bluehammer
The Right Tool for the Job
By Carole VanSickle Ellis
If you only have one tool in your toolbox, it had better be a hammer. There are more than 100 tools and tasks that do not include pounding nails for which a carpenter or builder can use a hammer, and even the biggest fan of today’s modern pneumatic nailers probably still carries a hammer on the job.
“A hammer is the one tool you had better have in your toolbox,” explained Robert Syverson, president and CEO of national real-time repair-estimating and valuation platform bluehammer™ (yes, all small letters). “Like a hammer, bluehammer is the one tool you absolutely need for efficient, accurate valuation and repair estimates. We have tightened and refined repair estimate accuracy and placed that accuracy within reach for anyone that uses this tool.”
Bluehammer is not just a modern algorithm spitting out valuations, either. Its estimates are based on a vast array of modern and historic data, including 58 years of data concerning what should be involved in a project in the company’s proprietary database, real-time information, based on ZIP-code, on materials and labor costs, and an algorithm and software system that enables the program to spit out accurate values for any project within about 30 seconds.
“Our data is all organic and built in-house,” said Issam Naber, vice president of operations at the company. Naber has worked with bluehammer for 18 years and describes his role as “making the data dance.” He explained, “Whatever the customer needs, I take our data and their requested inputs, throw my touch of magic on it to come up with a working model, and then pass it off to the developers to code.”
A bluehammer user provides property-specific information not just about the location of the property, but also characteristics like bedrooms, bathrooms, living areas, and types of flooring. “With that information, we can make calculations behind the scenes for types of rooms to be included in the valuation by providing measurements, baseboards, number of outlets, HVAC vents, switches, doors, types of windows, etc,” said Naber. “We can get very granular, even factoring in wall thickness.” Then, the client gets a working model for estimating repairs at lightning speed. “We can do a 300-line-item estimate within 30 to 60 seconds,” he said proudly. “It’s pretty amazing.”
Syverson noted that although bluehammer clients use the tool to get current valuations on properties they are considering buying or selling, the company also has a solid base of other real estate professionals using the tool as well. “Real estate agents are using it to get an idea of what a property might sell for and what types of improvements a client might make in order to boost that value,” he said.
The tool also helps agents come into a property and revise an owner’s ideas about what that property should list or sell for. For example, an agent can input data to indicate closer values to room size, presence of large amenities (like an outdoor kitchen) or small ones (like a medicine cabinet in the bathroom), and immediately get a revised estimate that is adjusted every place that change will affect the value of the house. Then, the agent and client can work together to determine what improvements to make or if they will sell the house as it currently is.
“You can adjust any quantity or quality of any item in the estimate,” said Syverson. “When you are done, you have a takeoff sheet right there that you can give to your contractor and start the work.”
Ongoing Research and Data at Length and in Depth
Naturally, a tool like bluehammer only works effectively if the data backing it is exhaustive. Clint Lien, the company’s vice president of cost research and business development, is intimately familiar with the data involved in making improvements and repairs to a property. After getting his contractor’s license at 19 and spending most of his life in the construction industry, Lien joined Bluebook in 2000 after consulting with them for a year prior.
“I have worked many different trades and with multiple types of subcontractors, so I understand what truly goes into specialized and individualized tasks,” he said. “It is my job to make sure we take every screw and the turn of every screw into consideration when coming up with a valuation.”
As an example, Lien took apart the “simple” process of replacing a one-square-foot section of drywall behind a door where a doorknob has knocked a hole in the wall. “This is a very common thing,” he said, “but there are multiple steps to the process that people overlook when they think about this process.”
Lien broke down the process, including every action, item, and individual who might be involved:
“First, you have to put plastic on the ground because you are going to make a mess when you cut the drywall and remove it. You are going to have to scoop that up and get rid of that. Then, you have to cut the drywall and place it, but you cannot just purchase one square foot of drywall. You will have to purchase three- or four-square feet, so you are going to have some waste. Then, you will use eight to 12 screws, which go into consideration when you are dealing with cost of materials. On top of that, you will have to factor in the time it takes to cut the drywall and put it in. Is that skilled or unskilled labor? There are hourly rates for both, and they are not the same. So, there is an additional factor of hourly time.
“Once the drywall is in place, you will mud, tape, texture, and eventually paint. Every step must be evaluated in extreme detail right down to the razor blades in the utility knife used for cutting the drywall. Everything is considered, then combined to give the client a simple, easy-to-understand result.”
Lien noted that most line items in a project involve multiple trades. HVAC projects, for example, will involve mechanical, electrical, and even plumbing experts. “Different trades have different skill sets, abilities, and skilled and unskilled pay rates,” he said. “An electrician will not earn the same rate as a carpenter or tile setter. We have to recognize all of this along with production time and the number of people each tradesman will need to support them.”
Naber chimed in, “We take all that data and all the related historical data already in our system about these processes and run it through the bluehammer system. Then, we segment by ZIP code. We start out very, very detailed, then make things simple to review and digest for the consumer, be they a contractor, a real estate agent, an investor, or a homeowner.”
Keeping It All In-House
Unlike most real estate data companies, bluehammer’s data is unique because it is organically derived, hosted, and analyzed in-house. The company believes this makes its data far more accurate than information derived from bulk-data providers, and they have the evidence to prove it.
“Technology has gotten very interesting in the real estate world,” said Syverson. “There is data available all over the place from tracking services, auction sites, widgets, you name it.”
Bluehammer data, however, is sourced from the company’s internal records dating back to 1964, when it was active in the insurance claims industry. The company constantly evaluates the results it provides consumers, working with clients and contractors to ensure that pricing and cost breakdowns are accurate.
“On pools of properties, our [predictive] evaluation numbers are within 2% of what clients ultimately receive when they sell the property to an investor,” said Syverson. “That resonates with clients because most investors have sophisticated valuation models that tell them what they are willing to pay for something, but they have to have a reliable repair number for that valuation. Otherwise, they will bid the unknown down in order to protect their returns.”
Syverson believes bluehammer’s high levels of accuracy will actually result in better offers for sellers as well as better deals for buyers.
“If you have a micro-listing of everything a property will need and how those changes will affect the end value, and those values are very, very accurate, then you can make a better and, in some cases, higher offer than you would otherwise,” he said. “A more informed buyer or seller is a more efficient buyer or seller, and that is good for the marketplace.”
“Our database is stout,” said Lien proudly. “It is organic and built, developed, maintained, and hosted in-house.” He recalled working with the founders and their two sons when he first started out at the company. The goal at that time was to “purify the [analytic] process,” he said.
“We also had to deal with new developments, new tools, new ways of doing things that make things faster,” Lien said. Something as simple as battery-operated tools becoming a ubiquitous item in construction zones changed not just the need for extension cords, but also how long a project would take. The company even factored in time saved because many tools no longer have to be plugged in.
“As things progress, we take into consideration how technology improves and changes things in all different types of processes from insulation to roofing,” Lien said. “We stay current on construction trends and technology trends, and it all goes into a database that has been actively maintained and tested for more than 50 years.”
One of the most essential ways bluehammer keeps its data current is by remaining firmly ensconced in the active construction field. Lien and Naber work with a team to constantly monitor and refine processes in the field, identifying new products that are becoming mainstream, such as using plexiglass to cover vacant properties’ windows instead of plywood, and determining exactly how that affects not only the cost of materials but the time spent on installation and procurement. The company even factors in the time it will take for the appropriate service providers to acquire the materials and arrive at the job site, considering the cost of gas and travel just as a service provider will bill – directly or indirectly – for these costs.
“We update our costs, at a minimum, every quarter, and more frequently if necessary,” said Syverson. Last year when lumber prices surged with what Syverson referred to as “head-snapping” speed, the company stayed in direct contact with clients to make sure they understood what might be coming. “It is very important to us that the people using our product do not get surprised,” Syverson said. “We need to let them know a price is moving and why, so they can react appropriately when dealing with their own clients.”
Relieving the Anxiety of the Unknown
All three members of the executive team at bluehammer emphasized that one of their primary goals with the company is to make sure that everyone involved in a real estate project can obtain and utilize the information the tool provides. “We often hear about real estate agents using this tool because they are able to come so much closer to value estimates when they are talking to potential clients about listing a house,” Syverson said.
Lien added, “Instead of taking hours and hours talking to contractors and getting estimates that still may not be accurate if you did not ask all the right questions or include all the right information, you can get a comprehensive, line-item estimate of cost on a property in about five minutes once you enter some basic information about a property.”
Although the data and analysis are complex, the values a bluehammer user must enter are simple: dimensions, locations, quality, and yes/no/quantity information about amenities and room features.
“We have trained more than 10,000 agents to use our platform and technology,” Syverson said proudly. “There is no reason every agent, investor, inspector, asset manager, or homeowner should not go into a transaction armed with the best tools and the best information possible, and that means they should go in with bluehammer.”
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Big Projects, Big Orders & Big Decisions
Bluehammer is unusual in its space because it is equally accessible for individual and institutional investors. The tool is used daily by investors and agents calculating potential results of repairs and improvements, but the company has its share of behemoth clients. One of these clients is the Department of Housing and Urban Development (HUD). Bluebook has held a HUD contract for the past 12 years with their RepairBASE product; the company helps the department audit estimates from contractors doing property preservation work all over the country.
“The bluehammer repair-based product contains the core data and information we use to help HUD and help contractors audit costs and make sure that they are in keeping with regional trends and pricing,” Syverson explained. “We use all that information to build up the database and keep our estimating process simple on the user side of things.”
The relationship with HUD is just one example of a large, federal body coming to Bluebook for help. They have also worked with the GSEs to evaluate large pools of properties with tenants in place in order to establish a reasonable value on the portfolio. “With tenants living in the houses, you cannot just let investors go in and look around,” Lien explained. “However, we were able to send in a real estate agent to do a broker price opinion (BPO) and an inspector to estimate repair costs. Those two people were able to collect all the data we needed to show clear, consistent, accurate values to investors. In most cases, if the real estate agent used bluehammer, the inspector estimate could be eliminated.”
Syverson added, “BPOs are very good for getting accurate comp valuations and condition assessments, but they are not always accurate about what it will take to get a house to those values. That is where bluehammer comes in.” On a major GSE project, the BPO repair estimates were roughly 37% off – either too high or too low – largely because BPO models do not use an estimating tool and the agents may over- or underestimate necessary repairs (for example, replacing a 100-foot fence when only 10 feet of the fence are problematic).
“Armed with a bluehammer estimator, agents and inspectors can get very specific about the repair required and the resultant cost,” Naber said. “This saves everyone money and makes for a much more informed decision when an owner is dispositioning a property.”
“Not having an accurate repair estimate leads to underbidding on the part of the investors the GSE wants to bid on the properties,” Syverson said. “People bid down unknowns because they cannot clearly tell what the condition of the property truly is. Using bluehammer gives the transaction clarity and leads to better results for everyone involved.”
