehouse that stores the reconciled property-level data from several sources. This is important for several reasons. First, when using a single data source, there may be inherent biases in the raw data and how those data are collected. By using a reconciled database, the opportunity to reconcile differences at the property level is presented. Say that 123 Main Street in Cartersville, Georgia is listed in one data source (e.g. tax assessor data) as having three bedrooms and two bathrooms. Further assume that a second data source (e.g. a current MLS listing) reports that the same property has four bedrooms and two bathrooms. An important difference here is the contributory value of the fourth bedroom if the MLS listing data is used instead of the tax assessor data; that contributory value could mean the difference in AVM estimate of $15,000 to $20,000 for this property, all else held constant. Recent research by Andy Krause

being different than the best source for number of bathrooms). This is important because this process finally fulfills the true promise of multi-sourcing property data to estimate AVM values — not just for the sake of creating redundancies (which does have some value) but also in creating a new “super set” of synthesized data that is 1) not available from any one source on its own and 2) not available from multiple sources utilized in a binary fashion (i.e. either one source or the other for all properties in a state or county). Conclusion In my opinion, the time has come for AVM vendors to start adding more value to the outputs that they provide customers. Standard outputs, such as the AVM point estimate and a measure of confidence in the estimate (often conveyed using the FSD), are just that — standard. Value-added outputs of interest to customers may include reason codes, statistically-derived confidence intervals around the AVM point estimate, the number of comparable sales transactions used to value a given subject property, and explanations of the underlying data source used to generate the AVM estimates. [1] An in-depth discussion of the various flavors of residential automated valuation models or AVMs (e.g. distressed, contemporaneous, lender-grade, marketing-grade, etc.), the difference between AVMs and computer assisted mass appraisal (CAMA) systems, and various ways to estimate “value” [e.g. broker price opinions (BPOs), appraiser-assisted AVMs, form appraisals] are important related topics that are beyond the scope of this particular article.

and me (2016) in the Journal of Real Estate Practice and Education describes the importance of documenting the reconciliation of between-source data variation to ensure the “best” valuation possible and replicability by other professionals in our industry.

So, the question that confronts us is which data source should you use?

In the “ATTOMized” data, the reconciled data for 123 Main Street used to determine the AVM estimate is from the source that has been deemed most up-to-date, accurate, and reliable for that given jurisdiction and that given property based on myriad factors, including timeliness of delivery from the source, percent of fields consistently populated, and previous performance in producing accurate AVM values. The best source will often be different from one jurisdiction to another, even within the same state, county, city, or ZIP code. The best source may even differ for different fields on the same property (e.g. the best source for number of bedrooms may end up

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What is your elevator pitch for DIMONT? “Twenty years ago, DIMONT founded the industry of providing hazard insurance claims adjustment services for mortgage loan investors and servicers. These days, we’re looking at 150,000 or more damage reports a month on distressed properties. “Essentially our process is that, after a property on a defaulted loan becomes vacant, the servicer orders a property inspection, and the inspector files a report. We get those property inspection reports and our trained employees review them, looking for claimable damage. For instance, in one of the pictures they may see a spot on the wall. They use their training to determine whether that’s a stain or mold — in which case it may be covered by the insurance company. If so, they file a claim against the insurance policy. Then, our cadre of licensed public adjusters work with the insurance carriers to resolve the claims. “Recovering the insurance proceeds is critical because the servicer needs to repair the damages to get the property into conveyance condition.

How do you and your customers utilize ATTOM Data? “Our lender clients also look for us to provide a variety of other specialty outsourced insurance and claims-related services. One of those is to provide an opinion of the value of a property, for flood insurance purposes, to make sure there is enough (but not too much) coverage under the NFIP (National Flood Insurance Program). “Our valuation tells them the amount of coverage they should require because, as the lien holder, the bank is going to want to have sufficient flood insurance on the property. On the other hand, as regulated entities, banks also need to ensure that they don’t require too much coverage, as the premium costs are borne by the borrower.

at risk for errors. And our clients need the information very readily so we have to turn around the valuations quickly, while ensuring they are accurate and justifiable. “With ATTOM we can get publicly available data about the house, like year built, square footage, and much more, and that solves all of these challenges we face. It’s fast, it’s reliable and it’s already in data format as opposed to documents. This is helpful because the data is then easily utilized by the technology tools we use to render the valuation opinion. Why did you decide to use ATTOM Data? “What really triggered the need for this new flood insurance valuation was the increase to the limits of the flood insurance program. The combination of the increase in the limits and the continued scrutiny on banks and

“Performing this service has historically been exceedingly manual. That makes it

Our clients need the information very readily so we have to turn around the valuations quickly, while ensuring they are accurate and justifiable .”

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This is a very unique, cutting edge service . Banks are trying to figure out what to do in this area, but most of them don’t have the capability, the expertise.”

What has been your experience with data delivery, quality and customer service?

servicers really caused our clients to come to us. They need valuations rendered by an expert third-party, with a reliable process. “We did several tests with the ATTOM Data. We got sample data from you and showed our clients. And they embraced it. “This is a very unique, cutting edge service. Banks are trying to figure out what to do in this area, but most of them don’t have the capability, the expertise. Some of them are doing it in-house. Some of them are not even doing it at all. What has been the impact on your business and for your customers? “With the ATTOM implementation, DIMONT has gone from 1.75 flood reviews per hour per employee to 5-plus per hour per employee — nearly tripling our efficiency and allowing us to save our customers time and money.

“In the past we’ve taken as many as 1,000 flood insurance valuation assignments in a day. We have 24 people that do this work. That number would easily be 50 or 60 if we didn’t have the ATTOM Data service in place. My guess is that if a servicer is doing this themselves, they would need well over 100 people. “It enables us to focus on the value-add portion of the service — our insurance expertise —as opposed to the number- crunching aspect. Our experts spend their time doing what they do best instead of chasing down documents. “This is a vanguard of where I think the industry will go. Through access to data that is both timely and accurate, along with insight and expertise, we really have something that is a new and different mission-critical offering for banks and servicers.

“We’ve been very pleased. As always when you try something new, there are some hiccups here and there, but we’ve had a great relationship with ATTOM. Richard (our primary point of contact) from day one has been extremely helpful. “What we’re able to do is work with ATTOM and let them know, ‘here’s what we need to do’, and work together to do it. It’s been a collaborative, solution- oriented approach.”

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800.913.0439 | www.attomdata.com

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Banks Win Big In Fla. Supreme Court Ruling The Florida Supreme Court on Nov. 3 ruled in favor of mortgage lenders in a decision that allows lenders to re-file new foreclosure actions against borrowers whose foreclosure cases were originally fe-filed more than five years ago but then dismissed even though the borrowers continued to miss mortgage payments. The case — Lewis Brooke Bartram v. U.S. Bank National Association — was decided in favor of the lenders as borrowers argued a five year statute of limitation should apply. The court’s ruling determined that when foreclosure actions are dismissed, lenders and borrowers return to their pre-foreclosure complaint status. The ruling was a victory for banks in Florida who continue to foreclose on loans that defaulted years ago. Many of those loans are so called “zombie mortgages,” or a foreclosure that has been started but not completed. In the future, foreclosure activity in Florida could rise, as lenders re-file foreclosure cases that were previously dismissed. Florida has a five year statute of limitations on foreclosure actions. Quicken Loans Gets Lawsuit Relocated to Detroit A federal judge moved Quicken Loans case against the Department of Justice and the Department of Housing and Urban Development from Washington, D.C., to the mortgage lenders hometown in Detroit. U.S. District Court Judge Reggie B. Walton said moving the case to the Eastern District Court in downtown Detroit would be more appropriate and convenient venue for the fraud allegations against Quicken Loans to be heard. Quicken, which is the nation’s largest Federal Housing Administration-backed mortgage lender, sued the DOJ and HUD in April 2015, claiming that it was left with no alternative but to sue due to the DOJ’s demands. The government countersued Quicken six days later. SOURCE: Lewis Brooke Bartram v. U.S. Bank National Association

CFPB Seeks Rehearing in PHH Lawsuit The Consumer Financial Protection Bureau (CFPB) is challenging an appeals court ruling in a lawsuit filed by PHH Mortgage Corp. that would enable the president of the United States to fire the agency’s director. On October 11, 2016, a three-judge panel of the United States Court of Appeals for the District of Columbia Circuit held in PHH Corporation v. CFPB that the structure of the CFPB as an independent agency headed by a single director violated Article II of the Constitution. The next step in the legal process is a rehearing of the decision before the full appeals court. The full court has a majority of judges appointed by Democratic presidents, while all three judges on the panel that issued the ruling were named by Republican presidents. The D.C. Circuit handed a victory to PHH Mortgage, declaring the CFPB’s leadership structure unconstitutional and vacating a $103 million fine against PHH. The PHH ruling handed a victory to the banking industry, which has viewed the agency as a thorn in its side and accused it of overreaching in its regulation of consumer financial activities. The CFPB has taken legal action against banks, mortgage companies, credit card issuers, payday lenders, debt collectors and others.

SOURCE: PHH Corporation v. CFPB

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SOURCE: United States v. Quicken Loans, Inc.

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Ohio Law Takes Aim at Zombie Properties A new Ohio law could get some zombie properties back onto tax rolls and into productive use. In late September, Republican Gov. John Kasich signed into law changes to the state’s foreclosure guidelines that are aimed at significantly speeding up the foreclosure process for vacant homes, establishing a fast-track system that trims the foreclosure process from two years or more to as little as six months. Ohio ranked third in the nation for the most vacant REO properties, with 3,585 vacant properties, according to ATTOM Data Solutions, the parent company of RealtyTrac . In Ohio, it takes an average of 689 days for a lender to repossess a property after filing a foreclosure lawsuit, according to ATTOM Data Solutions. While Ohio’s delay is longer than the national average of 629 days, it’s nowhere near the longest in the nation. That distinction is held by New Jersey, where lenders take 1,249 days, or three- and-a-half years, to repossess a foreclosed-upon property.

NAR: More Single Women Buying Homes At 66 percent, married couples continue to make up the largest share of home buyers and had the highest income ($99,200). However, single women made up 17 percent of all home buyers, despite having a much lower income ($55,300), according to the National Association of Realtors annual Profile of Home Buyers and Sellers report. “Single women for years have indicated a strong desire to own a home of their own, as well as an inclination to live closer to friends and family,” said Lawrence Yun, chief economist for the NAR. “With job growth holding steady and credit conditions becoming somewhat less stringent than in past years, the willingness and opportunity to buy is becoming more feasible for many single women.” Single women are buying homes at twice the rate of single men, despite the fact that women have much lower average incomes than men. Like men, three-quarters of the properties the women buy are single-family, detached homes.

SOURCE: National Assosication of Realtors

SOURCE: Toledo Blade

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HOUSINGNEWS REPORT Housing News Report is a monthly publication dedicated to helping investors succeed by providing them with timely and relevant information about the residential real estate market.

Executive Editor Daren Blomquist

Managing Editor Octavio Nuiry

Writers Daren Blomquist, Octavio Nuiry

Art Direction Anderson Jackson, Eunice Seo

Contact Us Phone: 800.306.9886 Email: octavio.nuiry@attomdata.com Mail: Housing News Report 1 Venture suite 300 Irvine, CA 92618

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