Article originally published at GlobeSt.com
Equity Valuation Partners (EVP) this week announced a new DIY valuation platform for lenders, called Inhabet, that the company says will allow them to “generate their own compliant estimate of value for residential and commercial real estate properties.”
Part of the announcement was the intent “to transform appraisals for appraisers, banks, credit unions and portfolio lenders with a product that did not require an appraiser’s inspection,” EVP CEO Drew Watson said in prepared remarks.
The twist rests on using “the internal evaluation bank regulatory carveout” that allows substitution of an estimated value rather than a traditional appraisal.
This may be more limited than it immediately sounds. An “Interagency Advisory on Use of Evaluations in Real Estate-Related Financial Transactions” lists three types of transactions that can use an evaluation without an appraisal:
- “Transactions where the ‘transaction value’ (generally the loan amount) is $250,000 or less,” although there can be situations where a transaction value is low enough but other factors, like a sufficiently high interest rate, can still require an appraisal.
- “Certain renewals, refinances, or other transactions involving existing extensions of credit.”
- “Real estate-secured business loans with a transaction value of $1,000,000 or less and when the sale of, or rental income derived from, real estate is not the primary source of repayment for the loan.”
The advisory also notes that a financial institution might decide an appraisal would be necessary or prudent even if apparently not required under the exception.
Regarding the qualifications for someone to prepare an evaluation, the advisory says this: “An evaluation is not required to be completed by a state-licensed or state-certified appraiser or to comply with USPAP. The evaluation preparer should, however, be knowledgeable, competent, and independent of the transaction and the loan production function of the institution. valuations may be completed by a bank employee or by a third party. In smaller communities, bankers and third-party real estate professionals have access to local market information and may be qualified to prepare evaluations for an institution.”
“The Inhabet platform is self-contained and includes the comparable sale data, app-based inspection platform and valuation platform,” the EVP release states. “No third-party login is required for Inhabet, and there is no software to install. Instead, users with basic knowledge of real estate transactions are guided through a multi-step process that leverages big data to simulate the appraisal process. After gathering data about the property, such as its age, square footage, interior condition and surrounding neighborhood characteristics, Inhabet helps lenders select and assess comparable properties.”
A lender can also pass the evaluation task over to EVP to complete.
The company says that while the system is primarily for residential valuations, it allows banks to standardize CRE data for easier analysis. EVP also claims that while there are other providers of valuation data, it is the only one that enables lenders to prepare their own evaluation reports.