It’s no secret that loan production costs are among the highest our industry has ever seen. But with a more modest purchase market on the horizon, rising costs have become particularly stressful to bear.
Of course, the primary driver of high loan costs is the length of time it takes to close a mortgage loan. And because it is one of the most time-intensive components of the mortgage process, the appraisal is a major factor in controlling costs. Appraisal problems have been known to delay closings and occasionally derail deals altogether, adding greater costs that lenders cannot afford.
At the same time, diminishing home values, new appraisal exception rules and in some cases, a shortage of appraisers in certain markets are creating problems of their own. Collectively, these factors can and have been known to have an adverse impact on appraisal quality.
With all of these things going on, how on earth can lenders improve valuation quality while reducing costs next year? Rest assured, it can be done. Here’s how.
Step #1 – Make Sure You Have Someone to Call
One of the biggest causes for appraisal delays happens when there are questions about the opinion of value. Sadly, too many lenders have found that when they have questions about an appraisal report, they could never find anyone to talk to. When they try calling the appraisal provider, they typically get an automated phone tree—which is ultimately another waste of time and money.
Before getting an appraisal, many borrowers have already seen one or more value estimates on the property they wish to buy. Rarely do the numbers line up between the appraisal and these estimates. The lender is also not an appraisal expert, either – yet it’s often the lender that faces questions from the borrower when a value is not what anyone expected.
Any client who orders an appraisal from a company has an absolute right to call their vendor partner if there are any questions about the appraisal—period. It’s not a matter of influencing the opinion of value. It’s about understanding the factors that went into the report. After all, the lender is working for the borrower who has little understanding of everything that goes into an appraisal report. Because of this, your valuation partner should have a trained, professional appraiser on staff who can go over the report and explain why and how the results were put together.
Step #2 – Know What Your Appraisal Partner Does to Ensure Quality
To accommodate lenders working in fast-paced markets, your appraisal partner must have created an efficient appraisal process that involves quality control checks at every stage, from the time the appraisal is ordered until it is delivered. These checks should cover the appraiser’s license status, the appraiser’s market expertise, and essential factors that went into the determination of value.
For example, Valuation Partners provides a Market$ense report for every conforming loan valuation that receives a high-risk score on Fannie Mae’s Collateral Underwriter. The Market$ense tool helps lenders identify the reasons why an appraisal got a high score and offers some direction to address or even correct it, if possible. If your valuation provider is serious about appraisal quality, they should have similar processes and tools in place.
Step #3 – Eliminate Unnecessary Delays and Surprises
Because every loan involves multiple moving parts and deadlines, a timely appraisal is key to the lender’s need to reduce delays and keep borrower anxieties at a minimum. While all parties want to close on time, unexpected surprises can and frequently do happen. For this reason, transparency is a critical component for the kind of efficient appraisal process that eliminates extra costs and keeps loan transactions on course.
The right appraisal partner will have built in proactive communication protocols within the appraisal process that all but eliminate delays in scheduling the appraisal appointment. Your partner should also constantly review its processes for purchase appraisals to improve transparency and ensure communication throughout every stage of the process.
For example, for every purchase appraisal order, the listing agent must be contacted immediately to schedule an inspection, and if there is any delay in doing so, the lender should be notified right away. If your appraisal partner isn’t doing this, it may be time to find a provider that does.
To be sure, lenders have lots of choices when it comes to an appraisal partner. If they hope to reduce costs and still receive quality appraisals, they must do their homework and ask the right questions. Frankly, they should demand more from all of their partners—not just their appraisal partners—if they hope to be successful in the coming year.
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!