When the mortgage market turns and loan volumes fall, we typically see a number of things happen. We’ll see lenders reducing staff, larger lenders turning away from wholesale business, and fewer stories about how appraisers are the root of all of the industry’s problems.
As a professional appraiser, I can tell you that I have never been at the root of the problems our industry has faced over the years. Our profession is many things, but they are all positive and beneficial to both home buyers and mortgage lenders.
Of course, there is the time thing.
When you ask a professional appraiser to travel to a property, inspect every aspect of the dwelling and land, travel back to the office, develop a market analysis, and complete a valuation that includes comparisons to similar properties, you’re tasking a process that takes a bit of time.
And that’s been the root of our problems.
Defining Speed in a Fast-Changing Industry
When volumes are high, lenders have no problem asking appraisers to deliver reports faster and then loudly complain when it’s not possible. Our profession is bound by standards that force us to take the time to properly evaluate every property before delivering our reports.
This was previously the case, but it sounds somewhat less true when volume drops. That’s when appraisers start calling lenders, promising that they can get their reports done faster. I have received a number of emails from appraisers who are offering to expedite appraisals, telling me they can deliver their reports in just five days.
With less volume, appraisers can get to appraisal requests faster, but is five days really fast? If you’re an appraiser who has struggled to get the jobs back within a month when volumes were through the roof, it certainly sounds fast.
The problem is that lenders no longer consider that very fast at all, and neither do the borrowers they serve.
Moving at the Speed of Digital
Another thing that always happens during a downturn is that the entire business is reframed and reshaped for the new market. It’s going to be interesting how that happens this time because this is not like downturns of the past.
First, rates have been so low for so long that many lenders aren’t even sure how to operate in this environment. They were very good at selling refinance loan products when interest rates were dropping, but this is a whole new game. Faster lenders will win, which will put more pressure on appraisers to keep pace.
Second, coming out of the pandemic has pushed most lenders forward on their journeys to digital lending. Necessity led to technology adoption, and now that genie is out of the bottle. We’re already seeing large investors waiving appraisal requirements because so much data already lives within their systems.
What’s the best outcome for the appraising profession? I’ve been thinking a lot about this. We want to:
- Maintain a steady flow of work, so our business is sustainable, and we can make a living.
- Advance process improvements that truly expedite our level of service.
- Improve our databases through the use of modern technologies and property owner–provided information that is needed to complete our assignments.
- Include more data to shift our standard from an opinion of value to a value prediction based on established facts. In this, the appraiser uses their expertise to qualify appropriate information and provide products and services that can be validated through reproducible processes, all with the goal of increased reliability.
We’re getting closer to this future, and I’m confident that one day lenders will stop thinking of appraisers as part of some problem and more like the valuable partners we have always been, only better because we keep improving.
We’re getting there, just not fast enough to suit me.
