Top Trends Revamping the Appraisal Market
By Collin Harbour
Throughout 2021, the words “unprecedented” and “frenzied” were often uttered when referring to the wild housing market. Indeed, with too little supply and too high demand, over 70 percent of home listings experienced a bidding war.
As appraisers struggled to keep up, often requiring weeks or even months to complete a simple transaction, housing appraisal prices skyrocketed, aggravating an ongoing problem. Consequently, the appraisal process became extremely frustrating, resulting in longer wait times for both lenders and borrowers.
However, changes are in process. Recently, government-sponsored enterprises (GSEs) Freddie Mac® and Fannie Mae® announced modifications to their acceptable appraisal guidelines. These revisions are vastly revamping the appraisal market, creating trends that are, most likely here to stay.
Increased Remote Contact
As a declining workforce since 2019, the number of available appraisers dwindled even further once the COVID-19 pandemic hit in 2020. Compounding the problem, homebuyer demand exploded thanks to historically low interest rates and societal changes.
Today, because of changing appraisal guidelines and requirements, many professionals are turning to remote inspections and/or desktop appraisals, defined as those appraisals completed without a physical, in-person inspection. With the implementation of social distancing and/or in-home assessments due to COVID-19, desktop appraisals inadvertently experienced an accelerated and widespread trial period. Noted for their speed in addition to reducing inefficiencies, these appraisals remove substantial roadblocks for both lenders and borrowers within the mortgage and homebuying process.
Evolving Technological Advances
In addition to increased remote contact, the appraisal industry is experiencing an increased and evolving adoption of technology, enabling the acceleration of progress and change. Whether it’s using mobile technology/applications, laser measuring tools, or mapping tools, appraisers are leveraging technology to change the appraisal industry.
Indeed, according to the 2019 Appraisal Income Guide, appraisers who excel at adopting new technologies earn over $44,000 more per year than others that fail to leverage these types of tools.
Why Desktop Appraisals and Why Now?
Given the previous restraints on the appraisal market, the adoption of desktop appraisals within Freddie Mac and Fannie Mae’s portfolio of solutions clearly opened the door for the entire market. As stated by Lyle Radke, Senior Director of Collateral Policy, Fannie Mae, “Desktop appraisals are intended to find ways to either make appraisers more efficient or dedicate them to more pressing problems.”
Mr. Scott Reuter of Freddie Mac noted, “We’re helping to build out product offerings on the spectrum between waiver and full appraisal.”
A key condition of desktop appraisals’ use is the inclusion of a floor plan sketch, showing interior walls and reporting gross living area. Numerous applications and mobile software offerings are available to provide a floor plan “blueprint,” all with the purpose of evaluating and recording the area. Whether using a standalone system that creates a rendering or a smartphone-based app that takes photos and dimensions, the floorplan must result from information captured within a software (and not a hand drawn sketch) in order to be paired with a desktop appraisal.
Ultimately, desktop appraisals are likely here to stay – they’re fast, easy, and efficient to implement -- completing a task that once took much longer and required much more effort.
With the introduction of desktop appraisals in appraisal fulfillment, it’s expected that these solutions will replace more traditional appraisals. In fact, we may begin to see a broader alternative mix of appraisal products, incorporating new technology and processes to address turn times, supply constraints and other issues.
As appraisers continue to navigate “this new normal” with more remote inspections and increased technological options, desktop appraisals paired with a floorplan sketched solution present a more efficient approach that helps address the ongoing challenges in the market.