Sponsored Content from Incenter: Desktop Appraisals: An Industry On Idle

In fall 2021, a roomful of lenders rose to their feet, cheered and applauded when they heard desktop appraisals would be a permanent, approved method for purchase valuation.

Seven months later, the promise and potential of desktop appraisals has gone largely unfulfilled. A month after the official launch, the number of orders industrywide is anemic. But why? How did we go from launch to idling so quickly?

There are reasons, and then there are reasons.

Desktops, which are appraisals without a physical, in-person inspection by the appraiser, aren’t new, but they became more widespread during COVID-19 when GSEs allowed for flexibilities in the traditional process.

But even during the pandemic, many lenders were slow to accept or order desktop appraisals. There were questions about veracity, confusion about workflow, and uncertainty around how long these would be accepted. 

Desktops remained a last-resort option, used only when an appraiser was willing to do one when a borrower didn’t want anyone on premises.

Then came the housing boom. 

Appraisers, who were already backlogged on valuations, faced a tsunami of demand. They couldn’t keep up. 

Sellers, buyers, lenders – everyone was in a hurry to get as many transactions done as possible. Prices skyrocketed. Buyers were offering huge amounts of cash over asking price and waiving inspections.

The holdup was the appraisal process. It could take weeks.

The total number of appraisers has been steadily declining for years, while the average age of appraisers has been steadily rising. As more and more reach retirement, fewer and fewer are coming up behind them.

So with all these factors – massive demand, the need for a faster process, and a shrinking pool of active appraisers – desktop appraisals for purchase seemed like a sigh of relief for a weary industry.

Because appraisers wouldn’t have to drive to properties, they could – in theory – do more valuations in less time. This would make an even bigger difference in rural areas where fewer appraisers cover large areas. A two-hour drive to a property becomes a four-hour time savings if it’s a desktop order, and in the case of many appraisals, days and even weeks saved not having to coordinate a time to drive to the properties.

The new normal was here! The future is now! Right?

Not so fast. 

With the GSE approval of desktops in March 2022 came a complicated requirement: Instead of a sketch, appraisals would need a detailed floor plan, to include interior walls and room labeling. 

Appraiser forums blew up with frustration. “How are we supposed to do that without visiting the property?,” they asked.

Appraisers would either have to go to the property and measure the house, which makes a desktop appraisal pointless, or they’d have to rely on third-party data provided by an agent or homeowner. 

Along came RemoteVal, a remote inspection app that lets an appraiser remotely inspect, photograph, and measure a home through the homeowner’s smartphone. It’s a third-party tool but first-party data. 

Appraisers could do most of their normal process, gather and verify all the data of an in-person visit, but they could do it from their desk. RemoteVal desktops have taken between two and four days, on average, to complete.

The official approval for desktops exists. The technology solutions to create accurate desktop valuations exists. So what’s the problem?

Let’s explore the three main reasons that come up:

First, confusion surrounding desktop appraisals is holding everything back. What types of transactions will meet eligibility? What about complicated, multistory homes? Will agents and homeowners willingly be part of the inspection process? How do we get floor plans when the agents don’t have them?

And where do most complicated homes/properties exist? In rural areas, where complex floor plans and fewer cookie-cutter builds make for more difficult comps. There goes the drive-time savings.

Second, lenders are reporting that they are not getting the approvals for desktop appraisals on a lot of their loans.

Third, appraisers allegedly simply refuse to do them. That’s an easy conclusion to jump to when looking at a site like AppraisersForum.com. Reactions range from “This is the stupidest idea I’ve ever heard” to “Let’s all band together and go on strike for a month.”

But appraisers like Wayne Wright who have actually used RemoteVal have drastically different responses.

“This is light-years better than a hybrid,” Wright said. “You get better data, you can do more reports, and it’s easier to schedule. RemoteVal is simple to use, and I got a good feel for the house. This is 100 percent a plus for the industry.”

The loudest voices online may not accurately represent overall appraiser sentiment, or even most of appraiser sentiment.

Lost in this conversation, though, are the appraisal management companies (AMCs) – which might be the real holdup.

When the GSEs gave their formal blessing for desktop appraisals, lenders turned to the AMCs and asked, “Can you do this?”

The reply: “Absolutely.”

Except that most AMCs didn’t have the technology or workflows in place to accommodate the number of desktop orders the lenders wanted, or to assist the appraisers in getting the floor plan created to help them complete the reports.

Overpromising and underdelivering isn’t a good look, so the easiest solution in most cases has been to blame appraisers, with responses such as: “We’d love to help you, but the appraisers either can’t or won’t do them.” Or “The AMC is changing the assignment type to something else, such as a traditional desktop or hybrid and fulfill it that way.”

So where do we go from here? Is the industry stuck with lengthy turn times? Are desktop appraisals DOA?

The future probably isn’t so bleak. Desktops aren’t going away, and technology like RemoteVal will only make the process easier and faster to adopt. Appraisers are also surprisingly sanguine about embracing new technology when they understand it and when they are in control of the process.

Despite all the confusion and initial frustration, lenders will have the most say in what happens next. After all, they are the customer, and customer demands eventually turn even the biggest ships.

If lenders remain vocal in their support for desktops and consistent in placing orders, then no amount of online angst is going to keep the future at bay.

As much as we all struggle with change, change is at our doorstep. And at our desktops.