Appraisal Management

The Hidden Costs of Appraisals

When executives at any company determine strategic initiatives, there are a variety of factors that determine their prioritizations, but typically the most important thing is boosting the bottom line. Profit is king.

When prioritizing initiatives within the mortgage lending industry, there are some desired outcomes that nearly every lender will think of first: getting more loans (customers), improving pull through rate, optimizing employee headcount, etc. These objectives are usually addressed broadly through online applications or shiny object solutions.

Determining hidden costs for lenders

What a lot of lenders miss, however, are some of the hidden costs, which would yield a huge ROI if detected and addressed. Usually these costs require some form of business intelligence tool to uncover.

While there are certainly challenges with getting the right data to discover these hidden costs, some folks simply aren’t focusing enough on discovering them in the first place, and it shows in their profitability margins.

I’ll give you an example and some context as it relates to appraisal.

When speaking with mortgage lenders about purchasing our technology, the average executive might be convinced by our better user interface, our dynamic and configurable feature set, or even by our integration capabilities, and realize right away that our platform is better than the legacy appraisal platform that they currently use.

Making the case for lenders to prioritize appraisals

Sometimes we get responses along the lines of, “Your platform is great but appraisal is not an urgent initiative for us. Let’s check back in later.” 

When we dig into why appraisal isn’t getting prioritized, it usually comes down to a perceived lack of return on investment from the executive. After some further conversation, though, it becomes apparent that it was not really a thorough analysis in this regard as the appraisal can cost lenders in excess of $258 per loan file in operational costs. These are costs that can easily be eliminated by appraisal management technology.

Here are some questions about appraisal that most executives at a mortgage lending organization typically aren’t thinking about when determining prioritization:

Lenders should dive deeper and evaluate their appraisal operation

This is just a sampling of the specific questions you should consider when evaluating how your appraisal processes impact your bottom line. From a high level, it may make sense why the appraisal is not immediately prioritized. But when lenders take the time to analyze these deeper questions, then the hidden costs and benefits of advanced appraisal technology immediately appear. We compiled a list of the 10 ways appraisal tech improves profits for lenders in another blog post and built a guide on three ways lenders can boost appraisal operational efficiency. At Reggora we're helping to write the book on how lenders can uncover hidden costs in their appraisals.

I can assure you based on the hundreds of conversations that we have had with executive teams that the hidden costs of poor appraisal processes are truly abundant and often overlooked. When you consider how much faster an appraisal platform implementation can get done versus a massive POS or LOS initiative, the ROI starts to get pretty appealing and becomes something of a ‘quick win’ for the team.

All of this gets completely missed if the analysis lacks business intelligence and thoughtful investigation into the deeper questions.

So, as you are handling the summer volume and beginning to think about what initiatives to prioritize in the fall, please consider hidden costs and easy implementations! 

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The Hidden Costs of Appraisals