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   ARTICLE   |   From Scotsman Guide Commercial Edition   |   November 2006

Location, Location, Location, .Com

Online maps and photographs can give you the edge in quick property assessment

Location, Location, Location, .Com

The view from the ridge line is impressive. You look down the slope at the home lots below and the ocean view beyond. You think to yourself, “I see why these lots will sell for $1 million each and why engineering will be so expensive. And I know just the lender that would love this development project.” 

Best Practices: Government Web Sites

Numerous county-assessor offices marry geographic-imaging and property information, including:

  • Escambia County Property Appraiser (Pensacola, Fla.): www.escpa.org
    Even relatively small municipalities such as this one have developed sophisticated services
  • Los Angeles County Office of the Assessor: assessormap.co.la.ca.us
    The site includes an option to display nearby recent sales with instant comps
  • Maricopa County Assessor GIS (Phoenix): www.maricopa.gov/Assessor/GIS/map.html
    Includes wealth of data, though requires software download

Then you look up from the digitally rendered hills on your computer screen and reach for the phone.

Welcome to the virtual planet. It’s changing the way brokers conduct property assessments and close loans.

In the past few years, Web-based software applications based on mapping and satellite photography have exploded as some of the most-buzzed-about innovations in information technology. From simple interactive maps and directions to full-blown market and demographic studies, these applications provide insights to capture businesses and consumers.

The start of this revolution in location-based computing arrived with the ingenious idea of combining three different technologies: databases containing the geographical location of addresses; image data such as maps and satellite photos; and search technology. This is what allows you to simply type in a street address and zoom in on an aerial photograph of that site.

The heaviest hitters in information technology are competing with typical ferocity to create powerful, compelling platforms based on geographical information systems (GIS). Cities and counties are getting into the game, too, granting access to huge archives of public-property data with the click of a mouse. What was once the exclusive domain of CIA analysts and computer-science professors has become fast, easy to use and — thanks to the Web — often free.

So what? Seeing what your house looks like from space is fun, and getting driving directions to that new Thai restaurant is great. But is all this flashy new technology useful at the office? Can you harness these tools to understand deal properties better, anticipate potential lender concerns, add value and get more deals done?


Eyes in the sky

In the fast-paced world of real estate finance, you need to understand the nature of the property at hand quickly to understand a deal’s viability.

For brokers and lenders, high-resolution satellite photographs are a great resource for looking at subject real estate and answering top-level questions: Where is it? What is it? What’s nearby? Does the proposed transaction make sense?

Essentially, “location, location, location” meets “a picture is worth a thousand words.”

Evidence from a satellite or aerial photo alone will not allow you or a lender to say “yes” or “no” to a deal. Many pieces of the puzzle must be assembled before making a final decision.

These images, however, can often confirm or disprove key, value-driving aspects of the subject property. Thus, they can have a big impact on the deal.

Say you give a lender a proposal from a client who seeks an astronomical condominium-development loan. The borrower thinks the price is justified by the property’s spectacular beachfront location.

Shortly after you send the proposal, the lender informs you that the site is actually one block away from the beach. Big difference. Now the deal is in jeopardy, and your credibility is dinged.

When the specific location of a property is critical to its value, it’s worthwhile to confirm that feature before launching forward on the deal.

Satellite photos can reveal meaningful facts about a subject property’s neighborhood, as well. Developers will usually tout positive aspects of their site, such as a property’s proximity to similar projects, shopping, parks, transportation hubs and so on. Clearly, verifying these claims is useful.

Equally important is finding out what you have not been told — namely, factors that could negatively impact the deal. Is the subject property adjacent to a power station or an unsightly, potentially hazardous industrial facility? Again, spending just a few minutes reviewing an accessible site image can inform you about the direction a deal should take.


But why stop with photo images? With GIS-based programs, you can also find other relevant information that pertains to physical locations. Home sales, demographics, zoning, traffic and crime statistics can all be integrated into these systems and displayed on a virtual atlas.

When you consider all the things businesses and consumers might want to know about location, the list is endless. Because of this, the Web has seen a blossoming of applications and services designed to merge and display all kinds of meaningful information. These data blends are called mash-ups.

Several mash-ups are valuable for brokers, lenders and developers. One allows users to take the property-sales data from a county archive and display the most recent transaction price for each address on an aerial image of the neighborhood.

Most of these sites take the task one step further by applying algorithms that use the available data to predict what every home in an area is worth.

But be careful: Some of these Web sites can be inaccurate, unless they are providing estimates of large subdivisions with cookie-cutter homes. Others use their own valuation systems. They can nevertheless be useful to paint a picture of general trends for a neighborhood.

Let’s say you have two clients, each seeking a loan to develop a condominium complex where completed units are projected to sell for $500,000 each. You go to a few of these home-value estimation sites and enter the general location of each development site. Around one, you see estimated values of existing condos between $350,000 and $450,000. Around the other site, the figures range from $150,000 to $250,000. Which project is more likely to attract funding?

The answer is clear. You’ve gained critical information with a five-minute search, at zero cost.

In certain urban environments, it can be helpful to get more than just the overhead view. Some Web sites offer “bird’s-eye view” aerial photographs, as well, taken at roughly a 45-degree angle to the ground. These photos show building facades and streetscapes in addition to rooftops. They add a vertical dimension to the analysis of properties and neighborhoods.

In some cases, such as when hillside sites offer great views, a property’s terrain is also critical to its value. One mash-up allows users to see how properties are positioned in three-dimensional terrain by adding topographical data to otherwise-flat geographical images. Then, the software warps the photos to create the illusion of hills and valleys. You can navigate the on-screen viewpoint to “see” the view for yourself.

For a condominium project in coastal Florida, this application won’t add much insight. But for a resort project in Colorado, it could reveal quite a bit.

Another step is to create your own mash-ups. Applications to import data into GIS platforms generally cost between $20 to $400 and are fairly easy to use. They give you the power to tailor the displays to your needs. When a client sends you a list of comparable sales, you can import them and display markers for each address to see if those comps are suitable.

Viewing the subject site and comps on the same map can clarify whether the properties are on the wrong side of the tracks, literally and figuratively.

Community services

Additional information for analyzing property locations can be found by visiting the online archives of many cities and counties. A growing number of municipalities have made some or all of their public-property data available online (see sidebar).

Simply entering the name of the municipality and “GIS” into a Web browser will often reveal sites that are treasure troves of property-related data, all accessible by clicking on an interactive map. These maps almost always display parcel boundaries, a critical piece of information and a great starting point for property research.

More-sophisticated systems have options to display a lot of data, including ownership, tax status, zoning, the size and age of improvements and transaction history. That last item especially can be meaningful for valuation purposes. Lenders may have a hard time approving a $5 million loan for a property that sold a few months before for $3 million. At the least, your client should expect a battery of questions.

Looks can be deceiving

Of course, as useful as many of the mapping applications are, they also have limitations.

The first problem is old images. Even the most-comprehensive image databases contain photos taken several months ago, which is an eon in high-growth parts of the country. Look at a shot of the region north of Phoenix, for example and you’ll see vast, empty desert. In fact, the entire area is now a continuous sprawl of residential subdivisions.

Second, the highest-quality pictures are taken over urban areas, so if your project happens to be a commercial ranch in Montana, you may not find clear — or any — satellite photos.

Finally, you can’t rely on simply typing an address into your browser and assuming you will get accurate results. Roads change and street numbers aren’t always perfectly sequential. You’d better be sure you’re looking at the right property before drawing any conclusions.

•  •  •

All of these resources are excellent tools to learn about properties, neighborhoods and real estate markets quickly. As a mortgage professional seeking to add value to clients and lenders, you can find a valuable investment in familiarizing yourself with relevant Web sites and applications.

You can quickly pull together critical information about properties and become more efficient in gauging the viability and risk profile of each proposal. You can provide thoughtful guidance to your clients about how to structure their transactions and prepare thorough information packages for lenders.

Because lenders will use the same information in their underwriting, your early research will help you head off potential problems and keep deals on a positive track. Lenders will appreciate your expertise and proactive approach to making deals happen.


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