John Liss is running on fumes. He’s up very early every morning building his company FAST. And he’s doing something important and having fun.
John founded True Footage, with a Harvard business degree in hand, to help a rather sloppy industry get a little more accurate. A real estate data authentication platform built to streamline residential transactions, they provide AI-based residential transaction data for the purpose of reducing subjectivity in appraisals and tax assessments for home buyers, from inaccurate square footage to under-assessment for minority property owners. The company uses video, computer vision, and machine learning to offer products such as square footage certification, floorplan, and property data capture, enabling lenders to save time and standardize data. The company operates in 17 states and is the fastest growing appraisal provider in the country. John started his career as a real estate agent before moving into real estate private equity and development. He has a BA from Harvard where he wrote his thesis on the real estate brokerage industry and an MBA from Harvard Business School.
Read the podcast transcript here
Eve Picker: [00:00:08] Hi there. Thanks for joining me on Rethink Real Estate. For Good. I’m Eve Picker and I’m on a mission to make real estate work for everyone. I love real estate. Real estate makes places good or bad, rich or poor, beautiful or not. In this show, I’m interviewing the disruptors, those creative thinkers and doers that are shrugging off the status quo, in order to build better for everyone. If you haven’t already, check out all of my podcasts at our website RethinkRealEstateForGood.co, or you can find them at your favorite podcast station. You’ll find lots worth listening to, I’m sure.
Eve: [00:01:06] John Liss is running on fumes. He’s up very early every morning, building his company, fast. And he’s doing something important and having fun. John has always been fascinated by the real estate industry, but, more often than not, John says people do not realize the true value of their real estate asset because the industry is a little sloppy. If someone enters 1100 square feet instead of 1200 square feet into a sales listing, then when it’s appraised, often using square footage comparisons, one hundred square feet of value is passed along to the buyer for free. Sometimes a subjective decision is made about a neighborhood or a street. And that, too might inaccurately value a property. John has set out to solve that problem with the company he launched in 2019, True Footage. They provide residential appraisals that are super accurate, using lidar and machine language-based software. Not only can they create faster turn times and more accurate underwriting for lenders, they are adding objectivity to a process that is often highly subjective and they are in demand. Over the last year, John has added 200 employees. He’s in 17 cities and he’s only just started.
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Eve: [00:03:01] Hi, John, thanks so much for joining me today.
John Liss: [00:03:04] Thanks for having me.
Eve: [00:03:05] I’m pretty excited about what you’re doing, but I wanted to start by going back to your thesis when you were at Harvard. You got a high honors for thesis on steering practices and I would like to know what steering practices are.
John: [00:03:20] Yeah, sure. So, my background has always been in the real estate industry. I started getting interested in it when I was about 12 years old. I grew up right outside of New York, and it was always a running joke in my family that I was going to become a real estate agent, but I actually decided to do that between high school and college. So, I took 15 months off and worked in a real estate office prior to going to undergrad. And so, then when I got to school, I knew that I wanted to incorporate real estate into my studies somehow and wrote my senior thesis on the residential brokerage industry. Doing an ethnographic study of New York City real estate industry. And New York City is a particular real estate market. Obviously, you have the highest prices in the country, but also you have building types that almost operate like country clubs. And those country club buildings are called cooperatives. Basically, it has in history have been very, kind of, drivers of segregation, I would say. And not just racial segregation, but also religious segregation, to the point where people knew which buildings accepted what kinds of people and then brokers would perpetuate those stereotypes by saying, oh, you can’t go to that, you can’t go to that building because they don’t like Jews there. Or you can’t go to that building because you don’t belong to your kids, don’t go to the right schools. And so that was kind of the history of New York. And obviously, over time, the city’s gotten better and the practice has dissipated a little bit, but it’s definitely a major part of the residential story on Manhattan.
Eve: [00:05:03] Interesting. So those are steering practices, right?
John: [00:05:09] Yeah, and you know, there’s been a lot of talk, now we’re in the appraisal industry, and there’s been a lot of talk about kind of what’s going on there. But I would actually argue that it starts in the brokerage space and appraisers have had to deal with kind of historical data that is, you know, punished by redlining and punished by some of these other practices, and it makes the job of the appraiser much more difficult because of kind of all of the upstream problems that are happening.
Eve: [00:05:35] So how did that influence your life? That thesis.
John: [00:05:40] Oh, I mean, I’ve been obsessed with real estate ever since I was little, and I always knew that I wanted to go into a career in the real estate industry. And I think another thing that I noticed in that thesis was just the use of data and how brokers use data and the importance of having clean and accurate data. I’ll tell you another part of the, not in the thesis, but later on in my journey in the real estate industry, I walked around New York City with a 3D camera. It was 23 pounds, so I looked a little ridiculous. And I measured properties and compared them to what was listed on Zillow or StreetEasy, which is the New York City version of Zillow. And I was finding discrepancy of 16 percent on average, and these are people that are buying houses for one thousand two thousand even nine thousand dollars per square foot. So, if you have this discrepancy and the brokers are reporting, you know, misreporting square footage, then you have a lot of people buying things that they don’t really know what they’re buying. And so, that kind of experience also informed my decision to eventually try to start a company that was all about objectivity and all about kind of getting to the right answers and making sure that the people who were determining those answers had all the tools they needed to deliver that service.
Eve: [00:07:01] So, the name is extremely appropriate. True footage is the name of your company, right?
John: [00:07:06] Yeah. So, the name definitely is from the square footage, but we’ve evolved immensely into an entire platform for appraising and beyond, so I’m really excited about kind of where we’ve been, but very excited about where we’re going.
Eve: [00:07:21] What are some examples of what goes wrong? Just, you know, besides in New York. There was an article recently about, in Northern California, about a black couple suing for a really lowball appraisal. They got a better one when they sent a white friend. Is that a problem that you can solve with your platform?
John: [00:07:45] Look, I think it’s important to note that ninety seven percent of appraisers are really, really good at their job. And so, there are some people that are really bad at their job.
Eve: [00:07:55] That’s true in every profession, right?
John: [00:07:57] Exactly. And I think there are people who, you know, have subconscious bias that affects their decision making. And again, that’s true in life. And we need to work hard to get, first of all, get those people out of the industry, but also provide tools to people to make sure that all of these instances are completely mitigated because it’s totally unacceptable, obviously. So, you know, those cases exist, and I think the main problem around kind of why this happens is just a lack of objectivity. Yeah, you can use technology to create more objective reports. So, one thing that we do is we have a ladder-based mapping solution that extracts square footage data using video, and we used adjustment technology that makes sure that our adjustments to the comparables are accurate and we have automated ways in which we report other parts of our data and make sure that some of the data that populates all the forms is done in the most transparent way. Because the problem is, a lot of the times, is the precedent data is terrible. So you have the MLS, where brokers are telling a story and they manipulate data in order to get across their vision of what they want to sell the property. And then you have County, which, you know, especially during COVID, they haven’t been out to assess a property in several years. And so, a lot of this information is extraordinarily stale. So that’s why the appraiser is more important than ever in terms of delivering accurate data to the equation because without them, you’re using data that is just oftentimes either purposely or im-purposely wrong.
Eve: [00:09:40] So that’s what True Footage does. Tell me exactly how it works, like do you have clients who come to you or, you know, how does this little business work?
John: [00:09:50] Yeah. So, I mean, we’re a full-service appraisal business and also a valuation business. So, what that means is we deliver appraisal reports, but we also can deliver alternative valuation reports as well. And we’re live in 17 states. We’ll be, call it in over 25 by next quarter. We have over two hundred employees and we’re working with over two hundred vendors already. So, what was a small little business is quickly resonating with banks and with customers, and we’re really excited about the progress, but really feel like we’re in the top of the first inning here.
Eve: [00:10:28] Wow, so are you in my state, Pennsylvania?
John: [00:10:33] We’re coming. We actually are looking at a Philadelphia office, but I know you’re in Pittsburgh, so we got to get…
Eve: [00:10:37] Oh yeah, it’s a big state. It’s the other end of it.
John: [00:10:40] Well, now that I met you, maybe we’ll get there faster.
Eve: [00:10:43] Yeah, OK. So, but still, who are your clients and how do they come to you?
John: [00:10:48] Yeah, so most of our customers are banks, and we develop relationships with them through all of our appraisers. So, we have appraisers around the country, they are best in class in each of their markets. We identify them, then we sign them on to the platform. And most of their banks are, you know, excited to work with them and continue to work with them. I think the way that the industry works is most banks have a scorecard system where appraisers are scored based on how accurate their reports are, how fast they get work done. And so, at a time like this, where volume is at an all-time high and the appraisals are taking longer than ever, people who are at the top of the scorecard are, continue to get more demand for their work because they’re good at their job. And so, we look for those people.
Eve: [00:11:37] Yeah. And actually, if any of our listeners don’t understand this, when you purchase a building and you go to the bank, the bank will order the appraisal. You don’t order the appraisal. The bank orders the appraisal. So, it’s a third-party discrete appraisal that they have control over, if you don’t provide one for them. So, I can see how banks would be like your most important customer for growth.
John: [00:12:00] Yeah, and I think that’s really important this third-party aspect, because obviously after 2009, what happened was that there was just not enough control, and a lot of the bad things happen. And so, the kind of third party component of the appraiser acting as an independent evaluator is an extraordinarily important part of the real estate engine in this country.
Eve: [00:12:25] So what’s been the feedback you’ve gotten from banks? What are they seeing in your appraisals and why are you growing so fast?
John: [00:12:33] I think everybody’s excited. You know, there’s a lot of change going on in the appraisal industry right now because of kind of, you know, the increased volume during COVID demonstrated a need for just faster and better reporting. I think generally what’s important to note is the appraisal industry, you have to deliver the reports in a way that is within the guidelines of Fannie and Freddie. And so. how the sausage is made is important but delivering the sausage in the fully compliant way is the most important thing, and that’s exactly what we do. So, the output kind of looks pretty similar to what a traditional appraisal model would look like. It’s more just kind of what’s going on internally to make sure that all of our data is done appropriately. The quality is high, and it’s delivered faster than other people in the market.
Eve: [00:13:24] Ok, so any favorite success stories? Any interesting facts on Earth?
John: [00:13:30] Well, that’s an interesting question. I can’t think of something right now but let me come back to you on that.
Eve: [00:13:36] Ok? And how long have you been in business for? You started. True Footage…
John: [00:13:42] So the idea came in business school, but we commercially launched on July 1st.
Eve: [00:13:48] And you’ve got 200 employees?
John: [00:13:51] Yes.
Eve: [00:13:52] Wow. You must not be sleeping much.
John: [00:13:56] I’m so excited, I’m not kidding, I beat my alarm clock by three hours every day. I literally am having the time of my life and more importantly, I think our appraising team is having a lot of fun. I mean, we have people that have been appraising for 30 plus years on the roster that said they’ve never had this much fun. So that’s kind of the best part of this all, is is getting buy-in from people that have been doing it much longer than I have and making sure that they’re super excited and pumped about kind of where this is going.
Eve: [00:14:27] Let me ask you, what did it take to launch? What happened before the launch?
John: [00:14:31] Oh God, a lot. I mean,
Eve: [00:14:33] That’s really what it’s all about, right?
John: [00:14:35] I had bad days. You know, I remembered like calling my ex-girlfriend once. I remember, just like worrying about kind of like, am I on the right track? There’s a lot of squirming. I had the idea originally that it was a square footage calculator. You know, I thought, why is it that, you know, we have our biggest asset in our lives, and we don’t know anything about it? There should be more verification and square footage is the biggest driver of value. And realize that that wasn’t enough of a business, and we needed to expand kind of the product offering. And obviously, COVID hit and what was a hardware product originally became a software product because Apple released their iPad that had Lidar in it. And there was so much literature going on about the appraisal industry around kind of the increased turn times and the issues around bias, which, you know, now the Biden administration is addressing. And I thought, wow, we had spent so much time building this technology. Let’s apply it to a broader industry. And that kind of was a big moment. We signed up. I got to work with my CTO who’s phenomenal, and he has a background in the appraisal industry as well. And we said, you know, let’s go at this and let’s spend the next six to nine months with our heads down building and then launch in the summer. And that’s kind of what we did.
Eve: [00:16:02] How long was that pre-launch period altogether, from idea to launch?
John: [00:16:07] Almost two years when I came up with the original idea. I was also in school. So, the innovation lab at school was an amazing place to bounce ideas and learn. And so that was kind of, I don’t want to say I was dragging my feet because I wasn’t, but it was definitely, you know, I knew once school ended, it was go time.
Eve: [00:16:29] So now you’ve launched, what are the biggest challenges you’re encountering now?
John: [00:16:36] That’s a good question. I think, you know, speed is an interesting one because obviously the incumbent banks have their own processes and just getting everyone on board and fast enough and getting order flow at the pace, we would like it. We obviously are appraisers are incredibly busy, but I think just generally getting everyone to move in sync together with all the different stakeholders is one. And we want to deliver more products. We have over five products in our kind of development phase right now. And so, I think just getting all of those out the door and delighting our customers is kind of our main focus right now. So, the main issue, I would say, is that we just want to get a lot done and there’s only twenty-four hours in the day.
Eve: [00:17:26] Actually, let’s go back to Lidar. What is Lidar?
John: [00:17:30] Lidar is a technology often used in autonomous cars that basically measures depth, and so it stands for light detection and ranging. And what it is is, when it’s embedded in all of the new kind of Apple products for virtual reality. Obviously, we’ve been seeing a lot about the Metaverse, et cetera. And so what it allows for is for using video to measure depth. And so, when you create a video measuring depth, you’re able to extract measurements and get to really accurate square footage data. I mean, you think about traditionally how floor plans are measured, and I had to, when I was an intern in my office, I would have to sit with the floor plan measure and watch him for four hours. And it was really with measuring tape or a single point laser if you were lucky.
Eve: [00:18:19] Right. Oh, a little tool that you roll on the ground, right?
John: [00:18:23] Exactly. You’re an architect, so you must have seen it before, right? And so, I mean, it’s crazy. So obviously with Lidar, you’re taking millions of points. It’s not just one point, and we like to think that all rooms are rectangles, but the truth is they’re not. And so having access to this lidar where you can create a map that’s much more dense in terms of the amount of points it’s collecting, is a huge value add, and also helps the appraiser save time. So, the appraiser is really happy because a lot of their risk has been mitigated. There’s nobody that’s going to come after them about the square footage because they know that it’s been validated by this technology.
Eve: [00:18:59] So tell me then, an appraiser’s job. I know what an appraiser does, but maybe most people don’t. It’s pretty tedious. What’s the job for you look like?
John: [00:19:09] Yeah, I think appraising is really cool and it’s something I wish, honestly, when I chose to be a broker, I might have chosen to kind of start as an appraiser because you really learn how to value things in the market. I mean, we have people that have leveraged their appraising career and gone into other parts of the real estate ecosystem on the side, and I think that’s really cool. What does an appraiser do? It’s all about valuation, so think of each property is almost like a little puzzle and you have to kind of get to what the value of that puzzle is. So, it starts with getting an order in and you have to bid on how much you think you should get paid for that appraisal, basically. And then you drive to the site or someone in your, your trainee drives to the site. And you conduct the inspection. You record all of the information around quality, condition, size and then you drive around, and depending on the bank, you have to shoot comparable properties for that. And then you go back to your desk and you kind of fill out a grid. And that grid is pulling comparable properties and then adjusting those comparable properties back towards the subject property to make sure that the subject property if you’re looking at [???]
Eve: [00:20:26] So you get like, I actually did an appraisal course and I passed it, but so, if you have two properties that are the same and one of them has a porch with a view, there’s going to be extra points for that. It’s going to have extra value or one of them has a garage and one does not. All of those things come into play, right?
John: [00:20:45] Exactly. And so, then you kind of arrive at an appraised value for that property and then based on what the contract price is for the house. Or if it’s a refi, you either get approved or not for that amount. And then if you’re under, you have to come up with cash in a purchase situation to kind of squeeze, fill that gap.
Eve: [00:21:07] And so, now with this new tool, everyone has an iPad?
John: [00:21:12] Yeah, all of appraisers have the Lidar iPad.
Eve: [00:21:15] And so they go out and they take a video of the space inside and they can get very, very accurate, true footage.
John: [00:21:22] Exactly. And I think also they can go back to that video and refer to it. If they forget, if they’re doing multiple inspections in a day and they’re like, oh, wait, which one was that? And so it’s much more kind of ability to check back.
Eve: [00:21:35] So your business is really, truly built on this new technology. You really couldn’t do it without it.
John: [00:21:40] Oh, absolutely. And I think, you know, there’s so much we’re adding on the data science side as well for the dust portion of the job that is really going to standardize and automate the report with the appraiser fully in the driving seat. I mean, we’ve seen what happens when big companies try to ignore the human at the end over the past couple of months, and it’s a disaster. So you’ve got to have an appraiser in the driving seat, otherwise your accuracy is going to be seriously doubted.
Eve: [00:22:08] Ok, so I’m going to ask, the other services that you’re planning. Can you talk about them yet?
John: [00:22:14] Yeah, I mean, it’s more just around different products within the valuation services umbrella, right? So, you know, an appraisal is the gold standard, but it’s not the most appropriate valuation in every instance. Sometimes people just need kind of a refresh of their valuation quarterly or something like that, and so we’re looking to expand the menu of offerings so that our customers can say, for this house, I need this type of report and for this house, I need that type of report. We’re building technology that will allow banks to spit in and address and then let us tell them what kind of report they might want.
Eve: [00:22:52] What about larger commercial buildings? Are you focusing on them at all? Because, you know, you just made me think about when I have to do refinancing or after five years when my mortgage expires on my 25,000 square foot little commercial building. The bank orders another appraisal from scratch, and that person has no information about the first appraisal.
John: [00:23:15] You just told me I’m not sleeping, and now you’re asking me to go into commercial. I think commercial is coming, but I think we’re really focused. Residential is awesome because it’s over a hundred and forty million properties. And so, let’s get that right. And then we can think about kind of next.
Eve: [00:23:33] Ok, so one last question what’s your big, hairy, audacious goal?
John: [00:23:40] My big, hairy, audacious goal. I’ve never heard it asked like that…
Eve: [00:23:44] It’s a BHAG. You don’t know what a BHAG is? A big hairy audacious goal?
John: [00:23:50] Is that an Australian?
Eve: [00:23:51] No, I don’t think so.
John: [00:23:54] Well, it shows what I know.
Eve: [00:23:55] It’s probably an older generation actually, John.
John: [00:24:00] We want to rebuild the residential data sector. We think that there’s a lot of, a lot left to be desired, and we think that appraisers are kind of in the prime position to be the leaders of that change. And that’s why we’re focused on appraisers being a part of the story and really kind of the cornerstone of that story. And we believe that access to accurate data is in the best interest of everybody involved. It’s in the best interest of the consumers and the homeowners. It’s in the best interest of the lending industry. It’s in the best interest of the U.S. government who’s backstopping all of this activity. And nobody solved the problem yet, and we’re on our way.
Eve: [00:24:42] Well, I’m super excited just listening to you. It sounds, I think it sounds fantastic. Thank you very much for spending some time with me today.
John: [00:24:50] Thank you so much. I really appreciate it.
Eve: [00:25:08] John is unpacking a tiny little piece of the real estate industry that could have a dramatic impact for everyday people. True Footage promises equitable appraisals no matter what neighborhood your house is in.
Eve: [00:25:33] You can find out more about this episode or others you might have missed on the show notes page at our website RethinkRealEstateForGood.co. There’s lots to listen to there. A special thanks to David Allardice for his excellent editing of this podcast and original music. And thanks to you for spending your time with me today. We’ll talk again soon, but for now, this is Eve Picker signing off to go make some change.
Image courtesy of John Liss, True Footage