24-Hour Appraisals: The Future or a Gimmick?

Rethinking Quality and Risk in Modern Valuations: Why Faster Can be Risky

Aside from the opinion of value, speed is often the next loudest talking point in any conversation about appraisals—but it’s also one of the most misleading. While accelerated appraisal procurement models promise faster turn times, they do little to address the concerns that matter most to lenders: inaccurate valuations, which lead to appraisal defects that create buyback exposure and margin pressures for lenders, ultimately contributing to delays and additional costs.

This isn’t to say that the prospect of 24-hour appraisals is not appealing: after all, who doesn’t like faster? But is it a game-changer or merely a gimmick?  In most instances, a full appraisal takes an average of less than six or seven business days to schedule and complete. Appraisals are not the roadblock in a loan manufacturing process that takes 40+ days.  So, while speed is valuable, it is not the determining factor in what makes a good appraisal, and an argument could be made that a fixation on speed can lead to shortcuts that affect quality.

Solving for the Right Problems

Today, lenders are facing greater scrutiny from the GSEs and investors over loan quality, in general, and collateral valuations in particular. Recently, Fannie Mae reported that collateral defects – like property damage, appraisal condition & quality rating inflation, and inappropriate comparable sale selection—are now accounting for nearly half of discretionary loan review defects. 

Pressuring appraisers to work faster is hardly going to address these issues. Improving collateral quality requires systems, workflows, and technology: First to deliver the right information to the best appraiser at the outset of an assignment, and then, once the order is completed, to review the work to catch defects and to understand the appraiser’s reasoning. Both steps are on the lender, or in some cases, delegated to an AMC and are out of an appraiser’s control.  

Fortunately, there are proven solutions and best practices that can catch these kinds of defects early in the process. 

Take defects like roof damage and water intrusion that can lead to “Ineligible Property” flags during post-purchase reviews. Cotality has developed a solution that uses AI to scan appraisal photos for red-flag conditions, such as tarped roofs, water-stained basement walls, foundation cracks, etc. These solutions confirm appraisers’ observations and help highlight items that may have been overlooked.

Similarly, widely used industry systems, like Mercury Network® and Collateral Management System® (CMS), provide risk-based workflows that, paired with integrated automated review solutions like Collateral Investigate and GAAR, can compare an appraiser’s conditions and quality ratings against historical property data and local market standards to automatically identify potential inconsistencies in condition and quality ratings. 

Running these systems on every loan won’t slow down the appraisal or review processes. Instead, they will provide a consistent, auditable level of quality assurance, reduce “stare and compare”, and free up experienced underwriters and reviewers to focus on more complex issues.

The Economic Impact of Quality
Getting an appraisal quickly can be a plus. But if the valuation requires extensive rework, it can create friction and delays and add operational costs to the underwriting process. One of the biggest slowdowns in the appraisal process is the back-and-forth between the appraiser and an AMC’s lender over administrative “corrections” that often don’t affect the opinion of value. In fact, recent Cotality data shows that nearly half of all appraisals are returned for some type of correction, and the vast majority of those returned do not have their value changed when resubmitted. 

If the emphasis on speed vs. quality results in a defect or buyback demand, then more time and costs must be devoted to defending the valuation. Of course, if the loan has to be repurchased or sold in the scratch-and-dent market, the lender faces a significant economic loss. That’s the downside risk of prioritizing speed over quality.

That said, there are ways to accelerate lending decisions while reducing risk and costs. Integrating proven collateral valuation systems and property data into a lender’s manufacturing environment can generate significant per-loan savings and cycle time improvements. A recent independent ROI study by MarketWise Advisors, for example, showed that lenders using the Mercury Network solution for valuation workflow management reduced buybacks and loan defects by 58%, shortened the overall origination timeline up to 4 days and lowered per-loan costs by more than $600. 

Viewed holistically, valuation modernization can be a competitive advantage for lenders and appraisers who prioritize process discipline, data integrity, and quality assurance. It can better prepare them for increased scrutiny, client and borrower expectations, and the ever-escalating expectation for higher performance.

But if this is the answer, what’s the right question? Is it: “How fast can we get an appraisal?”  Or: “Did we get the right valuation, from the best appraiser, when we needed it, and how we need it?”