Appraisal Observations from the Middle

I live between Appraisal Land and Lender World. I work for a technology company that provides, among other solutions, an automated appraisal review tool for lenders. That means I work with lenders reviewing appraisal reports every day. It’s part of my job. I am also a licensed appraisal assistant. I do not claim to be an expert on lending or the art of appraising, but I do have a unique perspective into the two industries because of my position in the middle.
The appraisal and lending industries are kissing cousins, yet at times, they couldn’t seem farther apart. We hear a lot of chatter about the difficulties one side has with the other. But the interesting thing I’ve found is that lenders and appraisers basically want the same thing. Lenders want to receive appraisal reports with well-supported estimates of value, in a fair amount of time, so they can close loans for their borrowers as quickly and efficiently as possible. Appraisers want to do a good, thorough job on each appraisal assignment and not receive multiple requests for more information, so they can finish one assignment and move on to the next as quickly and efficiently as possible. Time is money for both the lender and the appraiser.
If lenders and appraisers have the same basic goal, why aren’t they working together more smoothly? Every day, lenders return appraisals to appraisers for more information. These delays may result in the loss of a rate lock, a modified closing date, or even loss of the loan. Every day, appraisers struggle to respond to lenders’ requests for more information while balancing new assignments. When appraisers have to put a current assignment on hold to address a question on a previous assignment, the turn-around time for the new assignment is impacted—as are their profit margins, which are razor-thin to begin with. So what are lenders and appraisers to do? I think I have a solution.
My big idea: Communication.
Almost every lender I work with uses an appraisal review checklist. That’s because checklists are a major part of what has made my company’s RealView technology platform so successful. It automates lenders’ custom checklists so they don’t have to sift through heaps of data to find an answer. RealView does it for them. Lenders need only focus on the items that do not meet the rules specified on their checklists. Here’s where my observations from the middle start to get interesting. Typically, the lenders’ appraisal review checklist is not shared with the appraiser. I’m not sure why this is, but it’s something that lenders may want to rethink. Sure, there are instructions in the scope of work/engagement letters lenders provide to appraisers, but that’s not enough to get appraisers and lenders on the same page. On the other hand, if the appraiser knows exactly what the lender is reviewing, he or she is empowered to make sure those items are fully addressed.
Communication solves a lot of problems, but it’s got to be clear. When it is, the back-and-forth updates and revisions that lenders have to request start to disappear. I see it happen all the time. When lenders begin using Platinum’s RealView appraisal quality verification tool, they start getting clear, succinct information about the exact items that didn’t meet their checklist rules. At this point, they can—and many do—communicate those findings directly to their appraisers. Once the appraiser understands the items the lender is reviewing, he or she can anticipate those questions and address them upfront. Over time, my clients have seen dramatic improvements in appraisal quality. By “quality,” I mean getting an appraisal that is underwriter-ready the first time the lender receives it.  Appraisers want each appraisal order to run as smoothly and efficiently as possible, just like lenders do. There isn’t one appraiser around that wants requests for additional information. From what I’ve seen with my lender clients, once appraisers know what’s expected of them, they start providing additional information or commentary from the get-go, so the lender doesn’t have to return the appraisal for more information. They eliminate the problem before it has a chance to surface. This isn’t just a win-win. It is a win-win-win—for the lender, the appraiser and ultimately, the borrower.
It’s time to start carrying transparency into the lender-appraiser relationship. Lenders, I encourage you to share your appraisal review process with your appraisers. If you work with appraisal management companies, make sure to provide them with copies of your checklist so that they may distribute it to their appraisers. Appraisers, ask your lenders about their review criteria. Ask them to share their appraisal review process with you. The more informed the appraiser is about lender expectations, the better the end result.
Lenders and appraisers have access to a tool that solves a major issue that lies between them. And, unlike most other solutions in our industry, this tool is 100% free. Let’s take advantage of this no ramp-up, zero-investment, easy-to-use tool that never needs to be upgraded or replaced. Let’s start communicating.