With the immense change that rippled across the mortgage industry in 2022, it has become more important than ever for lending institutions to ensure they are operating at top efficiency. Lenders need to impress borrowers at every stage of the lending process, including one of the most visible and stressful parts — the appraisal.
It has historically been very difficult for lenders and their appraisal operations teams to know how they were performing against the market. From appraisal fees and fee escalations, to turn times and revisions, lenders have been forced to simply “get what they get” with little visibility into competitive benchmarks.
Reggora has been working hard to change that. Leveraging aggregated data from the orders placed through Reggora’s appraisal management platform, we are pleased to introduce our Appraisal Performance Index, which contains trending data on turn times, fees, and revision rates from lenders doing business across the continental United States.
The following is an analysis of 2022 monthly averages and trends we’re seeing in the following areas:
While we’re showing regional and state averages in this report, the full Appraisal Performance Index is granular to the county level. We are not posting the county-level data publicly at this time, but if you’re interested in taking a personal tour of the dataset to see trends and averages in your geographic region or industry segment, click here to request a private benchmarking meeting.
The main variables that can create variations in appraisal fees include property and market complexity, appraisal services demand, appraiser capacity, and lender allocation efficiency. As you can see in the chart below, the national average appraisal fee dropped steadily throughout 2022 after peaking in March. This decline coincides with the drop in appraisal demand that resulted from rising interest rates.
The story is a little different when you look at fees regionally. The West saw the highest fees in the beginning of 2022, and then showed the sharpest decline throughout the year. Meanwhile, fees in the Northeast and Midwest stayed more consistent and actually increased slightly throughout the year. This is likely due to less volatility in these regions, with market maturity not subject to wide market swings driven by supply and demand.
Geographically, we saw consistently higher fees in the western states and northern New England, and generally lower fees in the lower and land-locked states.
Of course, within each state fees can vary widely across specific submarkets, and for lenders who tend to do business in specific urban areas this state-by-state comparison is not granular enough. Our full data set is available for lenders to analyze at both the state and a county level. Click here to learn more.
Fee escalations, as a result of strong demand and the constrained supply of appraisers, became very common and expected during the refinance boom that peaked in 2021. Throughout 2022, as demand for appraisers subsided, we’ve seen fee escalations begin to come down as well after peaking at 9% in April.
The fee escalation amount followed a similar pattern, peaking at $232 in April and then trending down throughout the rest of the year.
When looking at fee escalation rates regionally, we see a trend that mirrors the regional total product fee trend. While all the fee escalation rate trends down in all regions after April, the highest escalation rates and steepest decline is in the West.
Another incredibly hot topic throughout the refinance boom and competitive market of the past couple years is the amount of time between order placement and initial appraisal submission, or turn time. With heightened demand, turn times soared in 2021 as appraisers struggled to keep pace with market demand. Unsurprisingly, we’ve seen turn times steadily drop throughout 2022 coinciding with the drop in lending volume.
We have also looked at and compared turn times geographically. Not surprisingly, the states considered more rural in nature with fewer appraisers per square mile, such as Maine and Vermont have some of the highest turn times in the country, whereas more densely populated areas are likely able to produce and perform at a more consistent level.
As a mortgage lender, it’s important to know how your turn times compare within your local markets. With our full Appraisal Performance Index, we can work with you to see average turn times across specific counties, as well as averages for each specific stage of the appraisal process: finding the appraiser; scheduling the inspection portion of the appraisal; and submission of the completed report. If you are a lender and this is something you would be interested in, please reach out to schedule some time with us.
Last but not least, we reviewed average revision rates for appraisals ordered throughout the country. Revision rates are important to pay attention to, as they may impact final decisions and loan closing scheduling and can be a key indicator of market volatility, underwriting and operational effectiveness, and the reliability of the appraisers chosen for your assignments.
While volumes and turn times have decreased steadily over the past year, we’ve seen the percentage of appraisals requiring a revision continue to climb. Revision requests generally will come as a result of three sources:
- Appraiser errors relating to completeness or consistency
- Underwriting criteria
- Appraisal content or results disputes
While it is often difficult to effectively measure the exact causes of revision rate due to variations of process on a per lender basis, our experience through analyzing samples of revision activities shows nearly 50% of revisions are due to straightforward appraiser error, with the remaining revision requests driven by lenders passing to the appraiser incorrect or outdated information regarding the property or transaction, product specifications and preferences, collateral-related risk measurements tools such as flood certificates and investor risk scoring systems, and appraisal disputes.
One may also speculate, with time pressures softening, and purchase volumes slowing resulting in reduced comparable sales for the appraiser to analyze, more time is being spent scrutinizing appraisal reports.
What Can We Expect for 2023?
Given current mortgage rate levels and anticipated purchase sales volumes, the performance measurements seen in the latter part of 2022 are anticipated to continue into 2023. As the market has shifted from refinance to purchase, it is anticipated that there will be continued demand for appraisals and appraisers, as not all demand and home buying activity is solely determined by interest rate levels.
Consumers and other market participants demand high levels of performance from their lenders, and appraisers are key partners that contribute to the overall customer experience. Lenders that partner with appraisal providers that remain focused on providing professional levels of service will add more value to their borrowers and be the most successful in this highly competitive mortgage market.
Data Methodology & Definitions
This dataset is comprised of completed appraisal orders on the Reggora platform, placed between January 1, 2022 and December 31, 2022. Analysis includes orders using Form 1004 and Form 1073 within the continental United States only. Turn time is defined as the number of business days from the date the order was placed to the date of first appraisal submission. Revision rate is defined as any appraisal with multiple submissions and does not discern between appraiser or lender-driven resubmission requests. For questions or more information, please fill out the form at www.reggora.com/index.
Appraisal Performance Index: 2022 Insights
Director of Appraisal Compliance & Initiatives
Chief Executive Officer
Appraisal Performance Index: 2022 InsightsDownload
Director of Appraisal Compliance & Initiatives
Chief Executive Officer