by Ryan Tate, Centurisk Director, U.S. East
At Centurisk, we deal with customers of all sizes. From small cities, school districts, and colleges to large cities, major universities, risk pools, and even states. For the most part, the general needs are the same. Each customer wants detailed property data, accurate valuations and, of course, to work with staff that is both professional and knowledgeable.
But while these organizations may want the same results, they each often task their appraisal partners to meet these needs in different ways. Which is why we work with them where they stand, creating a customized appraisal solution designed to keep their values current based on their unique constraints. For each client, we may use one or more of the following appraisal techniques:
The Multi-Phase Rolling Cycle
This is where we divide our customer’s Statement of Values into multiple phases for appraisal. Each phase that isn’t appraised annually is then trended to keep the values up to date with the properties that are appraised on-site. We base this trending on current regional market conditions (materials, labor, and supply chain conditions factor into this) and we update those factors annually.
Annual Value Trending
For projects that aren’t completed over multiple phases or where the organization hasn’t had appraisals at all, the customer may choose to have their current SOV trended based on current market trends. While not as accurate as on-site appraisals, trending is an adequate method to bridge the gap between valuations.
Generally, we suggest the value trending method only if a customer has had appraisals completed in the last one to five years. Beyond five years, an organization’s property schedule has likely changed a lot; property condition, upgrades, property sales, new property purchases, and more, require careful on-site documentation, so the utility and accuracy of trending really wanes beyond that time.
Trending is also not ideal for clients lacking confidence in the accuracy of their current data or replacement cost values. Trending data that already isn’t accurate won’t get a client what they need. It’s a simple case of the old saying: “Garbage in = Garbage out.”
Single Inflationary Factor
A single inflationary factor is a method that basically says: “Let’s apply X% to our values across the board.”
Customers might choose to do this when there isn’t money for appraisals in the budget or when inflation is so high, they’re willing to test their appetite for risk. In this case, they might only apply a fraction of that inflationary factor percentage, because applying the correct factor would trigger large increases to their premiums. The downside is that then, when they have a loss, they likely will be underinsured.
And much like trending inaccurate values, applying a single factor to all unverified values won’t correct a data inaccuracy problem.
Desktop Appraisals
Desktop appraisals are a cost-effective way for customers to complete valuations without an onsite inspection. With this method, our client provides us with their Statement of Values, and we leverage the details they provide to determine their latest property valuations. This method can work appropriately if a customer has confidence in their data. But if there are already gaps in the data, those gaps will likely remain after a desktop appraisal is completed. As with annual trending, using inaccurate data for a desktop appraisal will not magically create more accurate values.
Virtual Valuations
Virtual Valuations are a hybrid approach between an onsite inspection and a desktop appraisal. As with desktop appraisals, customers provide us with their SOV, which we use as a starting point.But unlike a desktop appraisal, our appraisal staff will also identify gaps in the data and work to fill in those gaps through several off-site methods. These include accessing Google Earth to collect information like the latitude and longitude, exterior square footage, proximity to fire hydrants or a fire station, and other relevant details. We might search online for images or construction history of the structure. And finally, we might reach out to appointed contacts to ask any remaining questions.
This technique helps correct some missing and flawed data, but it isn’t a substitution for an on-site appraisal, where our appraiser can catch details in-person and verify whether all data points are true.
Defining the Right Appraisal Project for You
While various appraisal methods offer flexibility and cost-effectiveness, the technique you ultimately choose should align with the accuracy of your available data and your organization’s specific needs. By keeping informed about the data you collect, and choosing the right appraisal partner, you can help ensure your property valuations remain as precise and relevant as possible, from now until your next appraisal project.
About the Author
Ryan Tate resides in Pittsburgh, PA with his wife Kelly and two children, Raegan and Maddix. When he’s not acting as regional director for Centurisk, he spends most of his free time as a spectator at his kid’s volleyball, basketball, football, and baseball games.