First index of its kind available in the mortgage industry to benchmark appraisal efficiency and value to the lender and borrower
- Appraisal activity fluctuates consistently with lending trends and demand.
- Time to process the appraisal has dropped steadily as the number of appraisals have become more manageable per appraiser.
- Appraisals requiring a revision increase as lenders and borrowers gain more room for scrutiny.
Boston, January 19, 2023 – Reggora, an appraisal management software company that is modernizing residential real estate valuation for mortgage lenders, delivers the Appraisal Performance Index, its first-annual study to index appraisal operations trends across the mortgage industry. To examine the results of the study, Reggora is offering private benchmarking sessions for lenders who would like to view the database in detail and see how their operations perform within their regions. Learn more here: www.reggora.com/index.
To develop the Appraisal Performance Index, Reggora aggregated 2022 data from its platform to learn how the industry performs in four of the most important categories: appraisal fees, fee escalations, turn times, and revision rates. The data, which can be analyzed down to individual counties, revealed a pattern of trends that matched the ebb and flow of originated mortgage loans across the country.
The year 2022 was an exceptional year to begin the Index. The year began with interest rates close to 3% and then climbed to 7% before retreating in mid-December, as shown in this chart published by Freddie Mac. The increase in rates caused mortgage volumes to plummet, creating a unique scenario where the number of loan originations went from too many for appraisers to handle to a manageable number and a reasonable flow of work.
“Tepid home sales and refinances in 2022 put less strain on the fulfillment logistics and allowed appraisal turn times to improve from the difficulties in 2021,” said Brian Zitin, Co-Founder and CEO of Reggora. “The data reveals that with a heavy caseload, appraisers require multiple days to complete each appraisal. When appraisers can accept fewer assignments, the work is manageable and appraisals can be completed more quickly with greater satisfaction from the lender and the borrower.”
Observations of the Index revealed, the average appraisal fee slowly dropped during 2022. The year began with an average fee of $620 per appraisal, peaked in March at $635 and fell to $592 by November (see Figure 1). This declining average is tied to fewer fee escalations as the year went on. With a reasonable caseload, appraisers do not need to raise fees to expedite orders. The average fee escalation rate peaked at 9% in April and May, likely due to both seasonality and a surge in loan applications facing a trend of rising interest rates, adding up to an average of $232 to an initial estimate in April (see Figure 1).
Figure 1: Percent of Orders Requiring a Fee Escalation and Fee Escalation Amount
Another highly criticized component of the appraisal process is the time it takes to find an appraiser, schedule and complete an appraisal, and submit the initial appraisal report, known as the “turn time.” During 2021, there was heightened demand for appraisals and appraisers struggled to keep pace with market needs. With the drop in volume throughout 2022 appraisers were more effectively able to manage the demand and deliver their appraisal reports in significantly shorter windows (see Figure 2).
Figure 2: Average Turn Time by Month
“The ability to complete an appraisal quickly has always been a sticking point,” said Ken Dicks, Reggora’s director of appraisal compliance and initiatives and appraiser of 38 years. “In 2022, we saw turn times come in line with expectations. Appraisals in locations where there are fewer appraisers, typically outside of centralized urban areas and their neighboring suburbs, generally take longer on average than appraisals in those centralized urban and suburban locations, but turn time performance improved for both segments as the demand slowed.”
Finally, Reggora looked at revision rates. As interest rates rose and local markets became more volatile, it can be speculated that appraisals became more closely scrutinized leading to a higher rate of revision requests throughout the year (see Figure 3). This attribute is expected to continue as market conditions fluctuate in 2023.
Figure 3: Average Revision Rate by Month
Appraisal Performance Index Methodology
Reggora is an industry-leading appraisal management solution supporting mortgage lenders and appraisal vendors across the country. This study is a comprehensive review of appraisal activity through the Reggora platform from January to December 2022. All appraisals in the study were completed form 1004 or form 1073 orders and include a broad range of coverage across the 48-contiguous United States. Turn time in the study refers to the number of business days from the date the order was placed to the date of the first appraisal submission. Revision rate is defined as any appraisal with multiple submissions and does not discern between appraiser or lender driven resubmission requests.
Reggora is driving appraisal innovation with a modern, two-sided platform for mortgage lenders and appraisal vendors. Through advanced and configurable workflows, Reggora streamlines the entire appraisal process for everyone involved, while improving the overall borrower experience. Lenders and appraisers benefit from payment processing, automatic appraisal ordering, rule-based reviews, appraisal delivery, status updates, and more, creating unprecedented operational efficiency.