WE’RE HEARING...that the days of tension between appraisal management companies and individual appraisers may be coming to an end.
Scott Pickell, vice president of operations at LRES, told me that while there was resistance to AMCs when the companies first emerged, that resistance has diminished as the industry has grown.
At the recent
“The majority of appraisers have accepted that AMCs are here to stay. We want to be the company that appraisers want to work with,” Pickell told me. “They want to feel respected. They want to feel that they are the experts in their area.”
He said appraisers are key to a good customer experience in a housing finance transaction, since they are often one of the few people involved that the homeowner or homebuyer actually meets, as they often do when a full appraisal is performed—and it’s mandatory today for all federally related first mortgages. As such, the appraiser is essentially representing the AMC and the lender when they meet a property seller or buyer.
Pickell said this year’s Valuation Expo, the appraisal industry’s big annual confab, had a strong focus on time management, market trends, and the impact that rising home prices are having on the appraisal business. Technology was also a key concern, he said. The improving market has created a quandary for the industry.
“How does an appraisal appraise in this market when your sales prices are higher than your prior comparables?”
In addition, appraisers face a more skeptical client base in part because everyone has access to basic home price estimates via websites like Trulia, Redfin and Zillow.
That makes it more important than ever that appraisers have the ability to analyze market trends in the local markets they serve, right down to the ZIP-code level. What if an appraiser says a market is stable, but other free, online sources tell clients, real estate agents and consumers that prices are rising? The appraiser has to be able to justify their determination, and the reader of a report today has to be able to see that the appraiser really did their homework.
One advantage appraisers have is access to the Multiple Listing Service, which requires a subscription. That reveals what the current listing prices are for homes actually on the market today. And it’s the one key piece of information that isn’t readily available to everyone, Pickell noted.
Technology prowess is a top concern of the industry these days as appraisers and their clients struggle to adapt to a new regulatory framework around the mortgage industry, Pickell said.
“There is no uniform process for appraisers to deliver their appraisal to the client.”
Appraisal management companies such as LRES have developed proprietary integration hubs that link their mortgage lending and servicing clients with local appraisers to speed up the process of delivering appraisals and to improve quality control, so that fewer reports need to be returned for revisions or corrections.
One thing driving the increased emphasis on technology and electronic delivery is Fannie Mae’s requirement that appraisals be delivered as XML files, as opposed to the PDF files most often delivered by AMCs to their clients in the past.
“That gives the client the ability to upload the file to the Fannie Mae hub. It’s all done electronically,” Pickell explained.
In a world in which mortgage loans are viewed as a commodity, quick turnaround time is one way lenders can distinguish themselves from the competition.
But Pickell said that appraisal accuracy is just as important as delivery speed.
“What the clients want is an appraisal report that is a clean appraisal report, one that will sail through underwriting.”
That means that AMCs must conduct quality control checks on appraisal files before they are delivered to the client. New state licensing requirements for mortgage lenders and new rules under the Dodd-Frank financial reform bill have added to QC pressure on the industry.
As for other valuation products, Pickell said that broker price opinions and automated valuation models should regain some favor as the home equity lending business picks up.
LRES is also has an asset management business to help clients such as mortgage servicers manage and dispose of REO. Pickell noted that is a cyclical business.
“We all suspect that in that side of the real estate world, as the REO gets cleared out and the values start to increase, we suspect that the homeowners that are upside down or in trouble maybe will be able to get out of their loans without having the homes taken back.”
He said clients often combine a BPO with a standard appraisal when trying to decide what an REO property is worth. While the appraisal may be the key determinant of the sale price, the BPO gives lenders a less “unbiased” view of what a real estate agent thinks the property could fetch in the market. In the end, they try to reconcile the two estimates to determine how aggressive they can be in pricing the property.
Ted Cornwell has covered the mortgage markets since 1990. He is a former editor of both Mortgage Servicing News and Mortgage Technology.
