Nationwide Appraisal Network (NAN) was the top-ranking appraisal management company on the 2022 Inc 5000 list at No. 1427, with an average 451% in revenue growth from 2018 to 2021. We sat down with Steve Sussman, NAN’s chief business development officer, to find out how the company is growing so fast and what they see for the future.
The following interview has been edited for length and clarity.
Sarah Wheeler: Nationwide Appraisal Network (NAN) was recognized on the Inc 5000 list for an average of 451% revenue growth over the last three years. What do you attribute that growth to?
Steve Sussman: Our recent rapid growth is really a product of years of responsible growth. Our company’s founders spent years building up operational infrastructure, really trying to perfect every aspect of customer service order execution. And only then did we really begin efforts to build a sales team and to grow. We did it the right way and now it’s paying its dividends.
Over the last 24 months appraisal fees were really soaring to new heights and it would have been easy for us to dramatically increase our management fees, too. But we made a decision as a company to stick to our commitment to print our management fee at the top of every invoice. We wanted the lender and broker community to know we were never taking advantage of the market. So, whether an appraisal was $500 or $5,000, our management fee held steady. We didn’t squeeze every penny out of every order because we’re looking at it from a long view of establishing a meaningful relationship.
There were also other factors that went into our growth. One was not being afraid to raise our hands for the tough work. A lot of our initial growth in the last few years came from markets where many AMCs prefer not to work. In fact, our foot in the door with three of the top 10 lenders came in rural Texas. They all came looking to us and we embraced that opportunity. We thought, hey, if we can shine here, then we’re going to gain recognition and trust with the lender and broker community. And that’s exactly what happened: all three ultimately expanded our allocation to a national footprint after seeing what we could do in some of the really tough markets.
SW: Did you already have deep connections in those rural markets or did you have to go out and find those people?
SS: It was a little bit of both. We have deep connections, because we have been a fully national company since the beginning and we have more than 12,000 appraisers on our panel. But when you get into some of those particularly challenging areas, we are fortunate to have a robust appraiser recruitment team, who are able in real time to turn around and say, I’m going to make sure we add some extra appraiser coverage in this region.
And then we just embrace technology. We take a data-driven approach to appraiser selection. We actually can see real-time performance metrics for more than 12,000 appraisers. So when an order comes in, we can see down to the ZIP code level based on their work history for that loan type, for that location, and understand all the KPIs that come with that.
So we can see the appraiser’s average turnaround time compared to the market, the on-time delivery percentage, and how often we see value disputes or underwriting revisions come in for them. All that rolls up into an algorithmic score and helps us assign to the best possible appraiser for the job. And that’s honestly 90% of this — getting it in the hands of the right appraiser.
SW: The mortgage industry saw huge origination volume over the last two years. What part did that volume play in your growth?
SS: Before the boom that started in 2020, we were already growing well into the double digits, and then projecting for triple-digit growth before the pandemic started. And of course, that kicked everything into overdrive.
I think that a couple of things really made a difference for us. One is deeper relationships with appraisers. Appraisals were a very challenging part of this process over the last couple of years, and there are only so many appraisers to go around. So for us, it kind of paid back that we’ve always shown great appreciation for our appraisers, especially during this time.
I think appraisers can get a bad rap sometimes. When you look back during the pandemic, the appraiser community, they were the ones who risked their health, who risked their families’ health, going into strangers’ homes to do inspections. If they had stopped doing that, this entire industry would have ground to a halt. We believe that our job is to sit between the appraiser and the lender, to make sure the lender understands the perspective and the challenges of the appraiser and vice versa.
We also moved to our next-day pay program, where, instead of getting paid in 30 days for their work, appraisers are paid within one day, as long as they turn it in on time. We committed to paying the appraisers industry-leading fees to make sure that they’re well compensated for their work and we had a really loyal relationship that went both ways. So the appraisers were inclined to take on our work and it helped us to shine during that time.
SW: We hear a lot these days about appraisal modernization. What does appraisal modernization mean to you?
SS: I have said for a long time, this is going to be much more of an evolution than a revolution. We’re going to try things, we’re going to find areas of new products and new offerings that work, and ones that don’t. We’ll keep refining it and making it better. I don’t know that we’ve stumbled upon any magic bullet just yet. But I think that it’s going to help solve a lot of problems both now and in future as we move toward more modern valuation methods.
SW: In your ideal scenario of appraisal modernization, what role should the appraiser play in the future?
SS: I think that it’s going to be kind of a hybrid role. I think there will always be higher and lower risk loans, so it depends on the needs of the lender. We all know there’s a shortage of appraisers, even now, with times being slow. So if we’re able to take some of the burden from the appraisers for loans that are lower risk, and shift their focus more toward doing the things that they really trained to do, I think most certified appraisers would agree that’s a better use of their time — being able to focus in on valuations, instead of driving from house to house taking measurements.
SW: Do you think the appraiser of the future looks materially different than the appraiser of today?
SS: I think that with the direction the industry is going, it’s a different type of person in the same way that every industry requires a bit of a different type of person 20 years later. It’s going to require more of a comfort with modern technology than it has in years past. There are always going to be some appraisers who say, “You can take my tape measure from my cold dead hands.” And there’s room for those appraisers — it takes all kinds, and that experience is extremely valuable.
But I think that as we move forward, it’s going to shift more and more toward those who embrace that next iteration of technology, like being able to use LIDAR scanning and capture floor plans and take measurements more effectively under modern standards.
SW: Does NAN utilize some of that technology right now?
SS: We do. And our mission over the last couple of years has really been to transform from an appraisal company to a full-service valuation company. So, we have embraced products that range across the gamut, those targeted toward HELOCs, or targeted toward renovation loans. And with that comes all kinds of technology that we are both working with partners to fulfill and also building in-house.
Our approach is like the Apple approach: we don’t want to be first, we want to be the best. So we are building an infrastructure to support all different types of modernization efforts. But rather than jumping the gun and trying to predict the future, we are working with strategic partners to fulfill right now, with an understanding that we’ll be ready with our own in-house solution once the industry finds its direction.
SW: The Biden administration has taken a great interest in combating appraisal bias. How has NAN looked at appraisal bias and how you can help solve for that?
SS: It’s something we take very seriously. We’ve always taken it seriously, but especially in the last couple of years, we have doubled our efforts to make sure that we are confronting appraisal bias in every way possible. From our perspective, we believe the vast majority of appraisers are good people who have honest intent, and are not out there looking to discriminate or harm anybody in any way. But we also recognize that both conscious and unconscious bias do exist. And in our view, even one appraisal that’s affected by bias is one too many.
So we’ve done two things on the proactive side. We have worked hard to educate our team for how to identify bias. We have worked within the industry — our chief appraiser speaks at industry events regularly talking about what does unconscious bias mean? How can we get better as an industry on the whole? And then we built some software to back it up.
We are launching some brand new in-house proprietary software that’s going to allow us to use machine learning and scan for words that should never be on an appraisal report. And it won’t just look for the words themselves, but will look for the context of the words, and that adds another layer. So, there are human eyes that will look at every report still, but now we’re also running through a scan with thousands of forbidden appraisal words that will quickly flag things that need an escalated look and allow us to get out in front of it.
On the flip side, we have a really robust reactive approach. The minute any kind of bias claim comes in from any party involved, it goes to our head of compliance. And she’s tasked with interviewing every involved member of the transaction. Anyone who was present, anyone who was part of the conversation, and working with our in-house staff appraisal team to review all the methodologies from the report and see if this a good faith report or if there is room to believe there could be potential bias here.
And our position is, we’re always going to err on the side of the borrower. If we’re not sure, then we toss that report, and we get a new one that we pay for at our expense. But we’re going to do everything possible to ensure that we never turn in a report that is affected by bias.
SW: One of the things that’s really hard to standardize is which comps someone should use to support value. How do you tackle that?
SS: We walk a tightrope, because from a compliance side, we never want to interfere with the best judgment of the appraiser. But at the same time, we want to make sure that we are advocating on behalf of the borrower. The way we approach it, when we review for quality, we are looking for certain broad parameters within the comps. We are not going to try to second-guess what the appraiser is saying, but we have a very robust system in place for reconsideration of value requests and disputes.
And if the report comes in and goes back to the lender, the broker, the borrower, and they look at it and say, “Hey, I don’t like these comps, and here’s why,” we offer them to work directly with our staff appraiser team. Can they provide us with comps that are superior? Meaning, are they physically closer to the subject property? Are they more similar to the subject property? Did they close more recently?
Something can’t just be, “Hey, I like this comp because it’s a higher value” — show us why this is better than what the appraiser used. And then we will go back and have a peer-to-peer discussion with the appraiser.
SW: What’s the biggest challenge for the mortgage industry right now, and appraisal companies in particular?
SS: This industry can be a boom or bust industry and we are feeling the highs and lows of it. As we move forward, it’s all about not losing sight of our core principles. Our core principles come from the top, from Joni Pilgrim, our CEO: integrity, accountability and transparency. We preach it every day and it’s really in every aspect of what we do.
I always joke that on the popularity scale, AMCs probably land somewhere between a root canal and the U.S. Congress. And there’s good reason for that. Not every AMC has operated above board, and there’s a perception of AMCs that they’re not adding value to the equation. And it is quite literally our company’s vision statement to provide service levels so profound, that we fundamentally changed the perception of AMCs throughout the industry.
When times are tough, you double down on your core principles, you make sure that you’re executing on every single order as though it is the most important order you ever going to see and remember just how much every loan matters right now. And just deliver absolute top-level service. And know that times are going to change — at some point we will be back to a boom cycle.
So, we’re going to continue to be smart with how we operate and careful with how we move forward, but at the same time, continue to invest in the business and technology and be ready when the industry climbs its way back.
SW: You’ve been on the Inc 5000 list for the last two years. Is it your ambition to be growing so fast that you get on that list again?
SS: It’s not a stated goal, but I want to live on that list. We’ve had our heads down and we’ve just been growing as fast as we responsibly can grow. We’ve built out more than 400 new client relationships so far year to date, even during this really down market. And I think that’s a product of right now, the lender/broker community, they realize every loan is important, so they’re really looking for service levels.
We have no intention of slowing down our growth anytime soon. And I’d love to have this conversation with you again next year and talk about another great year.
