Tom Millon, CMB, and Tony Pistilli: Valuations and the Pandemic–The ‘New Normal’ for Appraisal
Tom Millon, CMB, serves as CEO of Computershare Loan Services US, Ponte Vedra Beach, Fla. Tony Pistilli is Chief Appraiser for Computershare Loan Services.
The mortgage industry is dependent on appraisers being able to deliver property valuations to banks, mortgage lenders and non-banking financial services companies. However, the Covid-19 pandemic has created health concerns for the profession given its traditional dependence on physical visits to assess the value of a property. The declining number of appraisers is also a contributing factor. As a result, housing inspections and valuations significantly slowed down, and in some cases ceased, earlier this year.
In response to these concerns, federal agencies including the Department of Veterans Affairs, Fannie Mae and Freddie Mac created temporary procedures and revised standards for valuations, including:
- Risk assessments performed by phone in advance of the appraisal, asking residents a set of questions about their health and recent travels
- Alternative appraisal methods such as desktop appraisals and drive-by inspections
- Using third-party sources such as the multiple listing service (MLS) or photos sent by the homeowner, rather than physical, in-home inspections
Alternative appraisal processes became the norm in a few weeks and helped the industry meet the challenges of the pandemic. Changes to processes allowed appraisers as well as third-party inspectors, such as homeowners and real estate agents, to safely conduct home inspections. Use of technology to compile reliable information and images from a property was also permitted.
These temporary, alternative inspections methods helped to demonstrate the reliability and benefits of bifurcation and may very well assist in the evolution of home appraisals.
Even as the demand for valuations rise, the number of appraisers has declined over the past couple of years. This downward trend is mostly likely attributed to a few key factors, including:
- Qualifications and licensing requirements
- Finding a mentor for supervised training
- Resistance among some appraisers to allowing trainees to perform services
- The investment of time to become a licensed or certified residential appraiser
The greater use of technology within our industry may help us manage this decline in numbers, both by enabling appraisers to manage greater numbers of cases without risking a decline in quality and attracting new people to whom digitally-based work appeals more. Nevertheless, the industry does need to take additional steps to address the problem of fewer people becoming attracted to the profession, and Computershare Loan Services has developed our own training program that offers employees the opportunity to become appraisers as part of our investment in expanding our valuations team.
The Next Step in Appraisals
Recent technological improvements in this space have helped make valuations more efficient and reduce opportunities for subjectivity and human error, allowing appraisers to inspect the property without physically entering it.
Artificial intelligence and technology are beginning to transform the market by introducing several features:
- Mobile applications that can capture the interior and exterior of a house and provide an accurate, simulated 3D image of each part of the property and its surroundings
- An intelligent, online appraisal portal that confirms property data through public records and offers essential local information such as local repair companies, cost estimates for repair or lists of suggested retail stores in the area complete with pricings.
- Geofencing technology, a location-based confirmation service, can help prevent errors or fraud by confirming that images of the property are associated with the correct address.
The New Normal Has Benefits
The pandemic compelled the industry to implement alternative inspections, but it also further opened the door to a bifurcated process, which is helping to remove existing resistance to such methods. This new model dramatically reduces the need for appraisers to travel, helping them focus more on the analysis. The result is increased productivity and being able to dedicate more time to complex valuations.
The demand for appraisals continues to grow, partly as a result of record-low interest rates and people seeking homes in the suburbs of major cities. Clearly, the pandemic is affecting the way we work, but alternative inspections are keeping property valuations moving forward despite the challenges. Beyond this, the practicality and convenience of alternative inspection will far outlive the current global pandemic, and we believe these methods are here to stay.
(Views expressed in this article do not necessarily reflect policy of the Mortgage Bankers Association, nor do they connote an MBA endorsement of a specific company, product or service. MBA NewsLink welcomes your submissions. Inquiries can be sent to Mike Sorohan, editor, at firstname.lastname@example.org; or Michael Tucker, editorial manager, at email@example.com.)