zaio.com [photographing america]

Can you tell me about Zaio and what it is doing?

Zaio Corporation photographs entire cities, one building at a time from the street. These images are compiled into a proprietary database called GeoPic™.
In addition to the photographs, Zaio also collects appraisal analysis for each residential property and adds it to the database.
Zaio is restoring the competitiveness and independence of appraisers who are banding together to inspect and appraise virtually every home in America. Zaio assembles a premiere group of local appraiser experts and provides them with photos, property data, a protected geographic territory and exclusive use of Zaio’s proprietary software in territories known as Zones. Appraisers are then able to efficiently inspect and appraise virtually every home in their zone, and Zaio’s software allows the appraiser to store completed appraisals in a large national database. Since the Zaio appraiser is required to inspect, rate, and monitor the values of every home in their zone, they become the undisputed local expert in that area, are able to correct and improve missing and incorrect data from county property records, and the software allows the appraiser to evaluate, analyze and report on a larger number of transactions leading to more thorough, reliable, and defendable appraisal reports. Appraisers then monitor every sale and changes in property conditions that occur daily, weekly and monthly so that customers can instantly order and receive a completed USPAP compliant appraisal with a current market value estimate. Zaio and its network of appraisers currently offer clients a 2055 exterior appraisal report, and the following additional valuation products are expected to be available in 2007: Desktop Valuation, BPO, Comp Search, Property Photo Report, and Insurance Replacement Cost Report.
Zaio accomplishes this by deploying teams of local photographers and appraisers in each city. The photographers walk the streets, collect photos and addresses, and input them into Zaio’s proprietary software. Affiliated appraisers then interact with Zaio’s proprietary appraisal technology to view the photos and related data, and take such information back out onto the street via handheld computer to conduct the appraisal. Zaio’s technology and licensing arrangements ensure that photographers and appraisers are able to keep their data up to date, year after year. For example, appraisers review comparable sales monthly to make sure their analyses accurately reflect current market conditions.
Zaio’s appraisal process allows an appraiser to research values for every property in advance of an appraisal order or property transaction. The resulting product is an accurate, objective, instant report that can be understood and underwritten by a lender.
Zaio plans to photograph and appraise the 250 largest urban centers in the United States. This will result in a database of approximately 100 million properties.
To date Zaio has collected over 3 million images. Photography is largely complete in the cities of Spokane, Denver, Colorado Springs, Phoenix, and St Louis. Photography has been started in Dallas, San Diego, Hawaii, and Orlando.
Appraisal reports are now complete in Spokane, and 5 lenders are currently ordering and using those Valuation products. Valuation efforts are underway in Phoenix and Denver.
Spokane is Zaio’s test market and has been used to help refine both the technology and the process prior to scaling up to cover the entire country.

Does Zaio produce an Automated Valuation Model (AVM) like product?

No. Each valuation product is produced by a licensed appraiser in conformity with USPAP. The primary difference between a ZAIO valuation product and a traditionally produced appraisal report is that the Zaio appraiser has inspected the property and prepared the report IN ADVANCE of the transaction. Lenders and other customers have always wanted appraisals to be delivered more quickly, and by preparing the appraisals in advance and compiling them into a large database, Zaio is able to deliver valuation products instantly in just a few seconds. By appraising the property PRIOR to the transaction, complete objectivity is attained since the appraiser is not trying to hit any particular value estimate. Rather, Zaio affiliated appraisers are required to inspect and evaluate every home in a concentrated area, thus becoming the only appraiser to have appraised every home. This assures all clients that the appraisal report is highly accurate, objective, and prepared by the most informed local appraiser possible.

Tell me more about the technical platform.

The following are some of the proprietary technology developed and used by Zaio.

GeoPic Collector software: Organizes the photographer’s photos and data, and transmits it to Zaio.
Quality Control software: Used by Zaio’s quality control to review every photo collected. All data must pass strict quality standards; deficient records are rejected and reworked.
Integration software: Acceptable data is integrated into a master database and matched up with parcel data from local assessment offices. Images and data are then available for viewing online.
Market Value Control Panel: Web-based software used by appraisers to view and interact with images and data from Zaio’s servers. Allows an appraiser to enter GeoScore ratings, sort records, select and balance comparable sales, and produces report cards that show predicted values against actual sales over time.
GeoScore PDA: Pocket PC application with synchronization software that interacts with Zaio’s servers to transfer images, property data and values onto the storage card of the handheld for appraiser field inspection. Changes made on the PDA are synchronized back to Zaio’s main servers.
GeoPic Online Search: Allows clients to search and view individual address photos and then immediately receive the attached appraisal or valuation report. The GeoPic search engine may be placed on or linked from any real estate related website such as websites of a participating Zone Appraiser, MLS websites or mortgage lender intranet sites.
Data Backup Systems: All of the data received by Zaio is fully backed up and duplicated for offsite storage and disaster recovery should the need arise.

Can you tell me about Zaio from an investment perspective?

Zaio is a Canadian public company. Shares trade on the TSX Venture Exchange under the symbol ZAO. In the USA, investors can also use the trading symbol ZAOFF where the stock can be purchased in US dollars rather than Canadian dollars. Additional trading information can be found at www.tsx.com, under the symbol ZAO.

Zaio Corporation was formed in February 2004 by an amalgamation of four companies. Since that time capital has been raised by way of private placements of stock.

There are 32.4 million common shares outstanding as of December 2006.

There are about 1,000 shareholders with none holding more than 11% of the stock. Directors and officers hold 34% of the outstanding shares.

The company has no bank debt.

Is this methodology USPAP compliant?

Yes, Zaio’s process and products conform with USPAP Standards 1 and 2. For further clarification on USPAP click here to view the PDF: 'Zaio Appraisal Process and USPAP'.

What do lenders think of this approach?

Lenders know their borrowers may be shopping for lower interest rates or faster mortgage approval while they wait days or weeks for a conventional appraisal report. Naturally, a service that allows lenders to close a mortgage commitment sooner is attractive to them. Speed is the main impetus for the advent of AVM models, however an AVM does not generally contain enough quality information for an underwriter to effectively analyze the property they are accepting for security. Zaio’s proprietary technology and processes allow individual licensed appraisers to efficiently produce large volumes of appraisals for every home in an entire city. The process ensures the appraiser has more data and better quality data than any other local appraiser. In addition, the “Pre-Appraisal” or appraisal prior to the transaction ensures objectivity of the final value estimate because the appraiser is not working to support any existing selling price or pre-conceived value requirement.

Most lenders have two sides to their operation, representing sales and risk. The risk side is looking for quality, accuracy and objectivity, while the sales side is interested in increasing market share by closing loans quickly. The Zaio process is designed to satisfy the needs of both by offering the objectivity and quality of professional local analysis with the speed of instantaneous mortgage approval.

What do appraisers think of this?

Within the community of appraisers, most view us as good – a way to clean up inaccurate county records, maintain the best quality database, formalize their local market expertise and profit from it while competing with AVM’s, BPO’s, etc. in addition to their traditional work. Many believe that Zaio’s technology and processes provide them with a competitive advantage in their local market. A few appraisers view us as bad – “just another attempt to ‘minimize’ the appraiser by taking us farther from the traditional full interior appraisal.”

Is this type of appraisal available anywhere yet?

Yes, it is available in our test market of Spokane, Washington and Mesa, Arizona.

Are there any Zone Appraisers that I can speak with as references?

Yes. Contact Zaio to be referred to them.

When does Zaio expect to kick off data collection in [my area]?

There are two ways for appraisers to get started in their local areas. For those appraisers interested in purchasing 10 or more zones in their local area, please contact Brad Stinson, VP Business Development by email.

For those appraisers interested in less than 10 Zones, you must attend Zaio’s informational meeting held in your metro area as Zones are sold at the end of that meeting, and refer to the meeting schedule on this website. Please RSVP for the meeting so we can ensure we have sufficient size meeting room to accommodate everyone.

What Cities and Zones are available?

Zaio has sold out in over 200 cities. To see which zones are available, please visit the Zone Finder here

How long do I own a Zone?

Zaio grants each Zone Appraiser the following rights:

Exclusive use of technology.
Use of photos and data in the database for the entire metro area
Exclusive geographic territory known as a “Zone” including revenues from all valuation products sold from that Zone.
The license runs for 5 years and is automatically renewable at the end of each 5 year term, as long as the responsibilities are being met. The license fee is paid only once at the beginning, with no re-licensing fee required.

Zaio is aggressively expanding throughout the United States and seeks to have Zones in operation in the 250 largest metro areas over the next few years.

What information does Zaio collect when photographing entire cities?

Zaio collects the street-level, front exterior view of each property that is visible from a public space, as well as its civic address.

Zaio never collects any information that is personally identifiable – all photographs are taken from public vantage points and are thus in the public domain. No information about individuals or building contents is ever recorded.

When we start an area, we advise local municipalities and police as to the nature and timing of our on-street activities.

Can you describe the activities I would have to do as a Zone Appraiser? What is it like and how long does it take?

As a Zone Appraiser, you will have to accomplish the following tasks:

Initial scoring: This takes one person about one month to score one Zone (about 10,000 homes). We recommend scoring the Zone online (from your desktop) first, just looking at pictures and data on the computer, and then taking the PDA out in the field to inspect this initial scoring. This is fastest overall and could be done in less than a month. If on the other hand you take the PDA out in the field first, and complete all scoring decisions on the street at each property, this is slower and could take a little more than a month (approximately 300 properties per day).
Combining Markets: Must be done once per Zone initially, and thereafter only as you feel you need to should you wish to change market groupings. Assume 8 hours max per Zone. You will start out with many Market Groups from Zaio’s default settings, but then you will reorganize and collapse them in the manner that makes the most sense to you and your neighborhood(s).
Adding Comps: Must be done once per Zone (specifically, once per Market Group). Each of your Market Groups in a Zone needs three comps. Pace should be 2 Market Groups per hour for adding comps. Assume 25 hours for 50 market Groups. Since you define the Market Groups, you are in control of how many there are, but typically there are around 50 per Zone.
Monthly Comps Maintenance: Review any new sales data to update comps as appropriate. Assume 8 hours per month/per zone.

All of these things are covered in detail in training. Going forward, you will need to look for any changes in your Zone(s) once per year. This can be done gradually throughout the course of the year or all at once (we recommend the gradual approach). This is the ongoing maintenance of the initial scoring. The purpose is to be comfortable that you know what is changing in your Zones, in terms of new construction, remodeling, etc. Your feedback will generate photographer activity as appropriate. The photographers will also be checking the Zones and will alert Zaio (and thereby you) when any changes have occurred. They will re-photograph properties as necessary, which will be automatically flagged in the Zone Appraiser’s part of the system.

Are you ready for the new FNMA forms?

We produce reports using ACI’s ZooWare and FormServer. All forms are available to us, although not all are currently implemented.

What if a particular property is just too unique to be properly appraised by this appraisal process?

Appraisers make the final determination, property by property, as to whether their values will be available to clients through the Zaio system.

How much should a Zone Appraiser expect to make per zone? Is there a simple business plan that outlines these numbers?

There are 7500 Zones in the US, distributed across 250 urban centers. Our research suggests there are 20 million appraisal reports annually.

A standard exterior appraisal report from Zaio will be competitively priced for each local market and is expected to be between $200 and $300 per report. Significant quantity discounts on the “per report” price will be offered to qualifying clients where high volume will offset the reduced individual report fee.

Zone Appraisers get 44% of appraisal report fees, plus an additional 15% if they are involved in selling the report to a client (i.e., get their clients using the Zaio system), for a possible total of 59%.

We believe it is reasonable to expect each Zone to generate 20 appraisal reports per month, or 240 per year.

Zone Appraisers will also be able to generate revenue from BPO, Desktop Valuation, Comp Search, Photos, and other services as they are added by Zaio. It is also possible for local Zone Appraisers to share in revenue from contracts that might be won to provide data or valuation services to local county assessors.

Each Zone appraiser simply needs to start making assumptions about the volume of business multiplied by the revenue to calculate the expected future earnings from each Zone.

Note that this discussion considers first and second mortgage "appraisal-report-style" products only - no portfolio valuation or other uses have been assumed. However, revenue sharing is valid on all present or future valuation products.