Real Estate Disruptors
Let's Disrupt Real Estate. What is Real Estate? Not all markets are created equal. Gulf Coast to Space Coast talks to the leaders in the industry throughout Florida just as if we were sitting across a dinner table. OH! and our hosts and guests change with every episode just to keep you on your toes. We cover the Gulf Coast of Florida to the Atlantic Ocean, think Tampa, Clearwater, St. Petersburg, Orlando, Daytona Beach, Space Coast, Miami. We talk about investing, marketing, staging, and many many more related topics. Start listening to the Real Estate Disruptors and see what Real Estates Past, Present, and Future will bring?
Real Estate Disruptors
Appraisal Modernization, Market Trends, and Overcoming Challenges
How is the real estate industry being revolutionized by appraisal modernization? Meet John Barcelo, a pioneering force in real estate valuation, sharing his journey from the foreclosure sales trenches of Tampa in the 1980s to co-founding a groundbreaking national appraisal firm. John unveils how technological advancements are reshaping appraisals, with the potential to deliver valuations within 24 hours—a norm in places like Australia and New Zealand. Get ready to expand your understanding of Fannie Mae and Freddie Mac's innovative valuation processes that are set to transform the industry.
Communication is key, especially when navigating complex real estate trends. We explore the dynamic interaction between real estate agents and appraisers, emphasizing the importance of speaking the appraisers' language for seamless transactions. From understanding the nuances of local market trends to the rise in mortgage applications due to fluctuating interest rates, we unpack the current market conditions. Discover how real estate agents play a vital role in the appraisal process by returning calls and sharing on-the-ground insights.
Natural disasters like Hurricane Helene that just passed throught the Tampa Bay area and throughout the south east, pose unique challenges to the real estate market, and in this episode, we tackle the issues of affordability and growth stagnation. John shares insights on the stigma attached to properties affected by storms and how remediation can shift perceptions over time. We also highlight the powerful partnerships that can be forged in the industry, harkening back to John's collaboration with Charles Rutenberg. Tune in for a comprehensive discussion on the importance of mutual support and collaboration for achieving success in the ever-evolving real estate landscape.
Hey, good morning everybody. It is Mike and Amir with you on this week's edition of the Charles Ruttenberg Reality Podcast, or better known as Golf Coast to Space Coast. That's right, Welcome. What's going on, Amir?
Speaker 2:You know, I just sat in this awesome class where John Barcelo joined us and gave the, like you said, one of the best appraisal classes I've ever been in.
Speaker 1:I told you it would be that good. I really tried to get here today. I was actually out buying storm hurricane relief supplies and I got a little jammed up. But we do want to introduce our special guest today, john. Welcome to the show.
Speaker 3:Thank you, gentlemen, I appreciate it and thanks so much for the kind words.
Speaker 1:Absolutely. You've earned every bit of them. I can tell you, john, I've been doing this a long time and, like I said, I learned more from your appraisal class about a year and a half two years ago, than I ever had in the appraisal business. John, how'd you get to where you are? What's your background in this little?
Speaker 3:arena. Lots of hard work and again, thanks so much for that. I am not an appraiser, I'm actually a salesperson by trade. But lucky enough, I was born and raised here in the Tampa area and my first father-in-law and I've only had two. My first father-in-law founded a little company called Mortgage Contracting Services and in that arena I was doing foreclosure sales for mortgage companies literally houses that have gone into an REO status.
Speaker 1:Back in 9, 10?
Speaker 3:It was after the 79 falling, so this is actually in 1985.
Speaker 1:John, you're not that old, I can tell you're not that old.
Speaker 3:I'm actually 56 years old, thank you very much. Graduated from Plant High School in 1986. So we'll make sure we get that plug in there too.
Speaker 1:All right, I love it.
Speaker 3:That's when I started valuing houses was literally while I was in high school that that company was founded and I started inspecting houses and doing foreclosure inspections and determining the valuation of the disposition of the real estate owned assets.
Speaker 3:So that is where I really broke, you know, broke my teeth in learning valuing properties and as a result of that background, I never obtained my appraisal license.
Speaker 3:I just really leveraged that knowledge into building businesses. So fast forward to about 2013, and I, with a group of four other appraisers, we formed a national staff appraisal firm and they don't carry sticks, not those kind of staffs, but employee appraisers, W-2 employees, not contractors which was the complete opposite of what everyone in America was doing from the appraisal standpoint. But it was an extremely, extremely wonderful venture because we grew from a little over $7 million in revenue our first year to just under $20 million in revenue in five years nationally, and at that time we reached a point where we knew we couldn't continue to grow just because of the dynamics of what was going on in the marketplace and we're going to talk a lot about that today, I know right. So we joined a group called Option, and Option is a global valuation firm based out of Australia, and we found a very like mindset with their ownership group in that in Australia, in New Zealand, appraisals are delivered on average within 24 hours of the time that the order is placed.
Speaker 2:That's crazy.
Speaker 3:Yeah, how do we get that here? It boggled our mind the first time. We saw it. Right, we were the same way. It's like disbelief. There's no way this could be happening. Well, guess what? Fast forward, what? Three years we've been with them and we are literally on the brink of being able to do the exact same thing.
Speaker 3:Technology is what allows this to come into place, and that's a lot of the class that we touched with the agents earlier. The way we collect inspection data today, the way we're able to analyze comparable sale data it's night and day to what it was in the 80s or 90s or even in the early 2000s. It's completely different. There's multiple companies working on the appraisal modernization platforms and all the things that are changing, and I think probably the biggest impact that we're going to see isn't even here yet, because the forms that all of us have been reading and that I'm teaching your agents to decipher, they're all going away. That's right, they're all going away. And with UAD, we're going to have a completely different valuation process that I'm going to get to come out here and teach all you guys again.
Speaker 2:So I'm very much looking forward to it. Good stuff. What do you think the timeline on that's looking like?
Speaker 3:Sooner rather than later. I think that it's going into testing in 2025,. Without a doubt and this is right on the Fannie Mae Freddie Mac website, they talk a lot about appraisal modernization. This is one of their key initiatives is to speed up this process.
Speaker 2:And this really isn't new. I mean it's new to America, but they've been doing this in Australia. You said for a number of years.
Speaker 3:Option employs over 800, we call them valuers in Australia, but over 800 appraisers in the country of Australia that have been doing 24-hour delivery since like 2017, 2018, they rolled this out Wow. The mortgage industry in those countries works completely differently, but the valuation process at its core is the same. You're selecting comparables, you're making adjustments. At its core, it's exactly the same. We have different geographies and topographies and those things to deal with.
Speaker 3:But, at the end of the day, it's collateral risk. Is the house worth it or not? Is the credit buyer worth it or not? And that's what we're trying to get to as much uniformity in that as we possibly can have?
Speaker 1:Do you think it's driving the cost down per appraisal?
Speaker 3:That's the goal. The goal is to make it faster and less expensive, to use the correct adjectives Less expensive and faster, and just as good, if not better, than the prior process. Is that doable? Um, I don't know. Probably not.
Speaker 2:I wouldn't think you know, when you have to leverage the technology, you got to pay the developers. You got to, you know, do all this other stuff, you know that's, that's, I think, the values. I mean clearly the value is there, but can you make it cheaper? Probably not. I think it's the industry itself.
Speaker 3:It's going to take time.
Speaker 1:Yeah, it will.
Speaker 3:It will over a longer scope, maybe over a 10-year period. I think we'd probably see. But the immediate think about it. The appraisers, the lenders, everyone has to re-infrastructure themselves for what's coming, relearn all this, new processes, new procedures and underwriting and quality control and pre-close, post-close validation. It impacts all these areas.
Speaker 1:So it's not something that's going to happen overnight. I have anxiety just listening to all of that right now. I'm sorry, me too.
Speaker 3:That's why I like sales.
Speaker 1:Yeah, exactly Me too. Oh, so there's a lot going on. Let me ask you something I know that we have had is this mechanism or this procedure technique you guys are using is it going to help us with? I hear we have a severe shortage of the old-fashioned appraisers, that it's difficult now for a new appraiser to get certified under the old system.
Speaker 3:Yeah, so that has been a major hindrance to our profession for a number of years. And, as we talked about briefly, both of my children are appraisers, my daughter's certified. My son will be certified very, very shortly and it took Alexis seven years from start to finish to get to her certification. Now she did give me my grandson in between. That time right finish to get to her certification. Now she did. She did give me my grandson in between that time right.
Speaker 3:But she had to graduate college. She had to do two years of training, you know multiple hoops to drop through, 1500 hours of tenured supervised work that had to be signed off by a certified appraiser before she could even sit for the exam. So if she didn't have all those life things in the way two-year process start to finish to become an appraiser.
Speaker 1:Two years, two years and I think you can get a real estate license in about 24 hours. I mean literally six.
Speaker 3:Close, yeah, I mean you know better than I do and I'll bite my tongue on that one. But yeah, and that's, listen, brass tacks. That's a lot of the consternation I guess would be a good word to use sometimes is that the appraiser is spending thousands and thousands and thousands of hours of training before they're allowed to even sign a report. Even sign a report, and then the rebuttal or they're correcting you know, hierarchy is someone that took a 60 hour class and has been working for four weeks in the real estate business, right. So I think if we all just kind of understand those dynamics and where everybody kind of sits in the transaction, then it allows us all to maybe massage that a little better maybe handle that situation a little better.
Speaker 2:Well, like I heard you say in the class today, you know realtors and appraisers and lenders. We all need each other, that's right. And the appraisers more or less look to the realtor to validate what what they're doing. You know, because they do know what they're doing. Obviously they've spent thousands of hours there, but sometimes they just you know, when that agent, that listing agent, comes up and says, hey, these are the comps I've used. Uh, take them, don't take them, whatever you want to do, but it just adds a little bit more validation to hey, this is the number that they originally came up with. And I think that's important.
Speaker 1:I do, I do too and and I literally was telling you guys right before we started the show is, last phone call I took from an agent was low appraisal. Well, we're starting to see more of those. I suspect we will see more and we've seen them in markets and different things in the appraisers. I'm sorry, the agent's thought process was a little scary, but I can see where they would have gotten. There was, I took the two comps and I divided it by two and it did not come out to the square foot price. And I whoa, there's a lot more going on than that.
Speaker 1:And I said by the way, they're just finishing up an appraisal class, why aren't you in there? She said well, I just got the bad news that the appraisal came back in. I said well, you might want to be out in front of it, but we'll talk about that in a little bit, before the show's over. We want to talk about how you would coach an agent to hey, we got a bad appraisal. What do we do here? Or I think what you're going to tell us, if memory serves me right, is what you do before you get the bad appraisal. What do you want from?
Speaker 3:the agent yeah, that you know I believe in any anything in life, right. The more proactive you can be, the better you're going to be able to control the result, right. So, understanding when you have a tricky transaction, right. When you have a tricky property, when you have a complex property, being aware of that and understanding that that's going to maybe pose some complexities that the normal cookie cutter house may not pose, you need to position for that, you need to do the research and make sure that it's going to take extra time. There's just no way around it.
Speaker 3:If you have a waterfront property on acreage with dock and davit and lifts and a detached garage and we have to account for all those items and the research is going to take a long time to get to the end of all those items, matching them up with all the other sales. But that's literally the process that each of us have to go through. So a large part of the training is communicating with the appraiser in the language that the appraiser is used, of communicating in, and that's why we talk a lot about guidelines and bracketing and terms like that, because that's what the appraiser has to do and sometimes on the real estate side we don't know that.
Speaker 2:We don't talk that way, and so that's what I found very interesting about the presentation I went through is learn to talk like an appraiser. Get on their playing field and you'll do so much better.
Speaker 1:Open up that communication speak. You know the same thing we talk about. When you go meet a buyer or seller, first thing you need to know is how do you like to communicate? Are you a texter? Are you a phone call? Are you an emailer? They speak a different vernacular altogether. I love my appraisers but you guys, most of them, are bean counters and you've got to talk in bean counter talk, not sales talk. Sales talk is like, hey, let's go grab a burger at Chili's and we'll talk about that. Bean counters. Don't do that.
Speaker 1:I know I had an appraiser in one of my companies and we had an appraisal department and literally his name was Bob and Bob walked around all day long with his head buried down into an open binder. All day long he would walk in everybody's office and ask questions. I remember when I first started I was in the commercial side and I talked to this experienced commercial agent that I knew and I said these appraisers call me all the time. I got so many calls, do I really need to call him back? And he grabbed me, literally, put his hands on me. He goes. You call them back every single time. They call you and you give them the information. I was doing a lot of leases that's not reported deals transactions they needed to know what was going on. They needed my information and I can tell you. By forming that relationship with them, it certainly didn't hurt anything. Now an appraiser is never going to because they, like you, give you a better appraisal than not. So agents, if an appraiser ever calls you, call them back.
Speaker 3:Please, please, please. What you guys are saying is 1,000% correct. One the appraiser has to verify every comparable sale that they put in a report. And verify doesn't mean that they can just look at it in MLS and think it exists. If they can't see the closing sheet, they're going to call an agent. If they can't determine what the financial concessions were, if there were any kind of thing where the recorded value is different than what's reported in MLS, we have to call and physically verify all that information. So, please, please, please, yes, answer the phone. That's why we're calling. And then the other thing that Am so please, please, please, yes, answer the phone. That's why we're calling.
Speaker 3:And then the other thing that Amir alluded to agents interact with buyers and sellers a hundred times more often than appraisers. Do you understand buyer and seller motivations more often than not in that local market much better than the appraiser does? The appraiser may have appraised in your neighborhood five or 10 times because they have experience. You probably sold 50 houses in that area during that time. You have 10 times the knowledge of that particular marketplace. So you're not upstaging the appraiser. By sharing your information You're more validating to the appraiser that you understand that market and you know the intricacies of that market and you're going to try to assist them in seeing that I want to back up to something you said.
Speaker 1:It was perplexing to me was real estate agents are really supposed to answer their phone.
Speaker 2:I think we just started talking about that in the past couple of months you know, with these new changes in the real estate world.
Speaker 1:Wait a minute. There's been some changes and you're supposed to answer your phone and be aware of the changes. Crazy concepts going on here today, guys. So what's going on with the trending market? So I see stuff I just read. I get the daily whatever from Florida Realtors. It gives me five bullet points every day. It says price is still ticking up. I find real estate to be hyperlocal, I see, you know. So when I read national stuff that doesn't mean anything to Florida. And then when I particularly read Florida, sometimes maybe that doesn't mean anything to Clearwater I can tell you there's probably some homes out in some zip codes on the beaches right now that don't feel like their value is moving up. But do you find that we're still moving up in values in our marketplace? The Tampa Bay MSA.
Speaker 3:As a market as a whole? Yeah, no, I didn't think so. No, not as a whole. But I will clearly say that there are pockets that have increased and there are pockets that have decreased. So pick your pocket wisely, in my humble opinion. It's pretty stagnant. We're pretty much hovering right now and we all know how low the transactions have been and why we're stagnant. But the reduction in rates look, the last rate cut that had been baked in five months before.
Speaker 3:That's why we didn't see any drop from there. We all knew that. But mortgage applications are up. Our appraisal orders are up 25% since the day after the announcement. That's awesome. The general public reads the paper. The general public are not real estate professionals like we are. They read online articles and they're like, hey, the Fed cut, the rates are dropped. Well, we know what was going on with that already and in November they're going to drop them again. So look towards the end of October and, amazingly, the rates might start dropping in advance of that, right, what a surprise. So again, we have to be real estate professionals and more than just our area of expertise, sometimes to kind of plug all this stuff together.
Speaker 1:I know I joke a little bit, but is there? What you just said was really interesting. Appraisal orders are up. I can get national data on mortgage applications. Is that a national statistic that we can get, or is that an industry something?
Speaker 3:you guys have. No, I mean, that's my secret.
Speaker 1:Could you come on here every week and tell us where we're at with? That please, because I think that's you can say one thing about mortgage applications, but when you tell me that appraisal orders are up 25%, that's the deal's already gotten down to pretty much closing and that's a great sign they're ordering title and appraisal is a very good sign, right. Yeah, when they start spending money Exactly.
Speaker 3:That's exactly correct. So that's why we don't I don't, we in our appraisal business. Of course we track, you know, application volume up and down, but our volume is more what we're focused on, especially the full appraisals, the volume of full appraisals, because you know part of what's going on through modernization and what they're trying to prevent is what we had during 2019 and 2021, you know two to three week appraisals. The market never wants to see that happen again and if we get down to a 4.5% interest rate again, we could especially in our area, we could easily see that kind of volume happen again right, we talk about this all the time.
Speaker 1:When deals, you know it's like a bouncing ball. The ball goes up, the ball goes down. We had an excess sell of units in 20 and 21, and now we're feeling the pain from that. I mean, we're only speculating when we say this, but I suspect deals are going to start ticking up in 25. Is that your Absolutely?
Speaker 3:Positively, there's no doubt. As the interest rate goes down, more people will have better affordability. You know what happened and being a native to me, I'll admit it very bluntly Like we doubled in value in four years in this market. Yeah right, you can't double again. No-transcript. People put money into these houses when they bought it. They didn't buy it on credit, they bought it with cash.
Speaker 1:And that's a really good point, guys, when agents that did make it through 2008, 9, 10, that saw that you know that ugly market which, by the way, we've had a rough year or so, 18 months.
Speaker 1:It wasn't anything like what we saw in 9 and 10. Oh no, y'all don't think that's coming again, but you just said the value and appreciation we have. That's why this market isn't comparable to 2008, 9, and 10. Most of the people that have owned their real estate more than 24 months have equity in these units. So we're not going to see the big short sale market and we're not going to see a big foreclosure market. Amir and I did a presentation about a month ago and we showed that agents I don't know what they're getting text messages from wholesalers, whatever that is. I'm still not sure what a wholesaler is, but I hear that a lot saying foreclosures up. I want to buy foreclosures. Foreclosures are less than 1% right now. I'm going to focus on the 99% of the market. I don't know about you. I don't want to go after the 1%.
Speaker 2:Yeah, exactly, you know we we started to see. You know I we base some of our information off of the calls we get. You know, we at Charles Ruttenberg Realty, as I'm sure you know, we have about 10%, uh, 10% of the agents in Canela's, and in Tampa are our agents.
Speaker 2:So when we pick up the phone and we get the constant question over and over again and I probably had the same question about short sales, at least over a two-week period so I was like, am I missing something here? Are we going to start getting into some short sales? But then it just stopped Interesting.
Speaker 1:I suspected somebody trying to sell them some packet on how to learn the short sale expert. And, by the way, you don't ever want to be involved in short sales. Unless you, that's an ugly market to be in and I can tell you Painful process right there.
Speaker 3:I concur with you guys 100% that we're a little bit stagnant because affordability is hard. We all know what's going on. We can all see that in the market, the higher the price, a little bit more days on market. It just is what it is right now. Cost of entry is tough but as the cost of money reduces and as the younger generation gets more time on job and they make more money, those things are going to start coming together again, Come back together and they're going to start growing again. Real estate should only appreciate like 3% to 5% a year If it's appreciating faster than that you can't support it long term, right.
Speaker 1:If it keeps up with my inflation, I feel, okay, that's my hedge, right. That's how I'm hedging. I don't have gold, so I'm hedging with my homes, all right. So there's two points. I know Byron's given us the wrap-up over there. We're going to be done before we know it. Here We've got about five minutes. Let's talk about the elephant in the room. What?
Speaker 3:do you think this little storm that blew through here is going to do to our market? Wow, it's a tough, you know that's a tough one. We, our heart goes out to everyone and the impact you know, being a native, a lot of us just I think we got complacent. I agree, I think there's a lot of complacency. Storm, weary, right. I mean, we've been through so many. I remember 2004,. We survived four and six weeks like nothing, and every other weekend.
Speaker 3:We were right in downtown Clearwater and my house never got an inch of water or anywhere close. So I think a lot of us that have been here a while, I think that's part and we didn't put our cars away and we didn't take the boat out, and you know some of that and lift our furniture and lift our clothes down and yeah all kinds of things.
Speaker 3:So, look, yesterday I volunteered with the pro group, with the affiliate group and the realtors, and we went out and we volunteered and cleaned some houses with Brandy Gabbard and some other officials.
Speaker 3:We were in Riviera Estates, over on Sun Isle, and, look, every single house on that street is gutted and everyone in that neighborhood has to be gutted. So you know, from an appraisal standpoint it's almost like a sinkhole situation where you have this claim and then you have to remediate the claim. And once the claim is remediated, from an appraisal standpoint, what we're trying to do is only use those other remediated sales as comparables. And we do that as often as possible, understanding that in some circumstances we may not only we may have to use some that are not that type, but from the core that have been through that remediation process, we want to set a predominant value or a mid-range, you know, an average value, and from that we're going to look at the non-impacted homes to kind of determine what we think the adjustment would be between the two, right? So getting there is hard is is, is the?
Speaker 1:I know this is a hard question to answer and it probably didn't have a black or white answer. But once a home has flooded, the stigma that goes with that, that, the disclosure on that and uh, you know from what I see a home that gets three or four feet of water in it. You know that's, that's a disaster for the homeowner. It feet of water in it you know that's a disaster for the homeowner. It really is. Most of them don't have flood insurance either, but I find it to be remediated and be very clean. Cut to me. I can come back in and see drywall was taken out. You know, maybe some studs had to be replaced, flooring's been replaced, electrical has been replaced, maybe a couple ACs. I think my initial feeling is that can be made whole, absolutely.
Speaker 3:And just as good as new. I think if you did a study of sinkhole homes in Hernando County and Spring Hill, that's exactly what you would find out, because that's my experience and I've been doing it 31 years. Once they get remediated and they look, act, taste, feel just like everything else on the street, the buyer stigma goes away. Maybe the first one, maybe, you know. But once the market gets going again and market acceptance, that first one gets bought, that second one gets bought in that same range. That's it. There's no more stigma.
Speaker 1:Yeah, we're good. I actually had an agent that was an appraiser for me as well in Spring Hill a decade or so ago. He told me that they were actually given a point or two premium for repaired sinkholes versus one that had never had one. He said these are sitting ducks that haven't had one yet, the ones that have already been repaired and grouted, and everything. We're actually giving them a little love. There's a train of thought.
Speaker 3:Yeah, there it is Exactly giving them a little love.
Speaker 1:There's a train of thought yeah, there it is exactly Now. I don't know if we can say that with flood, because you know there could be another one right behind this one and you could get flooded again. If I'm going to get flooded again, though, I hope it happens before I remediate. Oh yeah. It makes the water flow through so much easier once the drywall is already out. I'm sorry.
Speaker 1:Listen, I think this is going to be a conversation, because I have four questions here and I didn't get to any of them. I think this is a conversation that we could certainly have again with some additional podcasts. I'm hoping that maybe we can get you to jump on our broker updates, maybe once a month or something, and share with the. We're doing some Zoom updates with our agents that have seemed to be pretty popular, because I would love for you to share that little inside industry stat. You have that about how many appraisals have been ordered. That is an awesome number to work with, guys. If you didn't pick up anything from this, 25% appraisal orders are up. That's strong. You're not going to know about it, though, if you don't get any appraisals ordered, so go talk to people that need to buy or sell. We're going to have to wrap this thing up, amir. Final thoughts.
Speaker 2:Yeah, hey, john, I really appreciate you stopping in today. I mean, your class, like I said in the beginning, was amazing and you know I hope that we'll be able to get you back. You know, we have one coming up the end of October where we go over at Pro. We have probably a good 50, 60 of our agents that come in in person and then probably another 200 on Zoom or whatnot. It'd be great to have you there if you have the time.
Speaker 1:That's a good point. We'd love to have you on our panel for that one, if you can do it. We're trying to nail him down here while we got him on air.
Speaker 3:That's right. He can't score him on us too bad.
Speaker 1:You got a final thought you want to close out with John.
Speaker 3:No, I listen, I appreciate the partnership. I've been working with Charles Ruttenberg here for darn near a decade through the affiliate program at Perot, so I just I appreciate y'all's partnership. You know we, from an appraisal standpoint, as a company, we have always thought about it just a little differently. Right, we've always wanted to be your partner. We don't want to be adversarial, we want to work together because at the end of the day it takes all of us right. It takes all of us to be successful and we know we can't have a successful firm long-term if we don't have successful relationship with the agents that are in the field making it happen every day. So we will continue to do that and I appreciate the invite, I appreciate the kind words and you can count on me being there. I love nothing better than the opportunity to give my humble opinion.
Speaker 1:I appreciate that, john, we do appreciate it so much, and you're right it does. You got to really be tired in with your industry partners to make this work. Single agents by yourself are on an island and that's not a good place to be. That's right. All right, we're going to go ahead and wrap.