A Hopkinton, Mass., company has hit pay dirt by exploiting the demand from lenders for lower-cost alternatives to conventional appraisals.

Market Intelligence Inc. says a rule promulgated last year under the thrift bailout law is a major factor in its growth from $1 million of revenue in 1994 to an expected $5 million this year and $12 million next.

The rule allows lenders to use unlicensed appraisers for home loans and home equity credits that don't exceed $250,000.

As a result, lenders have been scrambling to find alternatives to the costly full-dress approach, and Market Intelligence is one of the companies offering a product tailored to this demand.

The company uses data base research, supplemented by a network of real estate agents and other nonprofessional appraisers who drive by properties to verify the computer reports. The cost is $100 to $135 per appraisal, compared to the usual $250 to $300 charged by licensed appraisers.

"Five years ago, if you told banks you could do evaluations at half the cost, quicker, and just as accurately, they would have said it couldn't be done," said Mark P. Sennott, executive vice president of Market Intelligence. "Now, we're doing it."

Lenders appear to be warming up to the process. Providers of automated estimates, as such appraisals are called, say that even though banks lobbied hard for the rule they are sometimes reluctant to abandon the ways they've always done appraisals.

"The lending industry in general is not high-tech," said Vicky Cassens, product manager for an alternative appraisal system at San Diego-based HNC Software Inc. "They have to get used to this and establish a comfort level. It's a whole new way of looking at it."

Despite any discomfort, financial institutions are eager for the cost savings that come with automated valuations.

Many banks have come to rely on inexpensive appraisals for home equity loans, home improvement loans, and other second-mortgage products.

Freddie Mac, the Federal Home Loan Mortgage Corp., is using automated estimates in its Loan Prospector program, boosting the credibility of the practice. And the Money Store plans to incorporate the procedure into some mortgage originations soon.

"It's going to become the nature of the industry," said Cameron Rogers, assistant vice president of Shawmut Bank, Boston.

Six months ago, Shawmut tapped Market Intelligence to do automated estimates and drive-bys for its home equity products. The bank expects to save $1.5 million, or about a quarter of its annual appraisal budget, Mr. Rogers said.

Although some banks choose to restrict such nonlicensed appraisals to low loan-to-value products, Shawmut incorporates them into loans with as great as 90% LTV, said Mr. Rogers. Market Intelligence's appraisals closely matched traditional appraisals in a series of tests Shawmut did, he added.

Several players offer software that calculates appraisals from data that include comparables, purchase price, past sales of the property, tax- assessed values, and characteristics of the home. HNC and Reason are leading providers. They're expected to be joined soon by TRW, already a major source of credit reports.

Market Intelligence, one of three national distributors of HNC's product, appears to be blazing the trail for augmenting data base research with drive-by verifications.

It has set up a national network of 15,000 real estate brokers and agents to take the looks.

Market Intelligence is also promoting the quick turnaround time of automated estimates. Electronic valuations can be delivered within 24 hours; including the drive-by, the average turnaround is 3.1 business days. Conventional appraisals typically take six to 10 days.

When Market Intelligence does automated valuations in areas not served by HNC, it relies on on-line services, multiple-listing services, and bank data.

"Whoever gets national coverage first is going to win the market," Mr. Sennott said.

Mr. Byrd is a freelance writer based in Denver.

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