Introduction: The State of Appraisals in 2022
Some of the most difficult conditions mortgage lenders experienced in 2021 carried into early 2022. Namely, navigating changing regulations while maintaining compliance and dealing with the consequences of an appraiser shortage amid high, persistent demand. These pain points caused a bottleneck in operations and are expected to return in the foreseeable future. However, changes in the industry are underway that could mitigate the impact of the ongoing appraiser shortage.
Desktop appraisals, which remove the requirement to conduct a physical property inspection and instead utilize property tax records and past sales, became a permanent option for some agency-backed loans starting in March 2022 — two years after their initial introduction by the Federal Housing Finance Agency (FHFA). Although desktop appraisals will not be available for all loan types, this remote-work option nevertheless provides important efficiency gains.
This white paper will explore lenders’ key challenges presented by the legacy appraisal process, the hidden gaps affecting turn times, and how appraisal technology solves these gaps to improve efficiency and profitability.
Leading Challenges Plaguing the Legacy Appraisal Process
Lenders often face numerous choices of strategic investments and most prioritize projects with the goal of reducing cycle times. However, the large impact of appraisal operations isn’t often understood and thus overlooked despite appraisal turn times often slowing down the rest of the origination process. This lack of knowledge can cause lenders to unintentionally miss out on transforming arguably the most significant area for efficiency improvement in their closing process.
The following are six key areas negatively impacted by inefficient appraisal operations and the ways in which modern appraisal management technology can improve lender outcomes.
Fragmentation in the traditional appraisal process delays the entire workflow, affecting the lender’s operations and bottom line. Slower turn times were an area of great frustration for borrowers in 2021 largely due to high volumes and the industry’s shortage of appraisers.
Appraisal technology connects siloed systems, automates manual work and provides process visibility for stakeholders to create a more efficient workflow.
Opportunity cost caused by manual efforts may be one of the sneakiest losses to lenders. Manual tasks and inefficient processes can drain resources and block productivity, keeping lenders from focusing on projects that address company-level objectives.
Not all work necessarily needs to be completed by humans. For example, hours of employee bandwidth are taken up each week by routine tasks such as fielding status updates and scheduling inquiries. If automation was in place, this time could instead be redirected toward higher-impact projects.
In addition to increasing a lender’s appraisal capacity, automation also improves accuracy and ensures compliance by reducing opportunities for human error.
Missing the window on appraisal delivery can lead to delays and unhappy customers, but lenders have improved their borrowers' experience by fixing issues in the appraisal process. Automated appraisal e-delivery to the borrower ensures lenders stay on track while removing another manual task from the larger workflow.
Talent Retention on Both sides of the Transaction
Retaining quality internal talent is important on multiple levels (training costs, institutional knowledge, employee morale, etc.). As such, lenders should be cognizant of the manual tasks their loan officers (LOs) take on, and whether those activities can and should be automated. Without workflow improvements, LOs may look for a new company that ensures they are not bogged down by manual appraisal processes.
Limits on Wholesale Volume
Brokers may opt to do more wholesale volume with lenders who have improved the appraisal ordering process and offer better transparency versus those who rely on manual legacy workflows. A manual process requires additional resources to tackle increased volume, while automation is the cheaper, more efficient and scalable solution.
As technology adoption rises, more-efficient workflows will become the norm. This will change table stakes for brokers, and lenders who have not improved their workflows will lose business to the forward-thinking competition.
Delays in scheduling, longer-than-expected turn times, and lack of transparency add to borrower anxiety during what is already a stressful and complicated home-buying process. Modern appraisal management technology alleviates these issues.
Borrower retention in today’s purchase market is important, as competition for customers is higher than when the refi wave came through. Additionally, a happy borrower leads to positive reviews, which in turn lead to more referrals and more business. Creating repeat business is more cost-effective than attracting new customers, making borrower satisfaction an investment with a worthwhile ROI.
Identifying Where to Improve the Appraisal Workflow
To achieve better outcomes for the challenges mentioned above, lenders must locate where the gaps and inefficiencies are in their appraisal process. By breaking down your entire workflow — from ordering at the beginning of the workflow to payment processing — you can identify the manual tasks and siloed systems that act as a bottleneck in your operations.
Then, consider these questions to help uncover additional appraisal gaps you may have:
- Loan officer frustration: How much time is wasted by your LOs and team sending emails back and forth because there isn’t transparency around appraisal statuses?
- Internal time-loss: How much support capacity internally is being used up by appraisal-related problems?
- External reputation: Are your appraisers not willing to work with you and therefore not picking up orders in a timely manner due to an inaccessible user interface on their side?
- Borrower frustration: How many loans miss rate locks due to the appraisal being delayed?
- Margin loss — borrower fallout: How much money are you losing by having to pay appraisal fees where the borrower falls through?
- Margin loss — fee disclosure: How much money are you losing by not having an automated change of circumstance/ appraisal re-disclosure process?
- Margin loss — credit card fees: Are you incurring credit card fees fronting appraisals for buyers?
These questions aim to highlight the gaps and unnecessary costs present across the legacy appraisal workflow. Even incremental changes in these areas can lead to big efficiency gains in borrower and vendor communications, appraisal ordering and vendor allocation and payment processing. Each of these areas has a direct impact on the bottom line.
How Appraisal Technology Solves for These Gaps
To overcome the six leading challenges presented by a legacy appraisal process, lenders must prioritize operational efficiency. No amount of additional headcount and man-hours will streamline the process without adding significant costs. Appraisal management software is the answer. Through integrations, automation and leveraged data, this technology is capable of making significant improvements across the appraisal workflow.
Automation streamlines multiple aspects of a lender’s operations. As previously stated, it frees employees from repetitive work and tasks that do not necessarily need human touch, so they can focus on higher-priority responsibilities. But perhaps the more important benefit of automation is its speed. How much faster would your average turn time be if you could automate scheduling, payment processing, collateral reviews, change of circumstance/re-disclosure and appraisal delivery?
Integrating the appraisal management technology with a lender’s loan origination software and equivalent proprietary applications allows for bidirectional data transfer and the ability to leverage data for things such as refined appraiser matching and performance tracking. Additionally, connected systems enable LOs to create custom dashboards to monitor critical orders, identify those that require immediate attention and drive business forward.
Streamlined workflows and improved internal and external transparency address the main pain points that borrowers, appraisers, LOs and the appraisal desk experience.
In addition to the benefits of appraisal management software, desktop appraisals are also helping to modernize the process. They eliminate the need for travel between properties, enabling appraisals to be completed no matter the weather conditions or how remote a property is. By spending less time on each valuation, appraisers will be able to increase their capacity per workday.
Combining desktop appraisals with automation — think appraisal tech’s scheduling, payment processing, and appraisal e-delivery capabilities — helps shorten turn times, which leads to happier borrowers and increases a lender’s capacity and profitability.
The process of managing appraisals today contains several efficiency gaps and hidden costs that impact a lender’s bottom line. The adoption and use of appraisal management technology is an important step in overcoming these operational challenges, especially as lenders contend with an appraiser shortage.
Lenders who implement Reggora’s all-in-one appraisal platform have streamlined their operation, seeing benefits from their appraisal desk to the accounting department. Reggora’s industry-leading software streamlines the entire appraisal process, from automatic order allocation to comprehensive quality control. Request a demo to see how Reggora can help you achieve better outcomes for your business and borrowers.
The State of Appraisals in 2022
Appraisal Desk Lead
Chief Digital Officer
Director of Operations
The State of Appraisals in 2022Download
Appraisal Desk Lead
Chief Digital Officer
Director of Operations