A conversation with Lou Spampinato, CEO of Real Value
When you’ve been in the real estate industry for nearly three decades, you begin to see patterns and trends. And you get to know what’s wrong – and how to make it right – in an industry you’ve called home for most of your career.
That’s Lou Spampinato. A broker and appraiser in Irvine, California, he has worked in residential sales and marketing valuation for a long time. He’s an expert witness in court. And five years ago, he stepped into the asset management world.
“As the landscape changed in the industry, and everything came crashing down, I took a job as director of valuations for a large asset management company. My job was to figure out the value of the real estate of all the loans that they were buying and selling at that company,” he says.
A year ago July 1st, Lou stepped out on his own and started Real Value, a company that provides valuation services for the entire asset management industry.
True value is an elusive concept in today’s housing industry. “We got really frustrated going by the data sources being offered and decided it was time to plug all of the holes in valuations they were leaving,” says Lou.
“There are great, big gaping holes in the process of doing valuations. There’s an old saying, the devil you know is better than the devil you don’t. We know this industry is misguided in the tools and processes we have to determine housing value and yet we keep using them, relying on them, despite our frustration. Perhaps a friendlier devil is around the corner, if we’ll just take a chance on a new way of doing things.”
Lou’s team uses three or four existing products and combines them for a more accurate assessment of the best value, right now. “We looked at the strengths and weaknesses of each product offered in the industry and use the best parts of each,” says Lou. In particular, he mentions BPOs as being particularly inaccurate.
“In 2008 they were very reliable but over the last several years, it’s become its own beast,” he says. “BPOs are not being done well. Part of the problem is that the agents who are doing them, aren’t compensated well enough for their time and effort. Plus, the quality of our comps today is really poor – you cannot compare a foreclosure with a home down the street with all the bells and whistles. So much of the time, we’re comparing apples and oranges.”
Lou believes in using the expertise of today’s real estate agents but “let’s use them for what they’re good at. They know the local market. Let’s send them to the house, take pictures of the house, tell us about the street, the local neighborhood, and stop there. Let’s not have the pitcher play first base.”
Over the years, the assessment that Location, Location, Location meant everything in residential real estate has evolved to three different L’s, says Lou: Legislation, Lendability, Liquidity.
- Legislation changes loosened up the market, says Lou. “Now we’re seeing the reverse: a very tight money market where well-qualified buyers in some cases can’t get loans.”
- Lendability refers to the disconnect between people who are qualified to receive loans and the barriers to actually getting them any money at all. Our market is so fear-based today that banks are holding tight to the purse strings, afraid to lend anyone, anything – even the most qualified.
- With such strict lending, “there’s less liquidity, which directly affects the demand side of the market.” How can someone sell a property when they can’t move on up?
Lou is energized by the idea of Woodward Asset Capital’s software solutions, www.OfferSubmission.com and www.VerifiedShortSale.com.
“They’re standardizing how an offer gets submitted,” he says. “What their platform does, among other things, is it makes it so all offers are submitted directly to the bank so the agent cannot control or buffer or hold some back in order to get his own offer accepted – for a friend, in-house guy or brother-in-law.”
“The idea of information and offers being all automated and foolproof in the industry is huge because of human flaws,” says Lou. “What is really important about what WAC does is that they protect against what we experienced in asset management, we would not entertain any offer until we verified that the property was properly marketed for one week to ensure proper market exposure.”
“We must protect against the uncertainty of offers coming in prior to proper exposure to the market, and agents secretly being part of the buyer pool,” he says. “The idea that WAC platforms keep everything at arm’s length fulfills an enormous essential need. I cannot begin to tell you how much the market benefits from being able to take an objective look at what’s going on.”
Ultimately, a good sale comes down to two important factors: proper exposure and pricing.
And the only way to ensure those two factors is by having unfiltered information to confirm both, which is what the WAC systems provide.