In the eyes of most of the business world, Steve Schaller had no doubt already reached the pinnacle: One of a handful of interns hired outright by Goldman Sachs while still at Syracuse University, Schaller quickly climbed the ranks and soon found himself on a team managing a book of around $3 billion of high-net-worth individual and institutional assets from Goldman HQ in New York City.
Though only in his early twenties, the future stretched out before him like a red carpet.
But a restless spirit and a desire to explore new frontiers of innovation and entrepreneurship led him just four years later to pursue a very different opportunity with Eleven James, a subscription-based “luxury timepiece membership brand.” After a few years of helping build that business from zero paid subscribers to around fifteen hundred, Schaller caught the attention of Cesar Devers, Chief Technology Officer of Bowery Valuation, a company that seeks to bring together “best-in-class appraisers with cutting-edge software to help them appraise smarter.”
Once again, when given the choice between stasis and an opportunity to help revolutionize a new industry, Schaller did not hesitate.
A&S recently spoke with the Bowery Valuation Chief Revenue Officer about his career, the unique challenges of appraisal, the even more unique skillsets of appraisers, and the current state of play in an unprecedented real estate market.
Why join Bowery Valuation?
For me, it was the perfect opportunity to unite the skillsets I had developed throughout my career. So, at Goldman, I received a high-end education not only in business, finance, and private equity, but also in how to meet the incredibly high expectations of clients with no patience for even average service. And then at Eleven James I figured out sales and how to grow a company. At Bowery, most of our clients are lenders, so it brings me back into the world of banking, but there’s also the entrepreneurial side of building a brand and a business. As Chief Revenue Officer, I get to take part in everything from marketing and business operation to sales and account management—that’s exciting to me. I learn something new every day. I learn a ton from our appraisers especially every single day. That’s exciting to me, too.
And you’ve proven a good fit, right?
I think so. We’ve taken our business from somewhere in the neighborhood of a hundred thousand dollars a month to multiple millions of dollars a month—even in a very tough market environment. We probably had twenty people when I started and now that’s in the hundreds. That’s not all me, obviously. But I feel like we’ve really built something pretty special here.
In this very volatile and active market, the appraisal process has only become even more important, right?
Absolutely. Appraisals are written for many different reasons, but, in most cases, we are the last stop for a lender who's considering making a loan. So, lenders are going through due diligence. Borrowers who are looking to either buy or refinance a property are providing all sorts of information. And our expertise and determinations—while always an essential part of the process—have become, as you note, more important as valuations are not as stable maybe as they once were, especially in a changing interest rate environment.
What has been the biggest takeaway from your five years at Bowery?
Again, just how skilled our team and appraisers truly are. I very quickly gained such a respect and appreciate for the craft of writing appraisals. When I was at Goldman, for example, we’d gain a workable level of expertise across every vertical of investment—but it was nowhere near as deep as what our appraisers bring to the table on any given asset on any given day. The attention to detail and minutia in every report that we write—and remember, we’re talking a 120, 130-page deep dive on each specific property—is just amazing to see. I marvel at their work every single day.
One thing that sets Bowery apart is the willingness to explore how leading-edge technology can make the appraisal process more efficient and accurate, right?
Yeah, totally. We were founded upon the premise that the appraisal industry had become a bit archaic. The founders looked out at an industry still writing appraisal reports using Microsoft Word and Excel—and thought, “There’s gotta be a better way.” So, what we've built is really TurboTax for appraisers—a powerful and complex web application: Our appraisers are still making every single valuation decision themselves, but rather than going to five disparate websites to grab information and putting it into Excel rows where they start from scratch each time, we’ve built an integrated platform that gets all available accurate public information—on rents, on expenses, you name it—to them faster. And each time we source new information, it’s saved for the next appraiser.
Then there’s formatting, maps, charts, graphs—our software is doing that stuff for you. We have a mobile inspection app where our appraisers are can take photos at property sites, and, using AI, those photos are automatically placed in the right place within our application and reports.
Most lenders currently are getting appraisal turnaround times in three, four, five, six weeks. Our goal is to always be able to provide our clients a standard two-week turnaround time on pretty much every single asset type most assets. ,ost times, if it's a simpler asset, like a multi-family asset or mixed-use property, we're providing seven as fast as seven day turns.
That's amazing.
Right? Appraisal has long been considered that the appraisal is quote-unquote the long pole in the tent for borrowers and lenders. We’re turning that into a thing of the past. We're still hiring best in class appraisers to produce best in class appraisal reports. And we're not asking them to rush the process—we're giving them new tools to enable them to their jobs quicker and better.
How do you see the current overall state of the rental market?
Rents across the country have largely stabilized. The outsized rent growth that we were seeing across every market when rates were effectively zero has not continued. Which is really a healthy thing. And across some of the major metros where rent growth was astronomical during the free money period, we've definitely seen a reverse in that trend, specifically in the Sunbelt where rent growth has now trended negative. In New York City, where we were founded and still our biggest market, rent growth has remained positive but lower than the rate at which it was growing at the beginning of 2022. So, in general, things have normalized a bit.
Where are multifamily cap rates these days?
There's not a one-size-fits-all answer. It really depends on product and location. Cap rates have certainly been rising across the board as interest rates have risen—albeit slower than we've seen interest rates rise, but still around twenty-five to fifty basis points per quarter. Again, it's hard to bucket—in the four and a half to five-point half percent range. Over the last quarter, we did see cap rates stabilize a bit more. The Fed took a pause and, in general, the outlook is for less aggressive continued rate hikes moving forward. We do believe we'll likely see some further cap rate expansion. But we're also hopeful the next moves by the Fed will take out some of the volatility that we've seen over the past year.
What kind of properties are the ones that have been more affected from your experience?
Office properties. The work from home phenomenon isn't going away and debt maturing on office properties is causing twenty to forty percent drops—maybe more in some cases—in value. Which has a huge impact on the market not only for office properties, but on the commercial real estate market in general. It just scares everybody—banks, lenders, owners, you name it. There's just a lot of doomsday reporting out there. It reduces the volume of transactions across the board that reduces price, clarity, and discovery. But, you know, appraisers look backwards, not necessarily forward, right? Outside of the office space, every other kind of asset class, at least as of today, seems to be fairly stable, even with rates as high as they are. The issue I think we're going to see is obviously with properties that were financed at very low rates and have to refi in a much different market environment.
What are the steps you think multifamily operators should take into consideration when appraising their property to maximize value?
I think from my end, the number one thing I've learned, is to have your ducks in a row. Do your due diligence to understand where you believe your property should be valued and then have the data and the documents to back that up. Don’t fall for the common misconception that the inspection is the appraisal. It's a very important part of the appraisal process, but the more important part is understanding that, as appraisers, we're really, really, really data driven. So, the more data and the more information that you can provide us, the more smoothly the process will go and the better our appraisal report is going to be.
Anything else?
Yeah, remember that appraisers are just normal human beings. They're actual people on the other end of the screen or phone looking to do their job to the best of their ability. Respect, to my mind, is always a best practice.
It is an emotional process for people, though, right? A lot is at stake. It seems to me one of the things Bowery is doing that has very real potential to reduce that stress and increase respect is shortening the process and increasing accuracy.
Yes. Providing higher quality, more data-driven reports with faster turn times than anyone in the industry helps. But we don’t plan on stopping there. The other side for us is to build and launch more client-facing technology to empower lenders as well as brokers and borrowers, improving the entire experience and process for everyone involved. The first tool we launched is a classic due diligence portal where instead of going back and forth during the appraisal process—sorting through, you know, a thirty-five email chain for documentation and information—we now have a portal where our clients can go in and simply input all the information and any notes that they have, and track the progress from there.
It’s a feel-good technology story—rare these days!
Yeah, hopefully! I mean, we have backing Goldman Sachs and Capital One. We just raised 16.3 million in a series B add-on. We’re continuing to grow our business nationally, continuing to really lean in on the technology side. The goals to make the appraisal process work better for everyone—and I think we’re making progress every day.
