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How AI Is Changing Property Valuations Without Replacing Appraisers · Brick by Brick - Wealth Building Conversations

• Kelly Githens: is how to conduct a tax appeal and I used a local municipality. But what you would do is if you believe your assessment is incorrect, is pull some comp is figure out exactly what the property is. That's one of the most important things in the appraisal process. Is defining what the subject is. Then you need how to pull how to pull comparables and in theory make adjustments to the difference in the characteristics of the property, such as land size, square footage, bedrooms, bathrooms, things like that. And you're going to come up with an estimate of value. So you're going to have the tax assessed value, you're going to have your value, and most every municipality, I guarantee you. has a way to submit these to make sure that the appeal process can reconcile it and see if what you're saying is actually true. There's a shortcut. There's a shortcut and that's hiring somebody like me to do the work. Loren Wernette: Welcome to another episode of Brick by Brick. Today we're guest joined by Kelly Githens. Kelly is a certified appraiser, and I'm gonna get this part right. appraiser number C000469 has been effective since 1994 with zero discret disciplinary action. So he's been in the game for a long time. Knows a lot about appraisals and is a general appraisal appraiser. And so he can do a lot of different things in appraisers. And as somebody that orders appraisals for my lending business, has looked at a lot of appraisals for loans I've purchased or and loans that I've taken out. I'm really excited to talk to him about what he's seen throughout the years as appraisals have shifted and changed, what we're seeing now with the advent of AI and how that's impacting appraisals. and then, briefly touch on what he is offering to the market as far as appraisals and real estate, new and real estate help. so Kelly, thank you for joining us today on the show. Kelly Githens: You bet, Lauren. Glad to be here. Loren Wernette: So I spent a little bit of time looking you up prior to the show. And forgive me, I'm looking down because I want to make sure I get these numbers right here. But you know, you have been federally federal appraised registration registry agency says you've been a general appraiser in Oregon since 1994. That's 32 years. Your LinkedIn currently says 12 years. So set the set that straight. How long have you been an appraiser? and and what happened in in ninety four that got you into that registry. Kelly Githens: Well, the lineage goes further back than that. I resigned my commission in 85 and took a couple of contracts in Saudi Arabia. When I got back, I finished my master's and I read an article in the Wall Street Journal about FIREA. They need good appraisers. And my goal throughout my entire life is to be to be the best investor that I can. And that's the reason that I chose to be an appraiser. If that logic makes sense, then you're further along the band in bandwidth than I am. But anyway, that's that's what happened. And I when I got back in country in ninety and I I finished my masters, and I got a job with what's called an MAI, member of the appraisal institute. And I took all the courses, I think I've got one or two left along with the dissertation, the example, to get my certification, but I realized that I was just fundamentally unhappy as an appraiser. And it took me a long time to figure that out. So I never did I never did finish getting my A MAI certification, but being appraiser is always held me in good stead. And to be honest, I don't really like appraisers. they tend to follow behind a deal and they sniff out all the elements that that make sense and they put it together so that somebody like you can understand it. It's like my heart has always been with the warrior side, the investor, that gets in the trenches and swings a sword and does the deal. But anyway, that's a long winded approach to my background. Loren Wernette: Got it. So so you're mixed. You have some you're you're working on a coaching side of things on the investing side, you're investing, and you do do some appraisals as well. So where what pays the bills today? Kelly Githens: appraising and some residual income from rentals. yeah, that's that's about it. And what I'm really looking forward to, and I've been between my assistant and me, we've been looking for like the last three years, is to find the right situation to join a team. one of the things I've noted, just kind of like a blinding flash of the obvious, is As I got further away from the military, I found that I I've become more and more isolated. And to find the right team has been an ongoing project and it's been like three years. And I guess to to go into what I'm looking for is like a newer company, they gotta know what they're doing. they're willing to listen to me and I think probably one of the most important things is they know how to have fun. Loren Wernette: Makes sense. Makes sense. And so I mentioned a second ago you are of a you're certified general, which basically means that you can evaluate anything. So talk to me a little bit about appraisals and specifically, you know, what kind of property types or asset classes are some of the hardest to appraise and why? Kelly Githens: Well, all right. I I told you I wish I would have had had these questions beforehand, but I've had the opportunity to appraise most everything except for assisted living facilities and hotels motels. the answer to your question though is probably a special purpose property. Loren Wernette: Mm. Kelly Githens: one of the most unique that I ever did and I I gained a lot of respect for the MAI that I worked for, is he took on a defunct meatpacking plant. And there were three or four different profit centers located within that property. And the way he ferreted them out, it's like there was cold storage, there was office space, there was excess surplus land and then there was a an apartment component to it and he took each one of them and had me do the research as he put it together. So the answer to your question is probably a special purpose property. Loren Wernette: Interesting. Yeah, I I wouldn't even consider the fact that a meat packing plant would need an appraisal, but yeah, you're you're probably right. At some point that asset's gonna get sold and and someone's gonna need to know what that thing is worth, right? So Kelly Githens: Not ever not everything is a distribution warehouse. Loren Wernette: Whether even if you might wish it was, right? Kelly Githens: Right. Loren Wernette: So, or a or a three-two single-family home. So, so in you know, when we think of appraisals, like I think that there's a bunch of terms that kind of get all lumped together in the market, right? There's appraisals, there's BPOs, CMAs, AVMs, after repair values, you know, just general comps. Can you give us a line on, how all of the different things break apart and really what the benefit of a full-on appraisal is over some of the other documents that are used to valuate properties. Kelly Githens: Alright, that's that that's unfair. I think I'm gonna go find a corner to hide in right now. That's a seven-part question. all right. Breaking the different types of valuations down, just from memory, of course. A BPO and a CMA are originated by realtors. They have a they have a vested interest in how that turns out. And they're not formal and they're not. If I remember the format correctly, they're not particularly qua quantitative in nature. AVMs are automated valuation models, and those are basically sophisticated AIs, like Zillow, Redfin, Realtor.com, probably a few more truly that I that I'm missing. but we've been dealing, if you think about it, The tax assessor, you own a home, of course, right? Okay, you've been using an AI for a lot of years. You've been being billed by an AI. It's it's called trending software. And it's been around, I think, even the most unsophisticated municipalities and counties have been using it for years and years and years. All right. I've gone down several paths. Can you can you get me back to help helping me what you I can I can answer for you? Loren Wernette: Well, but before we go I wanna go back to that. So the counties are using that to basically get an AVM t for tax tax value purposes, correct? And and so then what happens and I'm I'm going down my own rabbit hole here, but what happens then? So let's say they come in and say my AVM, my tax valuable is a hundred thousand dollars more than what I think it should be, and I wanna put an appeal in. Does then they go out and get an appraisal? Or do they how do they how do they quantify or or Re readjust that. Kelly Githens: All right. First of all, let me say that that's that's a chapter in the book I wrote. Is is how is how to conduct a tax appeal and I used a local municipality. But what you would do is if you believe your assessment is incorrect, is pull some comp is figure out exactly what the property is. That's one of the most important things in the appraisal process. Is defining what the subject is. Then you need how to pull how to pull comparables and in theory make adjustments to the difference in the characteristics of the property, such as land size, square footage, bedrooms, bathrooms, things like that. And you're going to come up with an estimate of value. So you're going to have the tax assessed value, you're going to have your value, and most every municipality, I guarantee you. has a way to submit these to make sure that the appeal process can reconcile it and see if what you're saying is actually true. There's a shortcut. There's a shortcut and that's hiring somebody like me to do the work. Loren Wernette: Sure. And and so we generally can look at, you know, tax value as like kind of the bare bones value of the property, right? Like if I looked at my house right now, it's probably got a tax value of three hundred and something. But in reality we know that the comps for the market are somewhere up by the six hundred range. So w why is there such a discrepancy? Is it just 'cause the land value is stru sucked out or we could know 'cause Kelly Githens: No, no. There's a thing called called millage rate that's applies to it that applies to it. If you take a look in your tax statement, and once again, you're catching me unprepared, so I'm just I'm shooting from the hip. But there's a thing called millage rate. And they take what they believe to be the true market value, they apply that millage rate, and that goes from your your example of six hundred down to three hundred or three hundred and fifty, whatever. So the answer to the question is Milledray. Loren Wernette: Got it. Okay, that makes sense. All right. So I think we think we got out of that rabbit hole. So okay, go Kelly Githens: Ha ha ha ha. Loren Wernette: going back to to BPOs and CMAs, right? So what you mentioned was those are more marketing type. there's they the person that's giving you a CMA is a realtor and they want to want your business to sell your house, right? So it it can it is conducive to them to give you the highest CMA that they can find because they want you to think you're gonna get the highest sale price because you so you pick them. BPO I I would say, maybe I could agree with that, depending on who got the BPO. we have our own BPO or purchaser or third party we use, and we pay them a fee and they send us a BPO. There's not really a marketing component to that. but I so I I guess I'm interested in that. And then to the AVM comment and to the other comment, I think the other question is if a borrower or someone that's trying to sell a house or something gives me a number, say this house is worth X. What are they, what number are they most likely giving me? Is it CMA? Is it just comps? how do I know what they're giving me is accurate? Kelly Githens: Who has given it to you? Loren Wernette: Well, let's say it's the owner of the property. Kelly Githens: They're an advocate for the property. They're not an unbiased third-party opinion. Getting back to your original speculation, I'm not sure of the format difference between a CMA and a BPO, even though I am a realtor and I suppose I should know that. But just in the acronym itself, you've answered your question. It's a broker's price opinion. I think a CMA is used more for marketing. The BPO, if I were at call, it's an opinion of value, so by its very nature it's gonna be more quantitative in nature. Loren Wernette: Got it. So if I am a a lender and I have a paid for on by me or by the borrower appraisal report. And let's say the property goes into foreclosure and sells for way below whatever the appraised value was. Is there anybody that stands behind that appraisal and what does that look like? Kelly Githens: Well, once again, you've you've painted me into a corner, but the first thing I'm gonna ask is there's always a time between when the appraisal is done, the effective date of the appraisal, and when it's used. Now, Loren Wernette: Mm. Kelly Githens: if you're talking about a period that's two to three years old, the appraisal's probably worthless if the mark unless the market is just completely stagnant. So that'd be the first question that I'd asked. And then I'd, I'd take a look at the qualifications of who did it. if you're talking about an appraiser, then yeah, they're they're always stuck with what they put their signature on. So you can always go back to them and say, what the heck is this? But once again I'm gonna say you got to take a look at the time frame. Does that kinda Loren Wernette: Sure. Kelly Githens: answer your question? Loren Wernette: i it it I understand the time frame question, right? I mean, recently I had a loan come in, and it was the collateral was a island off of the coast of South Carolina. Kelly Githens: Wow. Loren Wernette: And they're like, great, this has got a one point two million dollar appraisal report that they provided. I'm like, Yeah, from twenty twenty two. It doesn't help me too much, right? but Kelly Githens: No, no. Loren Wernette: but go ahead. Kelly Githens: That that is a unique property. That's what when I do an appraisal, I've been potty trained to look at every data source possible. I'm going to take a look at what the assessor thinks it's worth. If there's an old report, I'm going to take a look at that. Then I'm going to take a look at the market data. So with respect to your island, that's such a unique pro let me ask you this: it was a unique property, right? Loren Wernette: It it's unique, but the mark I would argue the market data doesn't support it because it got that appraisal and then it went on the market a year later, sat on the market for eighteen months and then sold for six hundred and fifty thousand dollars. Kelly Githens: Okay, this is a pregnant pause with me. What do you what what do what can you look back over your shoulder and what can you attribute that to? Loren Wernette: So, my biggest contributors, if I look at the comps that are in there and compare it to what this is, there's no ferry service, there's no docks associated with it. And I personally think that the just the pool of buyers that are looking for a 38-acre island with no utilities and no servicing to it is relatively small. And so that inherently will push down the market because you just don't have a big pool of buyers. and as a lender, It's my job to say, if this thing forecloses, how fast can I sell it and what can I sell it for? Right. And if it sat on the market for 18 months without a buyer in 24, right? And economic conditions are what where are they compared 24 to 25? Who knows who's looking for islands right now? Do I think I could unload this property at X dollars and recoup my principal? Kelly Githens: That's that's a great point. There there was kind of an applied question in there. And that's when I do an appra a formal appraisal for an investor or even a bank, a lot of times they'll ask me to do a fire sale on it and say th they're asked what's a normal marketing period for it? And then forget about that. If I had to sell it within 30 days, what could I get for it? And that's that's a completely completely different thought process. and it goes dovetails exactly into the thought process that you just laid out for me. Loren Wernette: Yeah. So I I guess I'm really curious too in this to is most of the appraisals we're getting, they're for banks, they're they're for loans. and that's not just me, that's other other lenders as well. Why have appraisals become like the standard operating procedure for most lending institutions? I I have some theories on it, but I would love to hear w your opinion on why Why that has become standard in the industry. Kelly Githens: That's an age old question that goes back have you ever heard of phyrea? Loren Wernette: Mm mm. Kelly Githens: Okay, it's what got me interested in appraisals in the first place. and it has to do with a lot of mortgage meltdown, the advent of the Dodd-Frank Act, and a lot of legislation that has to do with collateral and how it's used. And you know, because you're a user of the product. what what what was the specific question? Loren Wernette: Why have appraisals become the standard pr operating procedure for financial institutions to define valuation of collateral? Kelly Githens: Because we're an independent arbiter. An independent arbiter. We don't advocate. We don't advocate for anything. We if if you're gonna advocate for anything, advocate for the property. we're unbiased and that's the reason that it's become the standard. That's the way it's it's always it it's always been meant to be. Loren Wernette: So so in a world where, okay, we can't take a CMA because the realtor's got an agenda, right? And BPAO is kind of the same route. Why not just have internal underwriters that are skilled in basically providing finding comps on or off the MLS and providing your own valuation versus going to a third party? Is it because you're worried about or they're worried about internal conflict of interest or internal biased about what the property should be worth? Kelly Githens: Yes, yes, and yes. And and they don't have to go through the training. And one of the things that's ingrained in us is have you ever heard of use PAP? Uniforce un all of us are required every time we get our certification and it's become standardized that we all have to take an updated use PAP class and that's that's How you report. It's the governing standard. There's there are substandards like the uniform appraisal data set and things like that, but use PAP governs it govern the long-winded answer to your question is use UsePAP governs us. And in addition to that, we're trained to be arbiters. We're trained for it. We're trained not to be biased. Loren Wernette: Hmm. Got it. So you've got a unbiased opinion of the property. And then i is there anything besides like so you've got a license, right? Is there anything that happens to an appraiser if the appraiser just gets it totally wrong and there's a a complaint by a legal or a lending institution if something, you know, goes sideways? Kelly Githens: Absolutely. There are appraiser licensor boards and they usually cover both licensing and and penalties or or things associated with that. And if somebody's got a problem, there are fifty state agencies or fifty fifty-one, fifty-two state agencies that will that will take that complaint and all of them All of them, I'm sure all of them have sub-agencies that take a look at issues. And before the mortgage meltdown, there were a lot I would scan the I'm lo I'm certified in Oregon. it's just kind of fun to watch a train wreck and you can see in the periodicals they put out, they'd have a section for reprimands and censures and license revocations and and things like that. It's it's like watching a train wreck in slow motion to see what happens when they deal with exactly the issue that you brought up. When they when they're either incompetent or they're biased. Loren Wernette: Right. And so the end result though is that the appraiser can lose their license or have some sort of repercussions, but there's nothing backing the user that ordered the appraisal for losses that may have accrued due to a bad appraisal. Kelly Githens: Now you get into lit now you're getting into litigation. And that is a a lawyer topic. And the answer to that is if if a client or a user feels that they're constructively damaged, yeah, there there's always there's always torts, there's always the civil litigation. Loren Wernette: Got it. So th so that's the that's their avenue. It's a it's a not like it's a warranty. There is a their civil litigation path that that is the the one lever to pull. Kelly Githens: I'm probably using the wrong term, but as in life, caveat emter. Loren Wernette: Hmm. Fair enough. So it it interesting, we're we're having this conversation and and just a few minutes ago you mentioned that you don't really care for appraisers Kelly Githens: Right. Loren Wernette: as a as a group. so I'd love to hear more about that, how that came about, why you don't really care for them. and you know, kind of if they're so important, which we all know they are for lending, you know, what the caveat is or what the other option is. Kelly Githens: All right. If I were a lawyer, I'd say asked and answered, but reiterating I'm first and foremost an investor in my heart. An appraisal certification was a byproduct of my goal. If I had it to do over, I pr I don't know if I would do it. it's like we have limited time, we have limited money, and I listened to your podcast with Alan Hale, and you brought up when you got into the business, you took a class on creative financing. All right, you sat back and You were under a gun. I con juxtapose the position. You got your wife looking over your shoulder. You got seven thousand dollars. But you know what you wanna do. And you chose to take a creative financing class. I went a different way. And I've taken creative financing classes subsequent to that, but I decided to go to the go the appraisal route. And the reason that I don't particularly care for appraisers is they're like a dog sniffing on the ass end of the deal. It's like They take the data, they interpret it, and then they give it to somebody like you to use as under an underwriting tool. And to me, you know, I like the swat the squash buckling, get in the trenches, find the deal, do it, fix, flip, wholesale it, land, commercial, whatever. Those are the people that I really, really respect. Loren Wernette: Yeah, I so my issue with appraisers is there are a lot of really good appraisers. And when you get a good appraiser, they give you a great va a v appropriate valuation, which is what you're going for. But there are also a lot of mediocre appraisers, and I've run into them as a group as well. And what happens, I think, is that the the sum total of the group gets averaged down because of the the mediocre ones. And so then when you're looking at an appraisal, if you haven't worked with that appraisal before, or if you don't have intimate knowledge of that area, which oftentimes you don't as a lender, it has to be looked at through a very critical eye. And you can't just say, they said it's 250, so we're gonna go with 250. It requires additional work to make sure that the two fifty is consist can will work for what you're doing, which which you should be doing anyways, but it's not gospel. And I think too much in real estate, specifically by other lenders that aren't in certain industry, you know, certain areas, realtors, it's treated like gospel too much. the appraisal said it's 270, so it's 270. If I go to sell that today, I'll probably get 230, right? 250 at most. and so that that becomes my concern with them is how accurate they are. and it really comes down to which appraisers are good and which appraiser bad, just like every other industry and every other profession. Kelly Githens: Okay, I'm gonna turn it right back to you because I I have a good idea who you are. And I'm gonna say if you brought me a property, you already know what it's worth. You you you already know the as is, you already know the ARV, or you've had somebody do it for you, so you got an idea. And you can tell if it's B S or not, you can tell if the appraisal is B S or not right off the bat. Loren Wernette: Right. And but that's the struggle that real estate investors have, right? Is I know that let's take it the other way, I know this property is worth one eighty and I'm trying to get a loan for it and my appraiser came in at one fifty six. And now that's money out of my pocket, even though I think they're wrong. And then if you try to push back on them, then you know, you can do an appeal and stuff, but sometimes it works, sometimes it doesn't. Kelly Githens: All right, l let l let's talk about pushback pushback. the correct term, the correct appraisal phraseology would be reconsideration of value. And give me your comps. Give me your comps. I've got this one hybrid customer where they'll give me third party inspections and I'll interpret the data from my desk. If they ask for a recon reconsideration of value, they're automatically going to give me up to three comparables that, that say that it's different than mine. And I can take a look at them inside of, generally speaking, five minutes and see where their logic went wrong. Loren Wernette: So so what are the couple things that you're looking for that immediately tell you your logic is wrong? Kelly Githens: Consid condition. All right, if I call something C C four or average condition and they give me a C three or good quality property, uh-uh. Because I know in a let's say I I don't know the rolling market like you do, but you got a just a standard track, three bedroom, two bath, twelve hundred square foot. I know that it's gonna take X amount to bring it from C four up to C three condition. It's gonna take twenty five to fifty thousand dollars to do the flooring, counters, cabinets, all of this stuff. and that's usually where the where their logic falls down. Loren Wernette: Got it. Is is some of that and so we we've all seen that, right? We especially if you've ever dealt with a wholesaler, right? it's ARV is two seventy-five and here's the comps. And it's like if you just if you just look at them like, yeah, sure they are good comps, and then you dive into them, you're like, this one's huge and it's got mahogany everywhere. Of course it's gonna be, you know, that kind of thing, versus this two one. but how much of a of a decider or how much of an impact is having MLS access or the access that to comps of your quality versus what a normal person has that just has public information on Zillow or Redfin or whatever on what's sold. Kelly Githens: Well, I take that into consideration then it's in this course that I've prepared where I teach, I instruct how to do due diligence on the subject and take a look at it in its entirety based on a property checklist I've created. And then I also show how to how to go into the AVMs if you don't have access to MLS and pull the comparables and look at them to to see exactly what we're looking at. So realtors have access to MLS and an asset called have you ever heard of RPR? Realtors property resource which is across the nation and it's really cool. you've also got third party data sources too that can give you a decent picture PropStream or things like that. Did did I answer your question? Loren Wernette: Yeah, I I think the the question goes down to is there if I if I wanna if I was a real estate investor, there's some people that say, I'd like to be a become a realtor as a real estate investor so I have access to the MLS to pull better comps. Now, that comes with its own other challenges of having some, you know, legisl regulatory bodies over top things you do and things you can and can't do. but I think the underlying question is if that's the reason to become a realtor, are the tools like Batch Leads, Prop Stream, public data, are those good enough to negate the benefit of becoming a realtor for that specific reason, not the other benefits like commissions and being able to sell your own stuff and Kelly Githens: Well, you're not pulling any punches, are ya? I would say, yeah. You know, you cited exactly the issues with becoming a realtor. You've got the regulations that you've got to adhere to, and you've got to have the mental bandwidth to pass it. Loren Wernette: Mm-hmm. Kelly Githens: to to pass it and get your realtor's license. I would say that there are enough data sources that and they've becoming they are sophisticated and they're becoming more and more sophisticated. And by that I mean When I take a look at something, I want to see the interior as well as the exterior. And there are certain things that without a professional building inspection that are just so easy to miss. Like I Loren Wernette: Mm-hmm. Kelly Githens: don't know if there's a foundation problem unless somebody points a a at a huge crack or a gaping hole or something like that. so I would say Not notwithstanding it's it's a personal cho it's a personal slash professional choice as to whether it's worth getting your license or not. Number one, you have to have the mental bandwidth to do it. and then you've got to understand that there are regulations and fees and and costs associated with it, both fixed and recurring, that you've got to take into consideration before you make that choice. Loren Wernette: Yeah. And and so on that same note, you chose the path of appraiser into real estate investing. based on how how important running comps and understanding valuations is, do you think that someone that's considering getting into real estate investing should consider the appraisal path? Kelly Githens: hell no. Loren Wernette: Ha ha ha. Kelly Githens: no. No. Let's let's talk about the advent AI. Loren Wernette: Yeah, let's do that. Kelly Githens: I am just thoroughly mystified, intrigued. with the with the uses of AI. And have you read Mark Zuckerberg's sixteen page manifesto? Loren Wernette: I have not. Kelly Githens: Well anyway, Loren Wernette: I'll add it. I'll add it to my list. Kelly Githens: and then you've got guys that are saying that within six months AI is going to cause the collapse of society. I think the the the answer lies somewhere in between. And I remember I was thinking about this one firm, and I and I said, Hey, test me out. Give me a complex property that you're dealing with, and and let me let me show off. And so they gave me a commercial zone a large commercial zone property in the city of Portland that had a de minimis structure on it. So it was basically land. And I said, give me half a day and let me go away. And I gave it to I gave I created the prompts for AI and it wound up spitting me a price per square foot that was just unbelievably accurate. so I think there is just so much potential there, but the concept of hallucination comes in too. Because I've used AI to create my course and I'm not gonna say I always call BS on it, but the concept of hallucination comes in there too. Loren Wernette: Sure. from an thinking about what an appraisal is, right? You're pulling data that's mostly available online into a plat into a a space that is generally consolidated, comparing it, apples to apples in most cases, or maybe apples to pears, and adjusting accordingly to get the to apples to apples, and then creating opinion or creating a valuation based on the correlation of that data. It it sits pretty pretty heavily in the AI wheelhouse of things that they do. So so how Kelly Githens: Yeah. That goes that goes back that goes back to your question about whether you'd advocate for somebody to get into the investor field via via the appraisers side. I'd say no. Loren Wernette: So, but on that same note, as an investor, and to your hallucination point, you as an investor, even if you know how to use AI really well, you still need to know how to evaluate properties, right? To understand whether the what's being told you from an appraiser, from an AI, from a BPO, from a CMA sits within the realm of reality. And so I know you have a have a course on it, but can you give us a little overview of what are the top things that drive Property value, and as a real estate investor, not an appraiser, what are those things that we should pay attention to most when looking at valuating a property? Kelly Githens: wow. I was hoping you were gonna go down the value add road because I'd really like to discuss that more than anything, but one of the things that an appraiser, if they're if they're worth their salt and they've taken the time to edify themselves professionally, is how to value unique properties that are dissimilar in nature. And how to pull data from various sources and have it all contribute to an opinion of value. And that's exactly what we provide. We don't provide an exact estimate. We provide an opinion of value. did I get off the track with the with the question? Loren Wernette: Yeah, I I'm I'm looking for tactical things as an investor that you should be looking for for valuation of a property. Kelly Githens: Well, you look at the different components of the property. You got the land and you've got the improvements. the land, yeah, you're always looking for I don't know about you, but I'm always looking for value add like excess land that can be developed, that can be partitioned, with respect to the improvements, I'm looking for the construction quality, I'm looking at the condition, I'm looking at the size, I'm looking at the room count, I'm looking for nuances like flow and functional utility that only that only comes with experience. And looking at a million of these things. I'm looking at amenity, I'm looking at parking. I'm looking at amenity packages and amenity packages. we could have a a whole conversation on amenity packages. So Loren Wernette: Mm-hmm. Kelly Githens: those are the different things that I look at that impact valuation. Loren Wernette: Do you think based on what you've seen so far that, AI as it replaces, an appraisal would be better fit for residential or commercial properties? Kelly Githens: Whoa. All right. Let me reach down and feel that one in the dirt. I go on the record as saying that trending software has been used since computers have been around practically, since probably ninety five, ninety four. I think if you're talking about a standardized commercial property and there are so many different asset classes, you've got commercial property. Commercial property is anything that produces revenue. You've got Loren Wernette: Mm-hmm. Kelly Githens: asset classes like warehouses, office buildings, multifamily. self storage, anything that produces revenue. I think if it's if there's data there and you can keep AI on the rails. It would be most appropriate for standardized residential. And then and then commercial as long as as long as it doesn't go off the rails. Loren Wernette: Interesting. I would have guessed that you would have said the opposite. And this is the reason why. If we think about the buyers of residential properties, and I'm thinking about consumer residential properties, not investment residential properties, I feel like there's a lot of what neighborhood is this in? Do I like the way the feel of the house is? There's more, there's less quantitative things. that go into the purchase. Is my wife walks into the kitchen, does she get happy with what she sees versus if I think about, there's a warehouse over here, it's got, 40,000 square foot of floor space and 32 foot ceilings and the roof's got 10 years left on it. and it's got 10 bays for, you know, truck loading. Like those are all quantifiable to things that could be, you know, easily tracked and compared against. and it becomes more of a decision based off metrics very versus a decision based off a feel. Kelly Githens: Was there a question in there? Loren Wernette: No, that was my that was why I thought you would have said opposite of what you did. So not a question. Kelly Githens: I know, I I can appreciate your logic. Loren Wernette: No. Interesting. Kelly Githens: I'm not gonna I'm not gonna say right or wrong. I mean what we're doing here is sitting back and pontificating or asking ourselves which one would be better. I don't know. I wish I would have had had the opportunity to ponder that question before we talk. Loren Wernette: It's all right. so I guess you mentioned your your coaching program a little bit. We talked a little bit about the kind of appraisal stuff and you mentioned value add. Talk to me a little bit about what your coaching pro program is, what you're teaching your students, and and what kind of value you're adding for them. Kelly Githens: Gladly. my niche. My niche I've swatted the you know what a swat is, right? I've Loren Wernette: Mm-hmm. Kelly Githens: swatted this thing to death. And my target niche on the inception at the start of this is newer realtors, newer in newer real estate investors. And there's always going to be a sub segment when you put the Venn diagram around of owners that just want to know about their property. Because you think, if you think about it, in the from a sociological point of view, that's probably a family's biggest asset. And there's always going to be a subset of owners that they just want to know. They're just curious. And that's and I've targeted it for. That segment, newer realtors, newer investors, homeowners, less than less than five years, less than five years in the business. Because I think from the point of view of somebody who's been in longer than five years, it's like, I know that shit. I know that stuff. but I think less than five years, and you've got somebody that says, Hey, I want to learn. And what I'm giving them is my years of appraisal practice and I've got a lot of mini lessons on how to do things and how to perform calculations and be aware of this and and do that. and I this whole thing is focused. I'm not I don't go off on a tangent on unique properties. I don't go off on commercial properties. I focus on vanilla flavored vanilla flavor flavored single families 'cause there's a whole body of knowledge that goes in there. And that's what I teach is Yeah. Loren Wernette: Fifteen hundred square foot, three two, right? No no, it doesn't include the meat packing plant. So Kelly Githens: No no. Loren Wernette: Yeah, I I I think that's really valuable. if I had to pick three skills that I would need to be good at to be a good real estate investor, understanding how to get a proper valuation of the property is on that top three list, along with marketing, and then probably just how to generally run a business on a day-to-day basis. if I if you know how to do those three things, you can be pretty successful. Kelly Githens: Break marketing down. Loren Wernette: Marketing, how do you find and capture leads, whether those be from your selling side or your buying side? Or capital raising side. Kelly Githens: Yeah, that was something that fascinated about me about you listening to I had to find a program that talked about you. And Alan Hill's podcast was really good. And one of the things I am terrible at is networking and marketing. I'm just I'm horrible at it, and it sounds that you have developed a skill. of networking and networking and marketing to find it's It's like I'm just stuck because number one, I don't have a team and number two, I don't have access to private capital. And my biggest impediment, I don't care what I look like on your show, is I'm just basically shy by nature. Loren Wernette: Yeah, I we all have skills. I know several people that are highly introverted, but they're excellent planners and you know, the skills that they do have are exceptional. And so I think, you know, as a business owner, you have to identify what your skills are and lean into those things and find people to offset your weaknesses. And so, you know, the things that I'm not the strongest at, you know. not great at the bookkeeping, at the CPA, that kind of stuff. I can do it. I don't like doing it. But my business partner is exceptional at those things. And so you you have to, it's going to be far easier to find the things that you're strong at and focus on those and hire or partner with people that are really strong at the things you're not Kelly Githens: That's good. You just reemphasized I could almost take that from y your other podcast with Alan Hale and superimpose it and you said exactly the same thing. And it's is really true. Do what you're good at and delegate the rest. Loren Wernette: A ask my wife, I'm ex nothing if not consistent, much to sometimes her her chagrin. So Kelly Githens: I'm I'm I'm curious I'm curious as we're winding down I can see that. you've taken that seven thousand dollars and it sounds like you've done very well and very well with it as far as a portfolio and and a business, both. How does she feel about it now? Loren Wernette: Overall good. I'm certainly very busy, right? and I don't think she thinks about it too much because all of our bills are paid for. and I have a job. Kelly Githens: Ha ha Loren Wernette: so we we have four small children. This is way more about me than what we usually get into. We have four small children, eleven and under. And so she spends most of her life fighting for her life with them. Kelly Githens: No, but that was I think that's that's a really relevant question to a lot of w wannabe investors that are faced with somewhat the same situation you are. They have a partner. They have a partner that's really uncertain. And I asked a I asked Loren Wernette: Yeah. I I th I think what Kelly Githens: them pre and post and I think that's really Loren Wernette: Yeah. Kelly Githens: valuable for them. Loren Wernette: I think a lot of people, they, they're the risk taker in the relationship and their their spouse or their partner is more conservative or risk averse. and so trying to meet them not where you are, but closer to where they are and making them feel comfortable because it's their life just as much as it is is yours, even if it's your dream, is really important and to consider all along the way. but I I have a a thing I've said a bunch of different times that I believe that to get to success, there's a certain number, I'm gonna call them pain points, certain number of pain points that you have to endure. and you have a choice of enduring a lot of pain for a very short period of time to get to that success, or enduring a little bit of pain for a very long time to get to that success. And neither Kelly Githens: Ha ha ha. Loren Wernette: is right or wrong. some of us just choose to jam all of that pain into about four years of their lives and shoot for getting to their goals quick. Kelly Githens: Bravo. Loren Wernette: So, well, Kelly, if somebody heard you, wants to hear about your coaching program, wants to just reach out and chat with you about appraisals or anything else that you've got going on, how can they get a hold of you? Kelly Githens: I will send you the synopsis of my course of course and my best email is Kelly K E L L Y at K D G LAN dot com or my website kdgland.com. Loren Wernette: Awesome. And I will make sure all of that is in the show notes. so if anybody's interested in learning more about Kelly or what he's got going on, I recommend you reaching out to him. Kelly, I really appreciate your time today. It's been very interesting chatting with you about appraisals. I tried not hope I didn't make it too hard on you, but I enjoyed the conversation and I think that there were some real nuggets in there that some of our listeners will be able to approach. Kelly Githens: Copy that. I really enjoyed being on your show, Lauren. Loren Wernette: Awesome. And to everybody else out there, make sure that if you got value out of this or somebody that will, share the podcast with them. And until next week, we will talk again.