Sink or Swim: Adapting to a Changing Appraisal Industry

This article was originally published as an Ellie Mae Blog Post.‍

Over the past decade, financial technology companies have served as willing partners in the digitization efforts of the mortgage industry. Driven by demands of a mobile-dependent millennial generation, lenders have prioritized technology and innovation in an effort to make the mortgage experience cheap, fast, and accessible.

This investment has manifested itself in new technology across the mortgage spectrum. Key components of the mortgage process - from online applications, to closing transactions, to point of sale systems, to entire loan origination systems - are undergoing massive upheavals as the industry moves towards systems that are simple and virtual.

However, despite this boom in innovation, mortgage modernization has fallen short in one key area - the appraisal. Often overlooked, the appraisal is a key component of the mortgage process, yet has remained stagnant in its technological growth. While lenders can tout digital ease and transparency during the mortgage process, as long as the appraisal remains outdated, the mortgage process will remain lengthy and frustrating.

The issues around the appraisal today are numerous and widespread. Almost every aspect of the process - from collecting the appraisal fee or placing an order to underwriting and reporting - is tedious and time-consuming for all parties involved. This is largely due to the industry’s reliance on manual processes, fragmented stakeholders, and old technology.

In today’s appraisal process, a national lender might build out an entire department of full-time employees dedicated to overseeing multiple appraisal management companies, who then engage with thousands of appraisers. Each party in this equation is on a different software platform that rarely integrates with the other, which leads to inefficiencies and redundancies within the appraisal workflow.

To address this, many in the industry have clamored for an advanced, all-in-one system that brings all stakeholders onto the same interface for transparency and standardization, but the lack of new technology in the industry has resulted in the same software for decades.

Because of this prolonged void in innovation, lenders have become resigned to lengthy turn-times, a lack of transparency, and high overhead costs. However, although many of these problems seem inevitable, with the right investment and focus, they are far from insurmountable. The question is - Are lenders prepared to prioritize the appraisal and prepare for the future of the industry?

The reality is that the appraisal industry is changing whether or not technology changes with it. Over the past few years, GSEs have loosened regulations around appraisals, adding a level of leniency to a considerably rigid process. At the same time, across the market data is playing an increasingly important role in the valuation. As a result, hybrid appraisals and automated valuation models are becoming more comprehensive and coveted, and lenders who have prudently invested in these technologies are poised to be ahead of the curve as the new era of appraisals approaches.

On the other side, lenders who are choosing not to rethink the systems and technology behind their appraisal process will soon fall behind. There is clear opening today to invest in automated appraisals that will not only streamline the current process for lenders, but also boost customer satisfaction and profitability on a per loan basis.

Reggora, an appraisal technology company based out of Boston, is at the forefront of this transition. Backed by the same investors as other modern technology companies like Twitter, Slack, Plaid and more, Reggora offers a fully automated, all-in-one platform that brings appraisers and lenders onto a single interface. Reggora has streamlined the modern appraisal process and by automating the manual processes of the appraisal, which lets lenders reallocate internal resources, while receiving a higher quality appraisal in less time.

Not only does Reggora offer lenders a unique solution for appraisals today, but as the nature of appraisals change to bifurcated products, desktop appraisals, and automated valuation models, Reggora offers the development resources of a modern technology company to help lenders get ahead of this trend and integrate new standards into their existing workflows. As the appraisal changes in its contour, its critical that lenders think about new systems that will prepare them for different types of appraisals and allow them to remain competitive.

In order to fully embrace automation and digitization in the mortgage process, lenders should strategically invest in appraisals today just as they have with eClosings or online applications. If they do this, the automated appraisal can serve as a market disruptor that genuinely allows borrowers and lenders to pursue a one-click loan in a fully digitized system.