Appraisals And Social Distancing: A Living Lab

Appraisals And Social Distancing: A Living Lab

Currently appraisers are taking a ‘belt and suspenders approach’

BY RICHARD GARRIE | SPECIAL TO NATIONAL MORTGAGE PROFESSIONAL

Limiting in-person contact is on the minds of everyone, causing the appraisal process to endure unique challenges. Appraisers are considered critical infrastructure employees, lender pipelines are bursting at the seams, yet most homeowners do not want them in the house – likely a prudent stance. A few states have even disallowed appraisers from entering homes. When your own brothers and sisters are banned from visiting, the likelihood of a complete stranger roaming around the house is low.

In response, and moving with unprecedented swiftness, the respective governing housing agencies announced appraisal liabilities to minimize the need for interior inspections for appraisals during the crisis. They are allowing information to be gathered from sources that have, historically, not been viable sources for appraisers.

These new guidelines and regulations have put alternative valuation products front and center, such as exterior-only (i.e., driveby) or desktop appraisals. Before the pandemic, these products were not often used. Muscle memory has kicked in for all of us – in a “Back to the Future” sort of way. Not surprisingly, most appraisers tend to prefer the exterior drive-by appraisals, as they are also able to get a sense of the neighborhood, which is helpful in determining a home’s value. With their name and reputation on the line, appraisers desire to see it for themselves where possible. I will not bore you with all of the maneuvering and adjustment that had to be made, but I will highlight a few of the noteworthy aspects.

SPEED AND FLEXIBILITY

Our panel of appraisers has always been the center of our universe. Therefore, it is fitting that I start with them. There is nothing like a national emergency to illustrate what kind of vendor partners you have. The speed and flexibility in which our appraisal panel has adapted to so many overnight changes have been inspiring, as has their professional dedication.

As expected, regarding these alternative methods, the two fundamental dimensions everyone wants to know about are turn time and quality. Here at United States Appraisals both dimensions are performing as expected, in line with established service level agreements. These are not new or unfamiliar appraisal products. They have just been less utilized in the recent past. And, regardless of the chosen method to assess value, appraisers simply never waiver on the quality of the result, always willing to vigorously defend their work product.

Dusting off and achieving such stability has been a monumental effort, as we contend with barriers not generally in play. For example, some transactions have taken a bit longer due to factors outside of our control, such as limited access to county data, making market analysis more challenging. Fortunately, the 3,000- plus counties across the U.S. have made great strides in recent years getting their data online. Appraisers also rely upon multiple listing service information and other third-party data sources to identify the property details.

DEFENDING FOR YEARS

Looking ahead, we fully anticipate the potential for added scrutiny and “defending the valuation” on all reviews completed during the pandemic’s temporary guidelines. While we always gather and maintain the necessary documentation on how we derive values, we are currently taking a “belt and suspenders approach,” documenting actions, data sources and overall methodology like never before. We will need to respond confidently and defend our conclusions years into the future, so we maintain a record of all market factors and sources at the time of the report.

Rapidly evolving technology is at the heart of our industry and now compulsory in the appraisal and valuation process. When performing due diligence on potential appraisal management companies (AMCs) to engage, go much deeper than their vendor onboarding process, turn time and quality metrics. This trifecta is still essential, but you should be taking a deeper dive into the AMCs underlying methods of achieving success and systemically replicating it on every order.

Ask the AMCs about their technology road map – seeking specific examples of how they have deployed new technology, and about the resulting benefits to their organization and its clients. These are the new foundations which that best-in-class AMCs are being built. The installment of such technology pillars should touch all appraisal and valuation products, including the alternative methods heavily relied upon during this pandemic. Examples include:

• Artificial intelligence and machine

learning: These technologies can fast-track appraisals by incorporating real-time scheduling and the ability to instantly analyze thousands of specific data points, appraiser trends and other critical essentials.

• Robotic process automation (RPA):

Technology that allows you to configure software (‘robot’) to mimic and integrate the most repetitive actions of humans (e.g., appraisers, QC staff, etc.) within digital systems to complete a business process. Via the user interface, RPA captures data and executes steps once performed by humans, as they interpret data, initiate actions, and talk to other systems. It’s about capturing decades of organizational, appraiser and employee subject matter expertise, best practices and checklists, and replicating them with robots that never take a break or make errors.

• Mobile apps and geocoding:

Appraiser proximity to the subject property has always been essential, leveraging those most knowledgeable on the area. Mobile technology, combined with geocoding, is the perfect combo to identify current appraiser location and availability to schedule in real-time. It works the same way as finding nearby Uber and Lyft drivers. Of course, proximity alone is not sufficient, so you must ensure the AMC also applies past appraiser performance factors when assigning orders based upon mobile devices.

And, regardless of the chosen method to assess value, appraisers simply never waiver on the quality of the result, always willing to vigorously defend their work product.

THE PATH FORWARD

Speaking of mobile technology, several AMCs have launched apps to deliver the best results for the revived alternative appraisal products. These apps are built to give homeowners step-by-step guidance to take and submit the requisite photos. I had always heard that people support what they help create, although I never envisioned homeowners being such an active participant in the home valuation process.

There’s some irony there, as homeowners have often shadowed appraisers going room by room, trying to add as much insight as possible to maximize the final valuation – not always welcomed by appraisers. Now we deliberately ask homeowners for that assistance. Many homeowners are often eager to offer video walkthroughs as well.

While nothing takes the place of an on-site appraiser inspection, being able to see photos adds significant benefit to the temporary process. It also provides some peace of mind for all stakeholders.

In the end, all guidelines during all times, temporary or permanent, are intended to mitigate risk and protect individual assets and portfolios.

What we are presently experiencing could very well be a living lab to help further define the path forward as we wrestle with appraiser shortages and very few new entrants to the profession, combined with the continued availability and reliance upon data.

Richard Garrie is chief valuation officer for United States Appraisals. His primary role is leading the quality assurance team.