How to streamline your real estate valuation process to reduce friction between your teams

For many commercial real estate funds, there’s often an opportunity to strengthen collaboration between the asset management and appraisal teams – to produce gold standard valuations.

A gold standard valuation is one that produces a higher quality result in less time while mitigating financial risk, enhancing scalability and fortifying investor confidence. All are valuable reasons for aiming to optimize asset manager and appraiser collaboration.

Let’s look at a conventional valuation workflow and then how to upgrade this using four strategies.

The traditional approach for the real estate valuation process is generally informal, lacking clearly documented expectations and an established schedule featuring regular communication and feedback opportunities. Unfortunately, this can lead to wasted time, missed deadlines and arguable valuations. It can also generate stress and conflict between asset managers and appraisers, which means performance, and work quality, suffers.

• Asset managers, who have a deep understanding of their individual properties, aim to maximize the value of their assets and their investment returns.

• Appraisers, who have a deep understanding of the market, are charged with determining the fair market value of an asset, based on their independent and expert view.

• Appraisers are responsible for multiple assignments and asset managers for multiple properties – and both parties must deal with tight timelines.

• Both parties must also navigate through an unstructured process lacking a straightforward schedule.

• When frequently interrupted to respond to questions or provide additional information, the valuation process can distract asset managers from other significant responsibilities.

To get the information they need to complete an accurate valuation, appraisers often must coordinate multiple information sources and points of contact.

Both parties require transparency – the ability to easily share information and evidence to justify an opinion.

But it is possible for the real estate appraisal process to address the needs and challenges of both asset manager and appraiser. The following four strategies can eliminate or reduce frictions and help to deliver timely, high-quality property valuations that win stakeholder confidence.

1. Standardize the valuation process

Using a streamlined, standardized valuation workflow process can reduce ambiguity and guesswork, keep work proceeding smoothly, elevate productivity, and improve the quality ­of the end product and the morale of those involved. To do so, this process (see figure 2) should include the following key components.

• Oversight by senior management

• Compliance with governing regulations

• Clear, documented expectations

• Defined responsibilities for tasks and decisions

• A detailed schedule of key activities (including requests, deliveries, questions and feedback), start dates and projected completion dates, including planned buffers to optimize the timeline

When everyone involved can align their schedules with a clear process, this helps to ensure understanding of common objectives and to promote harmonious collaboration.

Aligning your schedule to a standard and consistent workflow provides the foundation for a successful valuation process.

2. Build collaboration into the workflow

Problems during the valuation process typically arise from poor communication. Establishing frequent communication and feedback opportunities can avert many issues.

Start by kicking off the engagement with a live discussion between the asset manager and appraiser. This helps to establish a friendly, positive tone and enables both parties to get on the same page. This is an opportunity to share details about the latest LOIs or leases and get context that’s not always apparent when reviewing rent rolls or financial statements.

Maintaining regular communication helps each party gain insight into the other’s perspective and to resolve issues quickly when they arise. The asset manager and other stakeholders, such as the fund manager, should have an opportunity to review the appraisal and provide comments and feedback. And the appraiser should have an opportunity to consider this input and determine whether it impacts their opinion. True collaboration enables everyone involved to feel acknowledged and heard.

3. Simplify with technology

Can collaboration be automated by technology? Yes, digital collaboration tools can remove many obstacles to efficient workflow and make the process simpler. There are end-to-end valuation management platforms made especially for this exact process. They enable management and collaboration throughout the entire lifecycle of the valuation process, with web-based workflow, analytics and document management. In general, there is a growing range of tools that can improve engagement and performance. Groups can use these to communicate, coordinate, share and solve problems.

• Document sharing tools, like the unified platform provided by cloud computing, enables viewing, distributing, modifying and uploading files among internal and external parties regardless of their location

• Work coordination tools facilitate shared activities, schedules and deliverables. These include portals, calendars and status updates

• Communication and conferencing tools facilitate the exchange of messages among individuals and teams through email, voice mail, video conferencing, instant messaging and more

Digitizing workflow also augments transparency and accountability. By providing a clear view of who is in charge of what and by when, identifying who is responsible for each process is simple. This promotes a higher level of accountability on both sides. It also provides an audit trail for solid governance.

4. Involve an independent third-party

Clear policies and procedures, a transparent, independent valuation process and in-depth expertise are increasingly high priorities for funds and investors alike.

There is growing pressure from regulators and investors to enhance governance over the valuation process. Many find that employing a third party that offers valuation as a managed service is another way to elevate confidence. An independent valuation provides a neutral third party’s opinion along with accuracy and fairness.

A capable external valuation provider that has industry experts with extensive operating expertise and transaction knowledge in diverse markets, can offer significant added value. Moreover, some managed service providers also utilize a standardized valuation process supported by collaboration technology to ensure efficiency and effectiveness.

Conclusion

Strengthening collaboration between your asset management and appraisal teams can produce gold-standard valuations. By standardizing your process, building collaboration into the workflow, simplifying with technology, and involving a third party, commercial real estate funds can deliver valuations that are higher quality, take less time, mitigate financial risk, enhance scalability, and boost investor confidence.

Interested in exploring ways to improve your valuation process? Talk to a solutions expert