As the housing market heads into semi-hibernation for the holidays, it’s a perfect time to start planning ahead. Between rising rates and potential price ceilings in a growing number of local markets, there are a lot of challenges in 2019 that beg our attention.
One particular trend we have been gearing up for is the increase in demand for HELOCs. The rise in home values and a strong economy are driving demand for home equity loans, especially lines of credit. HELOCs in particular could surge in the coming year, according to a recent TransUnion study that found home equity levels have surpassed their previous peak in 2006.
The success lenders have in capitalizing on these products will have a lot to do with having the right valuation strategy in place. Here are the three things they’ll need most.
- High quality, hybrid appraisals
While higher rates have all but killed off the refi market, so far, they are not hurting home equity loans. Large gains in home values coupled with a strong economy and record low unemployment have many homeowners feeling confident enough to take money out of their homes for renovations or other expenses they’ve put off.
For this reason, it is wise to leverage the services of a valuation partner that has expertise in hybrid appraisals. These products are similar to a desktop appraisal but include an exterior inspection that is usually performed by someone other than the appraiser. They are perfect for home equity products as they offer a more thorough and trustworthy valuation than an automated valuation, but at an affordable price.
- A more timely, smooth valuation process
A smooth, efficient valuation process will be needed to support borrower expectations on HELOC lending. HELOC products require both proactive communication and the ability to provide real time solutions. Because timeline needs for HELOC loans are much shorter than purchase transactions, there must be dedicated, responsive customer support throughout the process.
A truly competent valuation provider will have the organizational depth to handle complications, delays and other unforeseen issues that arise during the valuation process. And they need to be there when you need them. In order to serve all markets, this means your provider must be available between 8 a.m. to 8 p.m. EST.
- Greater levels of transparency
A strong valuation process must also involve transparency for all parties, regardless of the type of valuation involved. HELOC valuations are abbreviated in format compared to purchase or refinance transaction appraisals. But suprisingly, we find HELOCs generate more questions from consumers rather than less.
For example, HELOC valuations are usually an exterior only inspection, but interior features are often important to the homeowner. That means thorough quality control measures must be instituted to eliminate shortcomings in reporting. After all, the consumer knows their home better than anyone.
Between rising purchase rate volume, rising rates and growing demand for home equity loans, lenders have a lot to chew on during 2019. Ultimately, the right valuation strategy is to understand the market and where it’s headed, and to think deeply about how to best meet your customers’ needs today and in the future.
If you want to find out how we can help you become more successful in 2019, drop us a note at email@example.com or give us a call at (281) 313-1571. We would love to help you find your own success!